Scaling Solutions: What Are They?
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This is preview from our May Newsletter. Stay tuned for the release of the rest of the feature along with the newsletter.
Scaling solutions is a term that’s thrown around fairly often in the cryptocurrency space. We hear it in regards to a variety of blockchain protocols and tokens, along with the idea that they’re imperative for mass adoption and accessibility.
So what are scaling solutions and why are they so important?
First, you have to understand a bit about the current limitations of the cryptocurrency and blockchain space. Bitcoin, the original cryptocurrency, is based on a proof-of-work consensus protocol. Proof-of-work relies on computers solving complex problems to receive a reward. This process takes time and is energy intensive. This can result in a slower transaction settlement.
While in the early days of cryptocurrency and blockchain, this wasn’t as much of an issue. The overall transaction volume was much less, smart contracts were still new, and decentralized applications had yet to be prevalent. Now, this isn’t necessarily the case. With a significantly larger and more complex user base, blockchain protocols need to be able to fully adapt to the needs of their users. This includes providing them with the speed, and cost-efficiency that they need.
With this being said, scaling solutions are simply solutions for ensuring that transactions can be both affordable (with lower transaction fees) and fast. There are a variety of types of scaling solutions as well. Some use Layer-2 scaling like proof of stake, others use different consensus protocols that may be more efficient than proof of work.
