62. What is blockchain network congestion, and how does it work?
Overloading a blockchain network is nothing more than when the number of transactions on a blockchain exceeds its capacity. The Blockchain, like any ‘normal’ network, has a certain number of transactions that it can handle per second. These are referred to as TPS.
Due to its huge potential to revolutionise certain industries, blockchain technology has grown in popularity in recent years. To fully understand the mechanism of blockchain overload, you need to know how blockchain itself and its components work. We have written about blockchain here: What is blockchain, and how does it work? [BASIC LEVEL].
Before moving on to the topic of today’s article, be sure to remind yourself of the lesson we mentioned.
How does blockchain work, and what does it consist of?
The blockchain ecosystem consists of a number of complex processes. These include block creation, consensus mechanisms or even miners. All to maintain the integrity and functionality of the entire network.
The blockchain is made up of important components that we need to look at before we move on:
Nodes, or individual computers connected to the blockchain network. Each such node stores a copy of the entire chain and participates in the validation and verification of a given transaction.
Consensus. These are mechanisms used by a given blockchain to reach consensus between nodes. The most popular consensus mechanisms include Proof-of-Work (PoW) and Proof-of-Stake (PoS).
Transactions, or the transfer of cryptocurrencies or information on a given blockchain. This is where you will find important details such as the address of the sender, recipient, or transaction amount.
And finally, cryptography, which safeguards the integrity and privacy of transaction data. It uses advanced data encryption algorithms for its operation.
Blockchain network overload – definition
As we mentioned, it is a situation where the network capacity is so low that it cannot process transactions. It causes congestion – transactions are delayed, and fees increase. Overloading the blockchain causes disruption to the entire blockchain ecosystem.
To give you a better understanding of the whole ambush, let’s have a closer look at the problem.
Each blockchain has a specific transaction rate per second (TPS). It refers to the number of transactions that nodes (computers), can process in a given second. If the number of transactions is huge, the blockchain network starts to experience congestion. It is unable to work, i.e., process the transactions in question. The result? We are dealing with network congestion.
Typically, as shown by the numerous studies carried out on this issue, the main cause of network congestion is the increase in the number of users using a given blockchain. However, this has its advantages – such bottlenecks motivate developers to find solutions to improve the performance of a given network. Such solutions include sharding.
Another reason that contributes to network congestion is the limitation of the scalability of a given chain. These are usually design issues.
Causes of blockchain congestion also include delays and poor blockchain throughput. The situation occurs when new blocks are added with procrastination and transactions are not approved in a timely manner. Such situations also affect the overall functioning of a given ecosystem.
Consequences of blockchain network congestion
First and foremost – higher transaction fees The mechanism of supply and demand works just as well in the world of cryptocurrencies as it does in traditional business. The higher the demand for transactions, the fees for them automatically go up. There have been cases where transaction fees have reached as high as USD 200!
Longer waiting times for transaction approval. When the network is congested, you can wait up to an hour for a transaction to be approved. In this situation, the blockchain may ask you to pay an additional fee to speed up the process. Your transaction will then be given execution priority.
Network congestion is strongly linked to the scalability of a given blockchain. It has not been known for a long time that ‘older’ blockchains such as Ethereum have a problem with it. Such networks can process a certain number of transactions per second. Therefore, developers are coming up with all sorts of solutions to fix this issue. “Younger” networks, such as Solana or Polygon, for example, have far greater scalability and rarely experience this type of issue.
How do you deal with network congestion?
There are a number of solutions that can ease the burden on the main chain and speed up the whole process. Here are some of them:
- Off-chain solutions. These are, for example, side-chains or payment channels operating outside the main chain. Transactions carried out in this way are faster and have lower fees. They also ease the burden on the main chain and minimise the occurrence of congestion.
- Network updates and improvements to existing protocols. We are talking about improved consensus algorithms, sharding, or Layer 2 solutions. Their purpose is to increase the capacity and performance of a given network. At the same time, these upgrades improve protocols, eliminate scalability constraints, and optimise transaction processing.
- Increasing the block size. This procedure also allows more transactions to be performed per second. However, it must be borne in mind that a larger block requires more computing resources. The balance between the size of a given block and the performance of the network is crucial to the proper operation of the chain.
- Lightening Network (LN). It is a Layer 2 payment protocol. The payment channels of both parties to a transaction connect to each other, enabling secure and simultaneous processing of payments between each other.
- EIP (Ethereum Improvement Proposal) Put simply, Ethereum improvement proposals. These are proposals from users of a given network, regarding functions or processes that affect the scaling of a given network.
Solving this problem of network congestion is crucial for the proper operation of the entire blockchain network. Particularly as the blockchain is constantly evolving and gaining new applications.
Getting rid of scalability constraints, optimising transaction processing, and improving the user experience – this is the ongoing work of the developers.
You already know how blockchain network congestion works and what characterises it. From now on, you will effectively deal with network congestion!
Complete today’s lesson!
- Examples of the use of blockchain technology [BASIC LEVEL].
- Is blockchain secure? [BASIC LEVEL].
- What is Proof-of-Work (PoW) and what is Proof-of-Stake (PoS)? [BASIC LEVEL].
- How to transfer cryptocurrencies? [BASIC LEVEL].
- Second layer – what is it? [INTERMEDIATE LEVEL]
- What is the Lightening Network, and how does it work? [INTERMEDIATE LEVEL]