Decentralization and Blockchain Trilemma

In the original Bitcoin blockchain there is no requirement for users to trust anyone. A user can download the entire blockchain, go through the ledger transaction by transaction to independently verify its consistency. However, as the system scales, this approach inevitably leads to centralization. For example, at 1 million transactions per second, the Bitcoin blockchain would be in the order of one exabayte of data, making it beyond reach of individual users to conduct independent verification. As such, a major challenge and design goal of Alphabill is to scale without sacrificing decentralization.

To many in the community due to a widely held belief known as the "Blockchain Trilemma", this is considered impossible. The term, as coined by Vitalik Buterin, states that decentralized networks can only provide two out of three benefits at any given time with respect to decentralization, security, and scalability.

The challenge with this and other rules of thumb such as the "Nakamoto Coefficient", is that while they can be potentially useful generalizations, they are not based on science. To be more scientific the abstract concept of security needs to be decomposed into its subcomponents, addressed by a sufficient amount of validation resources. The breakdown of security into its components is described in Alphabill Trust and Security Model.

Decentralization is a compromise. More decentralization adds overhead, as there are more replica machines, synchronizing the state and re-doing the same computations to validate state changes, in order to overwhelmingly outbalance the effect of a malicious entity trying to obstruct or overtake the network.

Alphabill achieves efficiency by providing redundancy in a flexible way. As the network is sliced into task-specific partitions; decentralization is addressed individually by assigning necessary quorum sizes of stateful and stateless validators for partitions. The number of validators per partition does not impact performance allowing the system to have partitions with a very high level of decentralization. For example, the governance and native currency partitions, or running with just a few validators, for example, enterprise applications on dedicated partitions.

In summary, with a decomposable blockchain such as Alphabill, it is possible to achieve all three elements:

• Scalability is achieved by having many shards validating transactions in parallel. Crucially, cross-shard communication is not required during transaction settlement, ensuring performance is not degraded as the system scales.

• Security is achieved by decomposing it into its sub-components, each addressed by a sufficient amount of validation resources. Users can independently verify the ledger histories of individual tokens that they receive, eliminating the need to trust validator consensus.

• Decentralization is achieved by having a sufficient quorum of stateful and stateless validators per shard, managed in a permissionless way by on-chain Proof of Stake processes. Stateless validation allows anyone with consumer accessible hardware to participate in verifying blocks without synchronizing the chain in advance, democratizing access and enabling mass participation.