V System

Since Bitcoin was not designed for general data usage, attempting to use the

Bitcoin style blockchain for data storage has proven to be difficult and

expensive. Bitcoin protocol limited legitimate data usage to the scale of 100

bytes per transaction - although this limit changes over time, the magnitude

stays essentially the same. This limitation was deliberately put in place at the

creation of Bitcoin, as the accommodation to data usage is a conflicting goal to

the system performance. It has been a prolonged battle and drama to raise

Bitcoin's maximum block size limit, by which evidently reflects that inherent

scalability limitation of the technology.

The scalability issues stem from the fact that, unlike previous distributed

databases, Bitcoin is an extremely redundant system. Each full node of the

Bitcoin network has a complete dataset of the Bitcoin blockchain, and must also

validate the blockchain in its entirety. To promote data usage, it would cost

even more consumption of the already-limited storage resources, and reduce

the maximum transactional throughput of the system. The high cost associated

with such extreme level of redundancy and resource straining discourages the

scaling of blockchain.

Over the years, there have been many attempts to make blockchain more

scalable. For instance, Bitcoin initially tackled the redundancy issue via a

system called light-weight validation, which cleverly organized transactions in a

merkle tree data structure, such that users can still follow the blockchain

consensus in a decentralized fashion by only using light-weight nodes. This

technique was able to significantly lower the redundancy level of the Bitcoin

network. Currently, the number of light-weight nodes far exceeds the number

of full nodes in the Bitcoin network.

Blockstream later suggested that applications may be offloaded to sidechains

[Back 2014]. In order to maintain a Bitcoin‐centric world, a pegging system to

Bitcoin was proposed in this scheme.

Besides from that, Ethereum proposed to tackle the redundancy level via

sharding. Sharding is a distributed database technique to divide a large

database into smaller ‘shards’, which is stored in different nodes. However, due

to the lessening redundancy, this system introduced a risk of reduced shards

availability. To counter this, Ethereum would likely require the existence of

several highly-available full nodes storing its whole blockchain.