There has been considerable hype around stateless blockchains representing the cryptocurrency industry’s future. But is this really true? We want to examine stateless blockchains and whether or not they represent the imminent evolution of the vast crypto sector.
What Is a Blockchain?
It is a public ledger that records all transactions across many connected nodes. Blockchains store data in “blocks” connected to each other via cryptography. Each node (computer) connected to the blockchain can access the data in real-time but not edit it.
Think of a blockchain as a Google Docs spreadsheet shared by many computers. All the connected computers can view the data in real time but can not edit or corrupt it. Transparency is guaranteed to all network participants.
Bitcoin and Ethereum are the most popular blockchains, with BTC and ETH as their native tokens. Both blockchains are public, meaning you can view all the BTC or ETH transactions between wallets. You can also monitor which wallets hold a specific amount of tokens.
State Growth: A Challenge For Blockchains
Blockchain nodes are “stateful,” a technical term for machines that can store data. Anyone can connect their node to a blockchain and help store data to validate transactions. In return, they’ll receive a percentage of transaction fees paid to the blockchain.
Popular blockchains require a lot of nodes to store increasing amounts of data. For example, Bitcoin nodes currently store about 7 GB of data, and Ethereum nodes store 650 GB. The storage burden for blockchains increases linearly with their throughputs (transactions per second or TPS); this implies that a lot more storage is needed to increase throughput and bring blockchain technology to the masses.
For example, the Bitcoin blockchain can currently handle only 7 transactions per second (TPS). This throughput is not enough to make it a suitable payment option for global usage. For comparison, the Visa card network can handle up to 24,000 transactions per second, and Mastercard can process up to 5,000 transactions per second.
Bitcoin is decentralized, unlike Visa and Mastercard, which central authorities control. Bitcoin depends on the cooperation of independent node operators across the globe. If the throughput for the Bitcoin network wants to catch up with that of Visa and Mastercard, it requires a magnitude more nodes than currently connected to the network, and it’s difficult to convince independent actors to provide these nodes.
To solve the througput problem, researchers have proposed a “stateless blockchain,” as in a blockchain that doesn’t need to store much data. Instead, the nodes will have a constant size without affecting transaction througput.
“Stateless” is a misnomer in this case. The nodes still have a state, but one that’s negligible enough to not matter.
However, stateless blockchains remain conceptual at this stage. None have been deployed so far, and they’re impractical with current technology.
The Challenge With Stateless Blockchains
The primary challenge with a stateless blockchain is that users must store extra data called witnesses to help validator nodes verify transactions related to their accounts. For instance, the witness could be a merkle tree proving that the user’s account has sufficient balance to execute a transaction.
Witnesses change frequently, so it’ll be difficult for users to keep up. Imagine that you had to update some local data before using your credit card to buy something online; it’s too much of a burden for ordinary people.
Researchers have proposed building a stateless blockchain that doesn’t require witnesses, but no method has been finalized.
At this point, stateless blockchains are more of an illusion despite considerable hype in crypto news circles. However, no one can predict the future. They could indeed be what will drive mass adoption of blockchains for financial transactions, but for now, it’s only an interesting concept.