ChainWeb and the Art of Scalable Blockchains

The proof of work(PoW) computation model of public blockchain technologies has been one of the major breakthroughs in computer science of the last decade. However, traditional PoW-based blockchains has proven to have major limitations in terms of throughput and performance when used in large scale scenarios. Most PoW blockchains such as Bitcoin are only able to process a handful of transactions per second; a statistic that pales compared to traditional centralized payment systems. Scaling trustless, PoW based computations represents one of the biggest challenges for the current generation of blockchain technologies in order to truly become a decentralized internet. Recently, a startup called Kadena that was initially incubated by J.P Morgan published a new decentralized protocol that might be one of the cleverest solution I’ve ever seen to try to address the scalability issue in PoW systems.

Kadena’s Chainweb is a new decentralized protocol that combines multiple blockchains to achieve PoW consensus at incredibly high throughput. Some of the initial benchmark showed that the Chainweb protocol can operate across over 1000 blockchain and process about 10,000 transactions per second which is miles ahead of other PoW systems. A good way to understand the relevance of Chainweb might be to understand other approaches to scale trustless computations in modern blockchain networks. Among those, Proof-Of-Stake and the Lightning Network are becoming increasingly popular in the blockchain community.

Proof-Of-Stake

Proof-Of-Stake(PoS) protocols emerged as a scalable alternative to traditional PoW systems. Essentially, PoS is an alternate way of verifying and validating the transaction or block. The method is based on a Validator (Equivalent of “miner” in the PoW) which selected by the amount of stake(coins) it holds and the respective age of the stake. If a Validator has 100,000 alt coins in a wallet, it will have an age attached to it on how long it has it. Here the 100,000 alt-coins is the stake. In any transaction, the aging gets reset. This amount is like the security deposit which means the Validator holds a significant stake in the alt-coin with good aging is more committed and combined with many other factors, will get a higher chance to validate a block.

PoS systems are an important alternative to PoW protocols but don’t come without limitations. For starters, PoS systems has been far less tested in financial transaction operations than PoW protocols which makes them a riskier alternative. More importantly, the fact that the different participants in a transaction need to stake funds in order to validate can be subjected to different regulatory controls in financial markets.

Lightning Network

Payment channels such as the popular Lightning Network are another interesting alternative to PoW protocols. The idea of Payment Channels protocols is to break down a transaction into a series of smaller payments executed through a channel. In that model, funds are sequestered from the main network and are used in a series of smaller payments (or commitments) between a specified set of actors, with the ability to net out the payments on the main network at any time.

For instance, suppose that two parties in a Lightning Network would like to engage in a transaction. They wll start by setting up multisig wallet (which requires more than one signature to enact a transaction). This wallet holds some amount of bitcoin. The wallet address is then saved to the bitcoin blockchain. This sets up the payment channel. At that point, the two parties will be able to conduct an unlimited number of transactions without ever touching the information stored on the blockchain. With each transaction, both parties sign an updated balance sheet to always reflect how much of the bitcoin stored in the wallet belongs to each.When the two parties have done transacting, they close out the channel, and the resulting balance is registered on the blockchain.

Payment channels are a promising alternative to PoW but also bring new challenges to decentralized transactions. Notably, the fact that funds must be pre-allocated for a channel imposes significant liquidity constraints which limits their availability to all but the largest stakeholders or those engaged in complicated multi-party arrangements.

Chainweb

The novel idea behind Chainweb is that the PoW protocol achieves consensus by processing a transaction through a network of chains that it calls Chainweb. In Chainweb, each chain must, in addition to validating transactions in its own chain, validate block headers of some number of pre-specified chains in order to produce a new block. The different chains integrate their Merkle roots with each other, ensuring that while they each act as a unique blockchain, they can still share information and create a consensus among the ledgers.

The Chainweb architecture enables to organize the different blockchains in arbitrarly complex topologies which allows its adaptability to different scenarios. To my knowledge, Chainweb is the only PoW scaling proposal that doesn’t require side channels and is able to preserve the security of the network as it scales.

Excited about Chainweb? Good! Because, in the next part of this article, I will deep dive into the Chainweb architecture and protocol.