Will increased scalability solve all of Bitcoin’s problems?
The main goal of Bitcoin is to provide an advanced and decentralized replacement for conventional monetary standards. The best way to achieve this goal is to eliminate the scalability problem. The final explanation for Bitcoin’s innovation was the desire for a fully digital, decentralized payment method that could be used as a free option, unlike traditional currencies.
Understanding the scalability of Bitcoin
In recent years, many cryptocurrency enthusiasts have been of the opinion that there is a need for a separate currency. The increase in transaction volumes and the significant increase in attention to the crypto sector as a whole have highlighted the biggest challenge facing the bitcoin community, namely its scalability. This means that Bitcoin`s blockchain is experiencing problems in the processing of many transactions.
Bitcoin`s Protocol clearly defines the maximum block size. The General condition for block size and generation is limited to 10 minutes with a maximum size of 1 MB. Because of these limitations, the average transaction time of a PTC is 7 transactions per second, which caused disruptions in the asset sector at an early stage, in 2017, when the problem became more noticeable. Other blockchains, such as the Ethereum blockchain, can process about 20 transactions per second, and the Visa payment provider can process up to 45,000 transactions per second.
Why is it so difficult to increase scalability
Both BTC and Ethereum emphasize the importance of ensuring that each block chain continuously registers ownership of a crypto asset and its transactions without the help of a Central authority. Despite this, the number of clients is growing, and it becomes very difficult to maintain a balance between proper recording and decentralization. In particular, with regard to the daily use of crypts for in-app purchases, it is currently unlikely that every payment will be recorded directly, correctly inside the Bitcoin chain, and yet decentralize it.
The proof-of-work methodology complicates the task, since the BTC Protocol depends on all the different networks of participants to process the generated block. BTC agreement is subject to all organized members to prepare the created blocks. With the increasing use of Bitcoin and its growing popularity, the number of blocks will increase dramatically, which will also increase the transaction completion time. Its scalability today can be compared to the problem of the gold standard, which affected the currency markets many years ago. The loss of gold forced Central banks to run deficits, and they printed less money, which reduced the amount of money in the economy. However, people still believed in the productivity of currency markets and continued to trade.
According to data provided by Christian Cohen, many Bitcoin miners, despite its scalability, still make large profits. Since it is obvious that people will not engage in an unproductive market, the presence of miners on the blockchain indicates that bitcoin farms are still making money and will continue to do so until a final solution for scalability is reached. So investing in this area is still worth it.
Crypto miners suggest that the best way to solve this problem is to increase the number of blocks to reduce slow transactions and increase processing speed. However, increasing block sizes faces the danger of fewer participants, because the process requires a large amount of electricity and better equipment, which is very expensive and can only be provided by large bitcoin miners, who to some extent can process many transactions in less time. Thus, Bitcoin may gradually lose what led to the influx of users in the first place – its decentralization due to the growing attention to verification.
Increase the block size by eight megabytes
This proposal was made by many organizations and specialists in 2015. As a rule, then there was a whole story connected with this decision. The essence of it is that a group of developers decided to create another digital currency based on the Bitcoin blockchain, but with a large number of blocks up to eight megabytes. The programmers had different ideas for solving the problem. Another group suggested creating a different currency without increment.