Many projects in Web3 aim to gain mainstream adoption by providing faster solutions than in Web2. However, the more speed, the less decentralized. The Scalability Trilemma can explain this. 

Scalability, decentralization, and security are three crucial components of a blockchain network, and the trilemma concept explains how these three factors must be traded off. It claims that it is impossible to simultaneously optimize all three aspects. Decentralization is frequently sacrificed in order to increase scalability, while scalability is frequently reduced in order to increase security.

Is high performance more important than decentralization? This course will explain just that →

Performance vs Decentralization

To be fully decentralized, a company must distribute its decision power across a network of nodes. These nodes might be across the globe, meaning if a decision needs to be made, it takes time to reach each one and gain a response. 

The Nakamoto Coefficient is a metric used to gauge how well a blockchain network balances performance and decentralization. It is described as the proportion of computing power controlled by the largest participant to the total computing power of the network. A network with a high Nakamoto Coefficient is highly centralized, whereas one with a low coefficient is more decentralized.

Developers must find a way to strike a balance between the trade-offs between scalability, decentralization, and security in order to increase the efficiency and decentralization of a blockchain network. 

For scalability, block size optimization, sharding, and second-layer solutions (like Lightning Network), as well as for decentralization and security, increasing the number of validators and user participation, as well as implementing strong consensus algorithms and regularly conducting security audits, are all strategies that can be used to achieve this balance.

Therefore, fast speeds and security from decentralization don’t really go hand in hand, making companies decide which reigns more important for their product. After all, not everything requires full decentralization.

For example, low latency projects, such as streaming services, would benefit more from high-speed performance, seeing that the user experience is worth sacrificing security from decentralization. 

Whereas more sensitive areas like data infrastructure, for example, or anything that would cause risks when relying on one trusted party should require full decentralization to avoid provoking major hazards in the space. In this sense, for KYVE, decentralization is much more important than high performance.


Congratulations! You made it through our course on Decentralization, Performance, and Security!

Want to learn more? Feel free to check these resources:

  • Curious to learn more about how centralization can lead to major risks in Web3’s data layers? Read our article on the topic here.
  • Run into any terms marked with * that you’re not aware of? Visit the KYVE Glossary to learn what they mean!