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How Bad are Blockchain Outages?

Lincoln Murr

Summary: Recently, multiple top blockchains have faced issues causing them to experience outages for significant amounts of time. The main blockchain facing outage issues is Solana, though Polygon and Cardano have also been highly congested or unusable entirely. Let’s look at the cause of these outages, their consequences, and what we can learn from them. On ...

Recently, multiple top blockchains have faced issues causing them to experience outages for significant amounts of time. The main blockchain facing outage issues is Solana, though Polygon and Cardano have also been highly congested or unusable entirely. Let’s look at the cause of these outages, their consequences, and what we can learn from them.

On March 10, the Polygon team attempted to release an upgrade whose maintenance would cause some downtime. A few hours later, the outage started, but went on for over 11 hours due to a bug with the consensus mechanism and block production. Fortunately, no user funds were impacted, but potentially billions of dollars in DeFi activity failed to occur. Even though this outage lasted for a while, and somewhat demonstrates Polygon’s centralization as opposed to more decentralized blockchains that do not experience maintenance-related outages, the fact that it was announced beforehand and was expected is much better than a random outage without warning.

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Similarly, Solana has experienced four significant outages in late 2021 and early 2022. These unexpected and multiple hour-long pauses in block production have significantly impacted the value proposition of the Solana blockchain, which has since experienced an over 50% decline in both total value locked on the chain and SOL price. The main reason for the outages has to do with Solana’s lofty goal of processing 65,000 transactions per second, over 30 times Visa’s number. The hardware required to validate Solana transactions must be extremely powerful, and there is little room for error. Additionally, the low cost of Solana transactions make distributed denial of service, or DDOS, attacks incredibly easy to do. These congest the blockchain with empty transactions and are done by users with malicious intent. In Solana’s defense, they state that their blockchain is still in beta and has lots of development left before it can be considered a final product. 

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Cardano, while not having experienced an outage, has had trouble with congestion over the past weeks. Users of the decentralized exchanges SundaeSwap and MinSwap have reported wait times of an hour to eight hours for activities such as making an exchange or yield farming. This has caused some users to complain about the speed of Cardano compared to other chains, and essentially claim that it is unusable. Fortunately, Cardano is working on their Hydra upgrade, which will help them scale to a theoretical 1 million transactions per second, far faster than any blockchain out today. 

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Some may argue that these outages are excused, as these blockchains are still in development and not ready for enterprise use. Others argue that any blockchain outage is completely unacceptable, as it effectively freezes billions of dollars in user funds for an indefinite amount of time. If there was an outage on a service like PayPal or Venmo that locked user funds for several hours, there would be severe consequences for businesses and commerce in general, potentially causing billions of dollars in lost revenue. If blockchains ever want to be used as a reliable and secure medium of exchange, they must have a 99.999% uptime rate, and even that may be too low. The global economy has no room for error, especially with financial transactions, and it is likely that blockchains that have experienced outages will forever be tainted.

Conversely, this makes blockchains that have not experienced outages even more valuable to consumers and businesses. Typically, the more decentralized the blockchain, the less likely it is to experience outages due to the number of nodes around the world. Additionally, older blockchains are more battle-tested and also less likely to stop working spontaneously, as opposed to newer blockchains that have yet to prove their reliability. 

In the financial world, security and uptime are of the utmost importance, otherwise billions of dollars in value is at risk of being lost. As more blockchains are created, and development continues on existing chains, outages will become less frequent and may stop altogether. Until then, it is important to look at outages as an opportunity to evaluate a project and its feasibility as a potential tool in the world of global finance.

By Lincoln Murr

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