Performance and Scalability of Blockchain Networks and Smart Contracts

Abstract: The blockchain technology started as the innovation that powered the cryptocurrency Bitcoin. But in recent years, leaders in finance, banking, and many more companies has given this new innovation more attention than ever before. They seek a new technology to replace their system which are often inefficient and costly to operate. However, one of the reasons why it not possible to use a blockchain right away is because of the poor performance. Public blockchains, where anyone can participate, can only process a couple of transaction per second and is therefore far from usable in the world of finance. Permissioned blockchains is another type of blockchain where only a restricted set of users have the rights to decide what will be recorded in the blockchain. This allows permissioned blockchains to have a number of advantages over public blockchains. Most notably is the ability to split the network into segments where only a subset of nodes needs to validate transactions to aparticular application, allowing the use of parallel computing and better scaling. Moreover, the validating nodes can be trusted, allowing the use of consensus algorithm which offer much more through put. In this paper, we compare public blockchain with permissioned blockchain and address the notable trade-offs: decentralization, scalability and security, in the different blockchain networks. Furthermore, we examine the potential of using a permissioned blockchain to replace the old systems used in financial institutes and banks by launching a Hyperledger Fabric network and run stress tests. It is apparent that with less decentralization, the performance and scalability of Hyperledger Fabric network is improved and it is feasible that permissioned blockchain can be used in finance.