Raiden, lightning and plasma aren’t the only contenders in crypto speed battle

Transaction completion speeds are one of the most buzz-worthy topics in cryptocurrency and for good reason. In a myriad of ways, many cryptocurrency projects have made the major technological advancements necessary to put cryptocurrency ahead of fiat currency in this category. Yet, there are many challenges that remain.

Let’s take a look at some of the barriers that have prevented the possibility of faster cryptocurrency transactions and also consider some of the current blockchain solutions that might improve transaction speeds in the near future.

Current barriers to speed

There are numerous barriers that have prevented Ethereum and other cryptocurrencies from becoming practical for P2P payments.

First, Ethereum uses an on-chain solution to verify and process transactions. The nature of blockchain technology requires every node on a network to process every single transaction. While this solution makes blockchains more secure, it doesn’t make them 100 percent safe from hacking attempts. Furthermore, the amount of transactions on the Ethereum blockchain at any given time has an effect on the average transaction speed and cost of each payment.

As more cryptocurrency projects are reliant upon Ethereum’s platform to create their own ERC20 tokens and as more people want to use the blockchain network for P2P transactions and decentralized applications (Dapps), Ethereum becomes less practical as a blockchain solution that can rival technologies offered by fiat money processors (i.e. Visa and Mastercard). While Ethereum is making advancements – such as sharding the network – to increase its average transactions per second, which is currently only at around 10 to 20 tps, on-chain transactions using Ethereum can’t reach the level needed to meet increased user demand.

Current off-chain scalability solutions

Ethereum, Bitcoin, and all major cryptocurrency project teams realize the inherent transaction speed limitations of blockchain technology. That’s why we continue to see these and newer projects working on new technologies that can increase throughput capacity, the main projects are:

Lightning Network 

Major cryptocurrency projects like Bitcoin and now Stellar are using the Lightning Network as a scalability solution. While this solution might be an improvement when compared to paying $50+ per average on a BTC transaction during high network traffic times, it still presents many new potential problems.

Lightning Network’s collateral with each user needs to be managed individually with expensive on-chain transactions. Because the sum of the collateral required must equal total transaction volume, there is an astronomical amount of money needed just to keep the network operational. For example, if an anticipated one million users have an average transaction volume of $10,000 per month, Lightning Network will need to keep $10 billion in collateral to just continue working.

Lightning Network’s collateral with each user needs to be managed individually with expensive on-chain transactions. Because the sum of the collateral required must equal total transaction volume, there is an astronomical amount of money needed just to keep the network operational. For example, if an anticipated one million users have an average transaction volume of $10,000 per month, Lightning Network will need to keep $10 billion in collateral to just continue working.

Raiden Network

When compared to Lightning Network’s solution, Raiden is simply a copycat. Similar to Lightning Network, Raiden requires rigid funds to be locked up and utilizes a complex routing solution. Since Raiden isn’t an ultimate solution and can only slightly increase scalability, blockchain projects are continuing to create something that can be considered the be-all and end-all solution.

Plasma

Plasma is Ethereum’s latest layer 2 off-chain scaling solution. Advocates call Plasma a novel answer to blockchain congestion, which allows developers to create “child” blockchains. Essentially, this solution aims to reduce the amount of interaction that applications must have with the Ethereum main chain. OmiseGo is a project that’s basing its future on the success of Plasma. While there are many issues with the OmiseGo project itself, the biggest problem is that Plasma’s child chains don’t survive 51% attacks on the main chain.

Another big issue is the fact that it’s relatively easy to create fraud proofs with this system. In other words, it’s possible to cheat the system and create cryptocurrency out of thin air. Currently, Plasma appears to be very theoretical and still has a long way to go before it can be considered a practical, fast, and secure off-chain solution.

An alternative scalability solution: Liquidity.Network 

The solutions mentioned above are comparatively better than just relying upon on-chain transactions. That said, they each have their own specific limitations to work out before they can become the go-to scalability solution.

In contrast, Liquidity.Network provides a vastly improved off-chain solution that is better for quite a few reasons. This solution offers superior speed, easier routing, greater security, and many more benefits.

For openers, Liquidity.Network doesn’t require rigid locking of funds (a.k.a. collateral), a major factor limiting the possibility for mass adoption of Raiden and Lightning Network. Compared to these projects, Liquidity.Network offers a simplified routing solution that is also decentralized.

The speed of Liquidity.Network is already comparable to fiat currency payment processors like Visa (~56,000 transactions per second) and has the potential to be much higher. Of the solutions mentioned above, Plasma proposes the highest transactions per second at around one million; however, this technology is still very far from achieving the security necessary to be implemented in real-world applications by blockchain projects. On the other hand, Liquidity.Network is much more secure and also capable of easily meeting the scalability demand needed for mass adoption.

What’s needed to make blockchain more scalable?

Certainly, blockchain technology must become faster at processing transactions. On-chain solutions have proven to be too slow and costly for many years. While off-chain solutions thus far have provided good proposals, they have failed to provide the breakthrough we need.

Liquidity.Network aims to offer a better solution that not only increases transaction speed but also does so without compromising on other essential factors like security, transaction costs, and the for need for 100 percent decentralization.

Image uses Raiden Image by GiulioMiccoli / CC BY 4.0

Dr. Arthur Gervais is a blockchain, security and payment expert and researcher. He is an assistant professor at the Imperial College in London and the co-founder of​ ​Liquidity Network​ -​ ​a third-generation, off-chain payment solution that resolves and improves Ethereum scalability issues. Dr. Gervais’ current academic research explores scalable, decentralized blockchain solutions, and focuses on how the real world can connect with Blockchain.