Slow transaction speeds are one of the major issues faced by the Nakamoto Consensus, caused by a low block generation rate and low block capacity. By contrast, there are different partitions on SmartX system which enable it to generate blocks independently. In doing so, the processing speed of the network increases linearly as the number of partitions increases, hence the transaction speed is greatly improved. Also, energy consumption and transaction costs are reduced dramatically.
What are the current approaches to achieve higher TPS?
Layer-2 Scaling Solutions
Ethereum has proposed many capacity expansion schemes using layer-2 protocols, such as state channels and the plasma protocol. The state channel was first proposed by Jeff Coleman in 2015, while the plasma protocol was proposed by Vitalik and Joseph in August 2017.
A state channel is an off-chain tech for performing transactions or status updates. Nonetheless, what happens in the state channel remains highly reliable and complete: if anything goes wrong, we still can trace back to transactions on the chain. Payment is one of the general applications of a state channel — it can not only be applied to payments, but also to other status update scenario on the blockchain, such as internal changes of smart contracts.
Plasma, on the other hand, is an off-chain expansion technology that relies on Ethereum’s security. Plasma takes a different approach form state channel in that it expands through Ethereum sub-chains. These sub-chains can produce their own sub-chains and thus it is possible to run complex operations on the sub-chain. An example of this would be the ability to run complete applications with thousands of users, all the while maintaining minimal interaction with the main chain. Since these operation do not need to be replicated across the Ethereum main-chain, the Plasma sub-chain runs faster and costs less.
The layer-2 network concept radically reduces the load on the main network, but requires smart contract developers to ensure certainty and consistency of the sub-chain themselves, which more or less increases the burden on the developer.
The concept of the Lightning Network was first proposed in the paper The Bitcoin Lightning Network: Scalable off-chain Instant Payments in February 2015. Its main idea is very simple — process a large number of transactions outside the Bitcoin blockchain.
Bitcoin’s blockchain mechanism itself offers good credibility, however it is slow. This raises the question: is it necessary to have such a high degree of credibility for a large number of small transactions? Lightning network improves off-chain transaction channels through smart contracts.
There are two main concepts at the core of the lightning network: RSMC (Recoverable Sequence Maturity Contract) and HTLC (Hashed Timelock Contract). The former solves the confirmation problem of off-chain transactions, while the latter solves the problem of the payment channel.
RSMC functions similarly as a reserve mechanism, assuming that there is a “micropayment channel” (pool of funds) between the two trading parties. Both parties deposit some funds into the “micropayment channel”. After each transaction, both parties will confirm the new capital distribution plan and sign to abandon the older version. The final transaction result will be written to the blockchain network for final confirmation when a withdrawal request is finally made. As you can see, you only need to go through the blockchain when you want to withdraw money.
Any version of the distribution plan needs to be signed by both parties to be legal. Either party can make a withdrawal at any time, by providing a fund distribution plan which was signed by both parties (meaning it must be the result of a transaction). Within a certain period of time, if the other party provides evidence and prove that the distribution plan was previously abandoned (not the latest transaction result), the capital forfeiture is given to the challenging party. This ensures that no one will withdraw money using an old transaction.
HTLC is a kind of time-limited transactions. Both parties of a transaction agreed that the payer will freeze a sum of money and provide a hash value. If someone can come up with a string within a fixed time and make its hash value match with the known value (it implies that the transaction was an authorized payment by the payer), the money will be then transferred to the payee.
Lightning networks are only suitable for scenarios that require less consistency and accuracy, such as micropayments. The implementation of the lightning network consisting of many coins still relies on the interaction between the two parties of the transaction, which adversely affect the payment experience.
How is SmartX capable to do fast transactions?
Based on the above mentioned existing approaches, SmartX’s innovations are able to avoid some technical shortcomings and overcome limits in application scenarios. The core idea in both layer-2 scaling solutions and the lightning network, is to use smart contracts to reduce the workload on main chain consensus. SmartX will instead focus on improving main chain speed and let consensus make full use of bandwidth and computing resources. That said, SmartX will support smart contracts and is capable to use smart contacts to achieve such an expansion scheme. It will make the SmartX network even more robust if adding a layer-2 network or lightning network expansion scheme to SmartX’s main chain consensus.