Throughout 2017, development teams at Bitcoin and Ethereum shifted focus to building systems that sit on top of their blockchains, seeking to handle far more transactions than the main chains could ma
Throughout 2017, development teams at Bitcoin and Ethereum shifted focus to building systems that sit on top of their blockchains, seeking to handle far more transactions than the main chains could manage on their own. Bitcoin's core developers incorporated Segregated Witness, a fix that shrinks transaction size by stripping out redundant information. Ethereum received the Byzantium update, which employed a similar strategy for trimming transaction data and accelerating block processing.
Even with these upgrades, Ethereum handles only about seven transactions per second. That bottleneck leaves the network unable to support large-scale applications that need consistent, high throughput. When the Byzantium update rolled out, EtherDelta stood as the sole functioning decentralized application built on Ethereum, a cryptocurrency exchange handling 14 percent of all network traffic. Users complained that it operated too slowly, a natural consequence of its distributed architecture.
Earlier in the year, Ethereum founder Vitalik Buterin and Joseph Poon of the Lightning Network team unveiled Plasma, a system designed to process billions of transactions per second. Plasma stacks multiple blockchains on top of each other and incorporates ZK-SNARKs, the zero-knowledge proof system developed for Zcash, to conceal transaction details while enabling compression.
The addition of ZK-SNARKs creates two advantages at once: hidden transaction data for privacy and reduced computational overhead for scaling. According to the Plasma whitepaper: "Further benefits include proofs of computation which allow for faster syncing and verifying of chains themselves. Note that zk-SNARKs does not solve the issue around data availability, just reduces the amount of data requirements and computation. This is especially useful as a replacement or complement for any assert/challenge time-based mechanisms."
Christian Reitwiessner, lead developer for Ethereum's Solidity programming language and C++ client, emphasized that Plasma attacks the root of Ethereum's scalability problem. In research he published, Reitwiessner argued that genuine scaling requires users to stop validating every transaction broadcast to the main network. He wrote: "The plasma system defines a structure of interconnected blockchains arranged in a tree structure that promises scalable smart contracts. One of the key ideas there is that each of the blockchains regularly store their current block hash in their parent chain so that users can challenge potentially invalid child state transitions in the parent chain."
By allowing applications to run on separate, linked blockchains, Plasma frees users from processing all data flowing through Ethereum, an otherwise unworkable demand. Reitwiessner put it this way: "Scalability does not come from the fact that blockchains are relieved from their load by creating a big number of smaller chains and moving the transactions there. Scalability is only achieved once a user does not have to verify every single transaction that is sent to the system."
Private transactions and multi-chain systems remain experimental for now. But solutions like Plasma signal a path forward for Ethereum's throughput problem, potentially opening the door to applications that currently cannot exist on the network.
