For blockchain to become a global payment system, it needs to process and update millions of transactions every second.
The term “Blockchain trilemma” was coined by Vitalik Buterin (founder of Ethereum) while talking about blockchain design tradeoffs. In the current blockchain and crypto space, blockchain system architects struggle in balancing decentralization, security, and scalability simultaneously on the underlying architecture of a given blockchain without any tradeoffs. A system has to make trade-offs with respect to one element when the other two are being optimized.
Decentralization, in general means, distributing and delegating activities away from a central authority. Decentralization of a network diversifies ownership, value and thus, influence. The distribution of data across multiple nodes on the blockchain network makes it censorship-resistant. In order to make it more secure, a consensus is established between multiple nodes. Utilizing a decentralized system does however have the consequence of a lower level of performance. Distributed systems are known to be not as efficient as centralized systems, stemming from the additional time required to communicate between the different nodes.
For blockchain to become a global payment system, it needs to process and update millions of transactions every second. The transactions not only need to be fast but also safeguarded from hackers, rogue agents at the same time if world-class scalability has to be achieved. This is difficult to achieve since any relaxation in consensus requirements for the ledger updates can make the system more vulnerable to attacks.
For CBDC to be ubiquitously accepted, it must achieve the speed of credit card/ debit card-based transactions and a higher level of security for high-value transactions.
Higher the performance, higher the network latency, higher possibility of attacks.
A blockchain platform can be called secure when it can be resilient (prevent attacks) in the short term and immutable (unchangeable) in the long run. The speed of transactions is a determining factor in gauging the security of a platform. If the number of transactions per second (TPS) is high then it is more prone to attacks. This is due to the fact that decentralised networks are asynchronous in nature and it takes longer for information to reach from one node to another.
MUI MetaBlockChain has successfully solved the trilemma by employing a hybrid payment architecture, identity-based blockchain and high degree of decentralization.
What is a hybrid payment architecture and how does it help?
A hybrid payment architecture treats micro and high-value transactions differently and caters to both. For CBDC to be ubiquitously accepted, it must achieve the speed of credit card/ debit card-based transactions and a higher level of security for high-value transactions.
To achieve a high speed in microtransactions, MUI MetaBlockchain utilises a centralised structure. The users choose Bank Node service providers and give a token contract to issue digital cash. When the user pays the merchant with digital cash, the merchant can claim the digital currency to the issuing Bank Node.
As for high-value transactions, MUI MetaBlockchain works on normal blockchain consensus protocol where all the Bank nodes are involved in the consensus of multiple digital currencies. The platform is decentralised and identity-based, thus any transfer between two parties is a digital cheque. This payment process is slower than the conventional credit card payment, but it is much faster and costs less than an account-based international bank transfer.
What’s Identity Blockchain and what does it do?
In the simplest words, identity-based blockchain stores identity records on its ledgers. For every account, the identity blockchain stores Decentralised Identities (DIDs) and for each transaction a public key pair, and the corresponding private key is stored on the user’s device. This makes the system self-sovereign, without trading off security for any transaction irrespective of its monetary value. MUI MetaBlockchain realises the highest level of security by employing a built-in identity Blockchain on the infrastructure.
How do we retain decentralization while maintaining security and scalability?
Decentralization comes with a common misconception that it is binary in nature - either fully decentralized or centralized. In reality, however, there are varying degrees of decentralization possible. The more decentralized a system is, the more nodes are involved in it and the more secure it is. MUI MetaBlockchain enjoys a high degree of decentralization as it incorporates several bank and user nodes. To ensure even more safety and security, the consensus protocol used by the MUI Meta Blockchain is a combination of PBFT (Practical Byzantine Fault Tolerance) and PoS(Proof of Stake).
By enabling decentralization, scalability and security we make way for a transparent and effective digital currency ecosystem. This ecosystem could serve as the foundational layer to a more digital future. The fourth industrial revolution is likely to have a digital economy using central bank digital currency along with machine-to-machine (M2M) transfers, smart cities, automatic payments within Internet-of-Things and much more.
MUI MetaBlockchain is the first-ever truly identity-based blockchain. It is developed by SovereignWallet Network. Visit our site for more information on our goal to empower self-sovereign finance for millions of people worldwide.