Blockchain, the Scaling Dilemma and ParallelChain™’s Proof-Of-Immutability (PoIM)

by Jason Li

In 2021, blockchain technology will cross the chasm from early adopter to mainstream, and this has drawn much attention. However, scalability has remained a challenging issue and many of the latest generation of blockchains are looking to resolve this conundrum through several solutions, which are typically classified into two types: Layer 1 and Layer 2 solutions.

Layer 1 protocols propose modifications to the blockchain (i.e., includes all approaches that modify the blockchain from within such as consensus and data storage), while layer 2 protocols propose mechanisms that are implemented outside of the blockchain (i.e., includes all the approaches that add an external chain, such as sidechains). In all cases, these scaling solutions are all about the implementation of the consensus protocols that make sure that every new block that is added to the Blockchain is the one and only version of the truth that is agreed upon by all the nodes in the Blockchain.

Here we will look at the most mainstream solution in Layer 1 and Layer 2 to solving the scaling puzzle and examine how they impact the blockchain.

1) Layer 1 scaling protocol: sharding — in this case, the blockchain network is divided into multiple committees, each processing a separate set of transactions — the blockchain is, in effect, split into multiple shards. Ethereum 2.0 is an example of sharding: in this context, sharding will reduce network congestion and increase transactions per second by creating new chains, known as shards. The advantages are numerous:

a) Sharding is a good way to scale if you want to keep things decentralized as the alternative is to scale by increasing the size of the existing database.

b) More network participation by lowering hardware requirements, thus a more decentralised network.

c) Increase in security through decentralization because the more decentralized the network, the smaller the attack surface area.

However, sharding does not come without challenges and some of the effects below are potentially risks in a sharded blockchain:

d) Cross-shard latency can become untenable (minutes).

e) Increases fragility and attack surfaces of the system.

f) Remains a computer science problem that is not entirely proven today.

g) Security is correlated with the value of the network– a single compromised shard could affect the whole network.

Other Layer 1 solutions such as Byzantine Fault Tolerance often come with a decentralisation angle that reduces the security on the blockchain.

Known examples of Layer 1 solutions are: Ethereum 2.0, EOS (asynchronous BFT), Iota (DAGs).

2) Layer 2 protocols: The main layer 2 protocols (a.k.a off-chain) consist of sidechains or childchains; these are separate blockchains, which are not standalone, as they are pegged in some way to the main chain. The main chain and the sidechain are interoperable, and assets can move freely from the main chain to sidechain and vice versa. These are much more common in the payment space (payment channels) as they can process certain transactions (e.g., micro-payment transactions) outside of the blockchain, and only record important transactions (e.g., final balances) on the blockchain.

Second layer solutions succeed in mitigating some of the scalability challenges of the blockchain: payment channels can solve throughput, latency and cost issues to a certain extent because transactions are handled outside of the blockchain; however, they also suffer a number of other limitations that include:

a) If two participants need to exchange assets between each other, payment channels require both participants to be online during the same transactions.

b) They require tokens to be locked in the blockchain, before executing transactions.

c) They cannot be used for arbitrary applications, only payments.

On the other hand, sidechains are more flexible and allow an increase transaction throughput compared to activities on the main chain. Unlike payment channels, sidechains do not require participants to be online to process transactions. However, second layer solutions, in general, are complex to implement, introduce new security risks and challenges or have a limited applicability (e.g., payment channels).

Known examples of layer 2 protocols are: Plasma, Lightning Network.

3) ParallelChain™’s Proof-Of-Immutability — PoIM is a Layer 1 solution. ParallelChain™ takes an entirely different approach by implementing the Proof-of-Immutability (PoIM) to validate transactions. It is a non-consensus-based mechanism ideal for business usage.

The key parties involved:

(i) Record Creators

(ii) Selective Nodes (chain participants and/or independent parties whose identities are KYC-ed).

Any public node is free to write its own records, and each record is identified by its hash, which is distributed to selective nodes once the record is stored in the ledger.

Each selective node has its own hash vault to store the hashes received, but the data/hash record is carried only by the creator. The record remains untouched until it becomes relevant to a transaction that involves other nodes, thus needs to be verified that it has not been tampered with.

PoIM is performed as selective nodes compare with one another’s hashes stored in their own vault, as well as with the creator’s. Unanimous consent is required in order to confirm the immutability of records. Selective nodes will be rewarded with XPLL tokens (Digital Transaction’s utility token — now available for pre-sales) for their efforts.

Any discrepancy identified will be flagged as malice and reported to nodes of a higher level or third-party auditors; a further PoIM for the entire hash history will then be summoned.

The advantages of PoIM include:

a) Security is guaranteed.

• Non-creators only have access to the hash of data
• No data distributed = No chance for data leaks.
• No incentives for malicious activities.

b) Trust is earned: the immutability of each and every record can be randomly and repeatedly validated at will.

When ParallelChain™ is deployed as a public-permissionless blockchain (e.g., similar to Ethereum 1.0), the identity of record creator(s) can be partly hashed, and identities of selective nodes (e.g., independent parties) be KYC-ed.

When ParallelChain™ is deployed as a public-permissioned blockchain (e.g., similar to Ethereum 2.0), record creator(s) may utilise Digital Transaction’s own-invented multi-biometric recognition technology for their own voluntary KYC process. Digital Transaction shall decide whether to provide such service, depending on the amount of XPLLs held.

In addition to advantages from the PoIM protocol, ParallelChain™ also offers ultra-performance features that are supported by this solution:

· Lightning-fast throughput at 100,000+ TPS
· Real-time latency of <0.003 second
· Unlimited scalability (with zero degradation in performance)
· Data privacy protection
· Real-time double-entry prevention
· Built-in GDPR compliance

A paper titled “ABC: Asynchronous Blockchain with Consensus” supporting a non-consensus-based mechanism, references the principle of non-consensus blockchains.