Can Bitcoin scale? It usually takes less than a minute for the money to arrive when you make a Bitcoin transaction. That’s fast. It’s only that fast, however, because creative developers have found a way to make Bitcoin run so smoothly. But Bitcoin has a scaling problem. It moves along because the people using it is a relatively small group. Where the number of Bitcoin users to grow substantially, the system would block.
That means Bitcoin can’t replace Visa and MasterCard transactions just yet. Bitcoin can only handle a fraction of their workloads. If Bitcoin is to be the future of the global economy, the scalability problem needs to be resolved. Otherwise, the Bitcoin will eventually lose its momentum and thus its appeal as an alternative currency.
The issue with scalability
Why is there a disparity? Why doesn’t Bitcoin have the same capacity at the credit card companies? It is rooted in the foundation of the blockchain system. Each block on the chain contains 1 MB worth of transaction records. That’s the way it was programmed by Satoshi Nakamoto.
A 1MB block of data takes an average of 10 minutes for Bitcoin miners to process. That’s fine with the present supply of miners and demand from users. Include more users to the mix, however, and the expense of processing transactions increases.
What are the solutions?
One of the options proposed early on was to increase the size of the blocks only. The issue with that solution is that bigger blocks require larger computers to process. If just the those with the most critical computers can mine Bitcoin, then it’s no longer a decentralized network.
In reality, the decentralized nature of Bitcoin is already threatened. A handful of companies mine over half of the Bitcoins on the network. Extreme measures are needed if Bitcoin is to compete with Visa and MasterCard.
Solution 1: SegWit
SegWit stood for Segregated Witness and was introduced by Pieter Wiulle in 2015. Instead of increasing the size of the blocks, SegWit is a way to save more deals in each 1MB block. The solution has been favored by the Bitcoin community and is slowly being embraced.
Solution 2: SegWit2X
Some blockchain expert argues that SegWit is just a short-term option that postpones the inevitable. A stronger option is therefore needed, they claim. SegWit2X was presented in 2017 as an extension of the initial SegWit, which would utilize SegWit and increase the block size to 1MB.
Solution 3: Schnorr signatures
Each Bitcoin transaction has the signatures of all the people involved. These signatures take up space in the blocks of data. Schnorr signatures were established as a method to combine these signatures, so they use up less space. This way they enable more transactions to be stored in each block.
The issue with the Bitcoin scaling options
There is a massive need for Bitcoin scaling solutions. Lots of scaling solutions are proposed by developers, but no one seems to be able to agree on one. It’s difficult to convince everyone on the network to upgrade their software. It’s worth to remember that Bitcoin is a decentralized network with no central authority to guarantee that occurs.