NEO claims to have cracked the scaling puzzles and reports that by 2020 it will process 100,000 transactions per second without sharding.

This report follows the start of the NEO DevCon that is currently taking place in San Francisco. If the platform manages to implement such a high capacity scaling solution without the challenges posed by sharding then it will have set the pace for the rest of the cryptocurrency world.

NEO is the main Ethereum competitor as they both offer blockchain platforms on which developers can create and deploy decentralized applications. NEO has been working on a project known as Trinity to address its scaling issues and allow for faster transaction times.

This method involves the use of what is referred to as StateChannel to allow for off-chain transaction processing using smart contracts or multi-signature agreements. These off chain channels can make as many transactions as required but only upload the closed contract result to the blockchain.

This would mean that transaction fees would only be charged once as all the off chain activities add up to a single transaction as supported by the single blockchain entry.

The Prevalent Scalability Problem

Scalability is one of the most elusive objectives of the blockchain model. This stems from the fact that most of the systems created using the technology are unable to handle the full transaction capacity that their design allows.

This has caused the major networks like Bitcoin and Ethereum to suffer from slow transactions and subsequently high processing fees for users. In theory, Bitcoin can handle up to seven transactions per second but only manages three or four per second.

On the other hand, Ethereum supports approximately 15 transactions per second in contrast to its theoretical 30 transactions per second. NEO, at the moment, has the capacity to transact approximately 10 transactions per second.

Compared to legacy transaction platforms like Visa and PayPal, these figures are far from satisfactory. PayPal carries out an average of 193 transactions per second while Visa does around 1,667.

The main difference between these platforms is the decentralization feature of the blockchain technology that relies on network nodes to confirm transactions. This means that the higher the number of nodes on a given network, the longer transactions will take to be validated.

But if ever these innovative models are to compete or even replace the incumbents, they would have to figure out a way to scale. The Ethereum blockchain has long touted the Raiden Network and sharding as the way to go.

Sharding Explained

Sharding involves breaking down transaction data into small portions (shards) and having network nodes work on the different portions side by side so as to give the result faster. The method is not without its challenges though.

The system has to incorporate a method of detecting fraud in case some nodes verify an invalid transaction. It is also possible for attackers to take over the majority of nodes that are involved in the verification process. Cross shard communication is yet another challenge on this model.