Scalability and decentralization

One of the key advantages of blockchain is decentralization, which is the removal of any single authority to control the network. Unfortunately, this has a downside, which is its effect on the performance of a system. Blockchain systems work by keeping all the nodes of the network in sync by trying to achieve consensus so that every computer running a blockchain sees the same system state. More nodes on the network typically results in less centralization. This also means that more work must be done to ensure that all the network participants are in agreement with each other, which limits performance and scalability.

There are a few reasons why a larger number of nodes hinders performance:

• Each node typically must process all transactions. The higher the number of transactions to be processed, the more processing power and network throughput that each node requires. As requirements go up, the network becomes less decentralized as fewer and fewer groups can...