Solving Blockchain’s On-Chain Dilemmas

Achieving robust and scalable blockchain solutions through verification and hybrid on-chain and offchain integration

• By Blane Sims

Ethereum’s Vitalik Buterin is often cited as describing blockchains as “a world computer” where decentralized nodes run Smart Contracts and use consensus protocols to ensure everyone behaves honestly. Blockchain evangelists sometimes take this analogy literally when trying to imagine a future where all compute runs on-chain and when arguing that any compute transactions that take place offchain are, by definition, less secure. 

With so many conversations focused on how to scale on-chain compute, we risk overlooking the types of compute that will most likely always remain offchain. And in doing so, we’re losing focus on the important advances that are being made to create highly secure, verifiable, offchain compute.

First, let’s shout out to all the amazing things you can do on-chain. Smart contracts are absolutely the right building blocks for adding data and performing transactions on blockchains. They allow us to structure the assets stored on-chain, define the actions that you can take on those assets, and enforce who is allowed to transact. 

While innovative, smart contracts are limited in scope and struggle with managing complex application logic. Additionally, high transaction fees and slower processing times on congested networks, like Ethereum, make it impractical for applications requiring high throughput and real-time performance.

Instead, the solution lies in a hybrid approach that leverages the strengths of both on-chain and offchain processes. Central to this approach is the concept of verified compute.

Verified compute allows complex computations to be performed offchain and then securely validated by the blockchain. This ensures that offchain computations are trustworthy and tamper-proof, combining the efficiency and flexibility of offchain processing with the security and transparency of on-chain validation. By focusing on verified compute, we can address the limitations of a fully on-chain model and achieve a more balanced, scalable, and secure blockchain integration.

Not everything belongs on-chain

The vision of a fully on-chain future, where every computational process is executed on blockchains, faces significant practical challenges. While Layer 2s and alternative blockchains have dramatically addressed some of the early scaling concerns for smart contracts, they do not fundamentally change the fact that smart contracts are meant to serve a fairly narrow set of purposes and are not meant to be a general-purpose computer.

Real-world applications cannot be entirely built on-chain. Identity, data, and financial assets have significant dependencies on real-world systems that do not exist on-chain. Integrating with the real world necessitates working offchain. For instance, connecting blockchain applications with traditional financial systems, regulatory frameworks, and identity verification services requires robust offchain interactions.

Additionally, AI models, big data processing, and complex business processes currently require offchain computing resources – and likely always will. The computational power and data storage requirements for these tasks far exceed the capabilities of existing blockchain technology. It should come as no surprise that nearly all Web3 applications are primarily built using offchain code. Without this offchain component, we wouldn’t have any practical, usable applications. Offchain computing provides the flexibility and efficiency needed to handle complex tasks that are impractical to execute on-chain.

However, using offchain code to build on-chain transactions introduces new vectors for fraud, hacks, and compliance issues. When offchain computations interact with the blockchain, ensuring the integrity and security of these interactions becomes paramount. This is where verification becomes crucial – by providing a transparent way to execute offchain code and an immutable attestation to prove that the data and code haven’t been tampered with, we can ensure security and trustworthiness in the hybrid blockchain model.

Verification acts as a bridge between the on-chain and offchain worlds, ensuring that the results of offchain computations are trustworthy before being accepted by the blockchain. This approach combines the efficiency and flexibility of offchain processing with the security and transparency of on-chain validation. By focusing on verified compute, we can address the limitations of a fully on-chain model and achieve a more balanced, scalable, and secure blockchain integration.

Trust through verification

While offchain computations provide the necessary flexibility and efficiency, their results must be trusted and integrated seamlessly with on-chain data. This is where verification plays a pivotal role.

Verification ensures that offchain computations are accurate and tamper-proof before being accepted by the blockchain. This is achieved through game theory and cryptographic proofs, where offchain computations generate a proof that can be efficiently checked by an independent node network without revealing the underlying data. These proofs confirm that computations were performed correctly and that the results are reliable.

For instance, when integrating blockchain with offchain data sources, verification mechanisms guarantee that data exchanged between systems has not been altered and is auditable. The accuracy and reliability of information are paramount in applications involving financial transactions, legal contracts, and personal data. Verification mechanisms ensure that offchain data has not been altered before its cryptographic hash is recorded on the blockchain.

Furthermore, verification mechanisms are essential for achieving transparency and building trust in decentralized applications. They allow users and developers to validate the correctness of offchain computations without compromising system performance. This trust is particularly important in decentralized finance and other blockchain-based applications where accurate and secure data handling is crucial. Verification ensures that all parties can trust the system, even when they do not inherently trust each other.

Verification acts as a bridge between on-chain and offchain processes. It ensures the reliability and auditability of offchain computations, code or APIs, thereby enhancing the overall integrity and trustworthiness of Web3 applications. This bridging capability enables a more flexible and scalable architecture, allowing for innovation and growth without being hampered by the limitations of a purely on-chain system.

Towards effective blockchain integration

To truly harness the potential of blockchain technology, we must recognize the limitations of smart contracts and the impracticality of a fully on-chain approach. Verification is key to bridging the gap between on-chain and offchain processes, making blockchain applications more effective and scalable.

A hybrid model that combines on-chain and offchain processes, supported by robust verification mechanisms, offers a practical solution. This approach addresses scalability and privacy challenges while enhancing Web3’s overall integrity and trustworthiness. By adopting this hybrid approach, the industry can develop solutions that are secure, transparent, and capable of handling complex real-world applications.

Blane Sims, Chief Product Officer at Truebit

Blane Sims is the Head of Product at Truebit, pioneering verified computing solutions for Web3 applications. With a focus on enhancing transparency and trust in decentralized systems, he champions the critical role of verification in establishing data integrity and algorithmic correctness. Sims’ expertise spans blockchain technology, AI integration, and complex data ecosystems. His work at Truebit aims to bridge the gap between blockchain limitations and real-world computational needs, enabling a new era of trustless applications. Previously, Sims held leadership roles at Tapad, MiQ, and Signal, driving innovations in data platforms and identity resolution.