The bitcoin scalability problem refers to the discussion concerning the limits on the amount of transactions the bitcoin network can process. The on chain transaction processing capacity of the bitcoin network is limited by the average block creation time of 10 minutes and the block size limit. These jointly constrain bip 101 bitcoin exchange network’s throughput.
The transaction processing capacity maximum is estimated between 3. 3 and 7 transactions per second. There are various proposed and activated solutions to address this issue. The block size limit has created a bottleneck in bitcoin, resulting in increasing transaction fees and delayed processing of transactions that cannot be fit into a block.
Various proposals have come forth on how to scale bitcoin, and a contentious debate has resulted. Increasing the network’s transaction processing limit requires making changes to the technical workings of bitcoin, in a process known as a fork. A hard fork is a rule change such that the software validating according to the old rules will see the blocks produced according to the new rules as invalid. In case of a hard fork, all nodes meant to work in accordance with the new rules need to upgrade their software.
If one group of nodes continues to use the old software while the other nodes use the new software, a split can occur. For example, Ethereum has hard-forked to “make whole” the investors in The DAO, which had been hacked by exploiting a vulnerability in its code. Alternatively, to prevent a permanent split, a majority of nodes using the new software may return to the old rules, as was the case of bitcoin split on 12 March 2013. Bitcoin Cash is a hard fork of bitcoin increasing the maximum block size. Bitcoin XT, Bitcoin Classic and Bitcoin Unlimited all supported an increase to the maximum block size through a hard fork. In contrast to a hard fork, a soft fork is a change of rules that creates blocks recognized as valid by the old software, i. Segregated Witness is an example of a soft fork.
Technical optimizations may decrease the amount of computing resources required to receive, process and record bitcoin transactions, allowing increased throughput without placing extra demand on the bitcoin network. Schnorr signatures have been proposed as a scaling solution by long-time developer and Blockstream co-founder Pieter Wuille. Bellare-Neven reduces to Schnorr for a single key. Protocols such as the Lightning Network and Tumblebit have been proposed which operate on top of the bitcoin network as a cache to allow payments to be effected that are not immediately put on the blockchain. The Lightning Network is a protocol that aims to improve bitcoin’s scalability and speed. The Lightning Network requires putting a funding transaction on the blockchain to open a channel. Payment provider Bitrefill tweeted in December 2017 claiming it was the first lightning transaction operating on the bitcoin network.
Transaction throughput is limited practically by a parameter known as the block size limit. Various increases to this limit, and proposals to remove it completely, have been proposed over bitcoin’s history. In 2015, BIP 100 by Jeff Garzik and BIP 101 by Gavin Andresen were introduced. By mid-2015, some developers were supporting a block size limit of as high as eight megabytes. Bitcoin XT was proposed in 2015 to increase the transaction processing capacity of bitcoin by increasing the block size limit. Bitcoin Classic was proposed in 2016 to increase the transaction processing capacity of bitcoin by increasing the block size limit. December 2015 by Bitcoin Core developers, and the development of a block size limit increased to 2 MB.
It was planned to be triggered on 1 August 2017, and it sought to force miners to activate Segregated Witness. The Three Major Bitcoin Protocols Explained”. The maximum throughput is the maximum rate at which the blockchain can confirm transactions. Today, Bitcoin’s maximum throughput is 3. This number is constrained by the maximum block size and the inter-block time.