2. Blockchain Trilemma

2.1 Blockchains Have Problems

Extant blockchain platforms face a range of well-known and seemingly intractable set of challenges [3]. These include what is commonly known as the Blockchain Trilemma, referring to the balance that blockchains strive to attain between:

• Scalability (handling large volumes of transactions at high speed)

• Security (guaranteeing the validity of transactions and protecting data)

• Decentralization (distributing transaction validation among nodes to eliminate a central point of control and to ensure accuracy and fairness).

The three properties are linked in that an increase in one generally entails a tradeoff with the others. As an illustrative example, the Bitcoin network is optimized for security and decentralization at the expense of scalability. This fact was made amply clear in late 2017, when backlogged transactions on the network resulted in exorbitant transaction fees [55]. One approach that Bitcoin is taking to resolve the issue is layer-two solutions like the Lightning Network [4].

Development of the ARK Technology stack began with consideration of the trilemma and further reflection upon two crucially related challenges, namely:

• Interoperability (enabling independent chains to exchange value and information)

• Sustainability (creating self-sufficient and self-governing environments).

2.2 ARK’s Approach to the Blockchain Trilemma

ARK uniquely addresses each aspect of the trilemma.

ARK achieves scalability through a multi-chain approach and ARK SmartBridge Technology. Highly complex business processes can be run on a bridgechain with only the results being transferred to the main chain, thus increasing efficiency through interoperability.

Security is ensured through a modified version of the Delegated Proof-of-Stake consensus mechanism, wherein token holders determine which nodes are deemed worthy to secure each network, as explained in Section 4.

Decentralization is determined by the needs of the system architects of each bridgechain. ARK’s flexible technology can expand to include thousands of nodes, or contract to a few high-powered nodes capable of breakneck performance. Developers using ARK technology hold the power to optimize each network as needed.