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19 Aug 2021

Things You Need to Know About Bitcoin Scalability

The Bitcoin scaling debate is as old as Bitcoin itself and seems to peek from behind the curtain after regular intervals, dividing the Bitcoin community, and leaving many new and seasoned investors with more questions than answers. Keeping that in mind, here we are going to take a look at what Bitcoin scaling is and what you need to know about it as an investor.

Debates on Bitcoin scaling have become somewhat common in recent times, especially as more and more investors learn about the term and ask why this problem exists in the first place. The scaling issue is also known as the big block size debate and exists because of the limit on the amount of transactions allowed within every block on the Bitcoin blockchain. As of now, there is a 1MB limit on the size of blocks that are on the blockchain, which translations to just seven transactions per second.

While this could seem unnecessarily complicated to some, we will have to take a step back in time to get a better understanding of Bitcoin scaling. When Bitcoin was first released back in 2009, there were no limitations on the block size. However, a limit was implemented later on by Bitcoin’s creator, Satoshi Nakamoto in order to secure the network that was still in its infancy from spammers and cyber criminals.

The network now has a free market that’s been integrated into its design, which means once the blocks are filled to 1MB, those transactions that have the highest fees attached to them are prioritized over the others and are included in the current block for confirmation on the network. This means that the other transactions just have to wait for another block for inclusion.

This is where the Bitcoin scaling debate heats up since a growing number of investors think that the network needs to scale its block size to cater to more transactions, especially because of the growing demand and interest in Bitcoin. Another valid point by those calling for Bitcoin scaling is that it will soon become too costly to carry out transactions due to a higher interest in Bitcoin.

Layer two solutions have been the most widely publicized answers to the Bitcoin scalability challenge, at least to this point. Those that sit atop the blockchain but don’t transact directly on it, such as the Strike and Lightning Network. This method takes the pressure of transactions off the blockchain – layer one, and moves it to sidechains, which are basically cheaper networks.

This innovation comes as Bitcoin continues to endure body blows in the media over its resource consumption and environmental impact. On the other hand, those calling for Bitcoin scaling argue that scaling Bitcoin puts these arguments to rest, as the efficiency and potential use cases of the network grow exponentially, shifting the value proposition entirely.

The typical approach to scaling blockchains is to grow vertically by improving the processing power of every node in order to handle a higher volume of transactions. However, some argue that scaling horizontally across numerous commodity machines is a better option.

But, there are still those who do not think that scaling is a good idea because of some very serious issues. For example, security and network speed have been two important criteria in determining a payment network’s reputation. As a result, cryptocurrency networks’ current infrastructure will need to be extended in order to accommodate rising transaction volumes and a growing number of users. According to industry experts, the options of vertical and horizontal scaling needs to be explored further; however, the inadequacy of current technology is one of the main problems faced by those calling for Bitcoin scaling. For more information on the latest developments in the world of crypto, check out the crypto trader app.

 

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