Will Increased Scalability Solve all of Bitcoin's Issues?Sep 23, 2020, 5:47PM
Bitcoin's principal objective is to provide an advanced and decentralized substitution to customary standards of money.
The best way to achieve this goal is to eliminate bitcoin’s problem of scalability. The definitive explanation behind Bitcoin's innovation was the wish for a completely digital, decentralized method for payment, that could be used as a free option in contrast to the traditional currencies. In the course of recent years, many crypto enthusiasts have held the view that there is a need for a separate currency. The increase in transaction volumes and a considerable increase in the focus on the crypto sector as a whole highlighted the biggest challenge faced by the Bitcoin community, which is its scalability. This means that Bitcoin’s blockchain is experiencing problems in processing many transactions.
Understanding Bitcoin’s scalability
The Bitcoin protocol clearly defines the maximum size of a block. The overall condition of the block size and generation is limited to 10 minutes, with a maximum block size of 1mb. Because of these restrictions, the average Bitcoin transaction time is 7 transactions per second, which prompted irregularities within the Bitcoin sector at an early stage, in 2017, when the problem became more prominent. Other blockchains such as the Ethereum blockchain are able to process about 20 transactions per second, while up to 45,000 transactions per second can be handled by the Visa payment provider.
Why is it so difficult to increase scalability?
Both Bitcoin and Ethereum stress on the importance of guaranteeing that each blockchain records Bitcoin ownership and Bitcoin transactions consistently with no assistance from a central body. Notwithstanding, as the number of clients builds, it turns out to be very hard to keep up the balance between correct recording and decentralization. Particularly concerning the everyday use of Bitcoins for in-app purchases, presently it is unlikely to record every payment directly, correctly inside the Bitcoin blockchain, and still, have it decentralized. The proof-of-work methodology makes it difficult because the BTC protocol depends on all the various networks of participants to process the block generated. The Bitcoin convention is subject to all organized members for preparing the created blocks. With the developing fame of Bitcoin and the ordinary utilization of Bitcoin, the number of squares would increment colossally, which would build the normal time expected to finish an exchange. With the increased use of Bitcoin and its growing popularity, there will be a massive increase in the number of blocks, which will also increase the transaction completion time. The scalability of Bitcoin today could be likened to the gold standard problem that affected the forex markets years ago. The loss of gold forced central banks to go into a deficit and they printed less money, which led to a reduction in the quantity of money in the economy. However, people still believed in the productivity of the forex markets and continued trading.
According to data provided by Christian Cohen on https://topforextradingbrokers.com/, many Bitcoin miners despite its scalability still make lots of profits. Since it is evident that people won’t go in for an unproductive market, the presence of miners in the blockchain is evidence that Bitcoin farms still make money and will continue to do so until a conclusive solution for scalability is achieved. Thus investing in the field is still worthwhile.
Crypto miners suggest that the best way to solve this problem, Bitcoin's scalability problem, would be to increase the number of blocks to reduce slow transactions and increase processing speed. However, an increase in block sizes faces a danger of fewer participants because the process requires heavy amounts of electricity and better equipment which is very expensive and can only be afforded by large multi-million dollar Bitcoin miners, who at some extent can process many transactions in less time, in larger blocks. As such Bitcoin might gradually lose the one thing that brought the influx of users in the first place: its decentralization, due to the increasing focus on verification.
Eight megabytes block size increase
Such a proposition was made by many organizations and specialists in 2015. As a rule, at that point, there was an entire story linked to this solution. Its gist is that a group of developers chose to make another digital currency based on the Bitcoin blockchain, however with more blocks up to eight megabytes. The programmers had different ideas to solve the problem. Another group suggested making another currency without the increasing blocks with its own protocol. From the outset, the organizations agreed on a trade-off, however, they later had disagreementS and worked separately to create their concepts. One of which is the Bitcoin Cash today which is extended in blocks yet is still not the solution to Bitcoin’s scalability problem, since transactions can take up more than 8mbs. As a rule, the possibility of increasing blocks cannot ensure a larger capacity and not even a reduction of transaction processing time.
It turns out to be very repetitive for a small miner to take a shot on small benefits, as they never know when a value of a coin drop may happen and have them working on losses. This problem has been almost immediately after Bitcoin’s creation, yet the market is still booming. Thus it is advisable for miners, as long as mining is productive, and many people still do it, the scalability will still be unchanged in the blockchain and the miners still have the opportunity to realize little traffic, thus making small profits with the Bitcoin scalability. While reputable speculators, financial analysts, and even fund experts cautioned that the quick rise of the digital currency prices was an air pocket that would burst at last, an environment driven by vague desires to make the most of the Bitcoin’s blockchain problem since it is not going anywhere any time soon.
Disclaimer: information contained herein is provided without considering your personal circumstances, therefore should not be construed as financial advice, investment recommendation or an offer of, or solicitation for, any transactions in cryptocurrencies.