One issue that Bitcoin has struggled with since its inception is scalability. As Bitcoin grew, so did the number of transactions, highlighting the network’s limited capacity to process transactions rapidly and scale.
In this article, we’ll explore the Bitcoin scalability problem and how it can be addressed while letting the network maintain its decentralization and security.
The Bitcoin Scalability Problem Explained
The Bitcoin scalability problem refers to the network’s challenges when handling large transaction volumes simultaneously.
As the world’s first and most secure cryptocurrency, Bitcoin’s continued adoption and growth led to increased users and transactions. Unfortunately, the network can’t handle the volume as it can only process about seven transactions per second. This is considerably less than what Visa, a traditional payment system, for instance, can handle.
If Bitcoin is to experience global adoption, it needs to have the capacity to handle much more data and at much faster speeds to allow more people to use the network without it becoming increasingly expensive or slow.
Simply put, the blockchain needs to be able to scale, enhancing more efforts of building on Bitcoin.
However, Bitcoin’s basic design (and that of many other decentralized protocols) implies that improving scalability would weaken the network’s decentralization or security in what is known as the blockchain trilemma.
The blockchain trilemma is a term coined by Vitalik Buterin, Ethereum’s Co-Founder, and it touches on the trade-off between three crucial features of a blockchain: decentralization, scalability, and security. The concept implies that it’s difficult for blockchains to attain optimal levels of all three aspects concurrently. Improving one would weaken another.
Possible Solutions to Bitcoin’s Scalability Problem
The Bitcoin scalability dilemma has been a hot discussion topic over the past years amongst developers. There have been several proposed solutions to address the Bitcoin scalability issue. Let’s take a look at them.
Payment Channels
Payment channels are a method used to bring micropayments to the Bitcoin network using the Lightning Network.
As an off-chain protocol, incorporating the Lightning Network means that transactions don’t occur on the Bitcoin blockchain but instead take place on an extra layer over the blockchain. These layers are known as channels, and they allow for low-cost, instant transactions, which the Lightning Network keeps records of and transmits the final balance to the main blockchain once a channel is closed.
While the Lightning Network ensures faster transaction speeds and reduced fees, one of its major downsides is its grappling with network complexity, given its dynamic routing mechanism and decentralized nature.
Sidechains
Sidechains on Bitcoin refer to parallel blockchains linked to the main blockchain.
Bitcoin sidechains improve scalability by tackling transaction congestion on the main blockchain by offering parallel chains without affecting Bitcoin’s functionality. The parallel chains process transactions off-chain, allowing for more efficient and faster transactions by reducing the workload on the main blockchain.
Despite guaranteeing faster transactions, one downside of sidechains as a scaling solution is that they don’t assume the security strengths of the underlying blockchain and, thus, are in charge of their security.
Rollups
Rollups are one of several Bitcoin Layer 2 solutions that work by ‘bundling’ multiple transactions into one and moving them off-chain to process them.
Using rollups for Bitcoin transactions helps to increase the transaction throughput and reduce fees on the main network. Rollups, however, tend to be complex and hard to implement, which can hinder their adoption in the short term.
Increasing the Block Size
The proposal to increase the block size is one Bitcoin scalability solution that has been getting attention but has been hotly contested.
Currently, a block creation on Bitcoin takes, on average, 10 minutes, with the block size limited to 4MB. Increasing the block size would allow more transactions to be confirmed and processed within a stipulated time frame, easing network congestion and improving transaction speeds.
Although increasing the block size has advantages, it also has disadvantages, as it could lead to the centralization of nodes, affecting the decentralized nature and security of Bitcoin.
Can Bitcoin Overcome its Scalability Problem?
It’s hard to ascertain whether Bitcoin can overcome its scalability problem, given that Bitcoin users have always been split on the proposed solutions. Moreover, although each solution has advantages, they aren’t void of disadvantages. Thus, no single solution can, on its own, solve the Bitcoin scalability problem.
Therefore, Bitcoin’s scalability issue might be solved by a combination of some, if not all, of the solutions listed above if it’s to achieve widespread adoption and allow millions of people to use it with ease and with little to no latency.