The bitcoin scalability problem refers to the limits on the amount of transactions the bitcoin network can process. It is a consequence of the fact that records (known as blocks) in the bitcoin blockchain are limited in size and frequency. Bitcoin's blocks include the transactions on the bitcoin network. The 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 the 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.
Video Bitcoin scalability problem
Background
The one-megabyte 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. Business Insider in 2017 characterized this debate as an "ideological battle over bitcoin's future."
Maps Bitcoin scalability problem
Forks
Dealing with scalability problems requires making changes to the technical workings of bitcoin, in a process known as a fork. Forks can be grouped into two types:
Hard fork
A hard fork occurs when a blockchain splits into two incompatible separate chains. This is a consequence of the use of two incompatible sets of rules trying to govern the system. 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. In 2014 the Nxt community was asked to consider a hard fork that would have led to a rollback of the blockchain records to mitigate the effects of a theft of 50 million NXT from a major cryptocurrency exchange. The hard fork proposal was rejected, and some of the funds were recovered after negotiations and ransom payment.
Bitcoin Cash and Bitcoin Gold are examples of hard forks of bitcoin. Bitcoin XT and Bitcoin Classic both supported an increase to the maximum block size through a hard fork. Bitcoin Unlimited supports a variable block size limit, which may result in a hard fork.
Soft 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.e. it is backwards-compatible. A soft fork can also split the network when non-upgraded software creates blocks not considered valid by the new rules. A user-activated soft fork (UASF) is a controversial idea that explores how to perform a blockchain upgrade that is not supported by those who provide the network's hashing power.
Segregated Witness is an example of a soft fork.
Proposed scaling solutions
Various proposals for scaling bitcoin have been presented. 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.
- "The Hong Kong Agreement" was a 2016 agreement of some miners and developers, colloquially termed "The Hong Kong Agreement," that contained a timetable that would see both the activation of the Segregated Witness (SegWit) proposal established in December 2015 by Bitcoin Core developers, and the development of a block size limit increased to 2 MB. However, both timelines were missed.
- SegWit2x was a proposed hard fork of the cryptocurrency bitcoin. The implementation of Segregated Witness in August 2017 was only the first half of the so-called "New York Agreement" by which those who wanted to increase effective block size by SegWit compromised with those who wanted to increase block size by a hard fork to a larger block size. The second half of SegWit2x involved a hard fork in November 2017 to increase the blocksize to 2 megabytes. On November 8, 2017 the developers of SegWit2x announced that the hard fork planned for around November 16, 2017 was canceled for the time being due to a lack of consensus.
- Bitcoin Unlimited advocates for miner flexibility to increase the block size limit and is supported by mining pools ViaBTC, AntPool, investor Roger Ver and Bitcoin Unlimited chief scientist Peter Rizun. Bitcoin Unlimited's proposal is different from Bitcoin Core in that the block size parameter is not hard-coded, and rather the nodes and miners flag support for the size that they want, using an idea they refer to as 'emergent consensus.' Those behind Bitcoin Unlimited proposal argue that from an ideological standpoint the miners should decide about the scaling solution since they are the ones whose hardware secure the network.
- BIP148 was a proposal that has been referred to as a User Activated Soft Fork (UASF) or a "populist uprising." It was planned to be triggered on 1 August 2017, and it sought to force miners to activate Segregated Witness. It became unnecessary because miners opted to vote for SegWit activation using the BIP91 scheme.
- Schnorr signatures have been proposed as a scaling solution by Blockstream's Peter Wuille.
- A paper by Mihir Bellare enables signature aggregation in O(1) size, which means that it will not take more space to have multiple signers. Bellare-Neven reduces to Schnorr for a single key. Bellare-Neven has been implemented.
Activated scaling proposals
Segregated Witness
Segregated Witness (SegWit) is an example of a soft fork. Blockstream co-founder and developer Pieter Wuille proposed Segregated Witness in December 2015. SegWit is an update aimed at solving transaction malleability, a known weakness in bitcoin's security. Segregated Witness is a system by which the signature data is segregated from other transaction data. Segregated Witness has been proposed as a solution for scaling, and has impacts in two ways.
Segregated witness makes a number of changes to the protocol. It changes how data is stored in each bitcoin block. SegWit provides a boost in transaction capacity while remaining compatible with earlier versions of bitcoin software. It fixes transaction malleability that has been a roadblock for other bitcoin projects. SegWit allows for an easier implementation of the Lightning Network.
Layer 2 proposals
Solutions such as the lightning network and Tumblebit have been proposed to operate on top of the bitcoin network to allow payments to be effected that are not immediately put on the blockchain.
Lightning Network
The Lightning Network is an in-development project that aims to fix the bitcoin scalability. Lightning Network will require 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. In January 2018 Blockstream launched a payment processing system for web retailers called "Lightning Charge," and noted that lightning was live on mainnet with 200 nodes operating as of January 27, 2018, and advised it should still be considered "in testing."
See also
- Software development
- List of bitcoin forks
References
External links
- Bitcoin Scaling Problem, explained
- Bitcoins Other Scaling Problem
- Bitcoins Scalability Issues
- Block size limit controversy
Source of the article : Wikipedia
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