Aleo's dynamic sharding & ZK-proofs solve the blockchain scalability problem

One only needs to do a quick Google search to see the apparent extent of the blockchain scalability problem, but the notion that it’s still a major issue isn’t true.

One only needs to do a quick Google search to see the apparent extent of the blockchain scalability problem, but the notion that it’s still a major issue is untrue.

In fact, numerous solutions have not only been proposed but also already implemented in real-world scenarios. The fact that scalability continues to be considered an issue is due to the enduring popularity of more established blockchains such as Ethereum and Bitcoin, but many people fail to realize that even these networks have the problem under control.

Unfortunately, it seems that many people just aren’t aware of the best solutions to blockchain scalability, or they don’t know how to access them, hence the myth that it’s a problem that still needs to be addressed. But with any luck, that will soon change.

Why couldn’t blockchains scale?

Blockchains are decentralized networks that enable users to interact with one another without any central authority. They’re made up of independent nodes that run the blockchain software, with each one having equal rights to every other node in the network. These nodes work together to process transactions and reach agreement on the state of the ledger, using specialized consensus mechanisms.

As the popularity of early networks like Bitcoin and Ethereum grew, the scalability of blockchain was indeed a major challenge. As the number of nodes increased and more people started using these networks, they started to experience congestion, and transactions that once took a few seconds would experience delays of minutes, and eventually even hours. It’s not unheard of for some Bitcoin user to wait several days before their transactions are confirmed!

It’s not difficult to understand why this happens because Bitcoin’s architecture means it can only process around seven transactions per second. That’s pretty poor compared to Visa, which can handle several thousand transactions per second, and it’s easy to see how a backlog can quickly build up when the network is busy.

Ethereum is similarly limited, and there are several reasons for this poor performance. One of the main limitations is the processing power of blockchain nodes. In the case of Bitcoin, which utilizes a proof-of-work consensus mechanism where nodes compete to solve increasingly complex mathematical puzzles, the hardware requirements increase progressively over time. Whereas it was once possible to “mine” Bitcoin using a PC, these days it’s necessary to invest in thousands of dollars worth of high-end processors to be able to compete successfully in the race to process transactions. These hardware problems constrain the transaction throughput of nodes and can also impact Ethereum, albeit to a lesser extent. Because each of the nodes must achieve consensus before new blocks are created, this holds back the network.

Another key challenge is the limited block size of Bitcoin and Ethereum. In the early days, Bitcoin block sizes were capped at around 1 megabyte, meaning each block could include roughly 2,200 transactions. However, the network’s architecture only supports one new block being added every 10 minutes, creating a bottleneck as the number of transactions increases.

ZK-proofs & sharding

Scalability is still a problem for Bitcoin and Ethereum, but that’s not really the case on newer blockchains that feature optimized architectures.

One of the most impressive solutions comes from Aleo, a confidential Layer-1 network that’s focused on enabling private transactions to encourage institutional adoption. It has implemented a combination of zero-knowledge proofs and a novel sharding technique that dramatically increases the number of private transactions it can process.

With its ZK-proofs, Aleo is enabling blockchain users to send funds privately to any other user by obscuring the wallet addresses of themselves and the recipients, in addition to the amounts sent. As one of the most sophisticated blockchain privacy technologies, ZK-proofs ensure transactions are completely untraceable. But there’s another advantage to ZK-proofs as well, because by masking many of the transaction details, it means there’s less data for the network to process, reducing the computational load. As a result, transactions can be processed faster.

As for sharding, this means dividing up the network into smaller fragments called “shards”, which can be managed by the network more efficiently. In the case of Aleo, this means processing transactions and smart contracts separately, in parallel, to increase the overall throughput. Sharding also provides privacy benefits. Because only one node is responsible for processing certain transactions, the details will not be shared with the rest of the network, only the final outcomes.

Aleo isn’t the only blockchain to employ sharding, but the way it handles things is pretty innovative. It utilizes a number of components, with the most critical one being a dynamic sharding mechanism that allows the size and number of shards to be altered based on the current network load. By dynamically creating and merging shards, Aleo provides more flexibility to support massive transaction volumes when traffic increases, at the cost of using more energy. Then, it can scale down during quieter times to save energy.

Load balancing is also