Scaling Bitcoin, past present and future
Talk to someone for any length of time about Bitcoin, and the question of scaling arises. From a technical point of view, scalability is not a challenge that is unique to cryptocurrencies, or to blockchain-based applications. Any application or network that is designed for high traffic or multiple concurrent users needs to be programmed and configured in such a way that many people can access it simultaneously without degradation of performance.
Public proof-of-work blockchains pose specific challenges because energy-intensive transactions must be recorded and consensus agreed on thousands of different computers to ensure the integrity of the network’s history. Detractors often cite Bitcoin’s throughput limits — it can process about seven transactions per second compared with around 65,000 per second on the Visa network — as a total failure of its original purpose.
Throughout Bitcoin’s twelve-year history, the debate around how — and whether — to increase its capacity has become a major topic, even prompting a standalone conference, Scaling Bitcoin https://scalingbitcoin.org/. However, equating Bitcoin to something like the Visa network is not a like-for-like comparison. As recent institutional acquisitions of Bitcoin indicate that more and more people are focusing on the original cryptocurrency as a store of value rather than a high-volume, consumer-focused payment network, it is probably true to say that it is Bitcoin’s function as a global settlement system that is valuable, as well as its ability to allow people to secure their own wealth in an uncensorable way.
In simple terms, we should not judge Bitcoin for its ability to process $2 dollar payments for cups of coffee quickly and cheaply, but instead think about the ways that its blockchain can support such payments in an indirect way. The best way to think about this is that we should look at the scalability of the entire architecture rather than the scalability of the baseline protocol itself…
Read the full article on Coinscrum.
I also write at greater length about scaling challenges in my book The Cryptocurrency Revolution.