Breaking Down Bitcoin and Blockchain Myths | Bitcoin Scaling
- Several myths and misconceptions dog Bitcoin and blockchain technology
- One Bitcoin myth concerns blockchain scalability and the presumed incapacity of Bitcoin to serve more significant numbers of users
- Contrary to popular belief, Bitcoin blockchain scalability shouldn’t be a problem for Bitcoin at all
Bitcoin Scaling – Is There a Problem or Isn’t There?
Just a year ago, the great Bitcoin scaling debate was still waging in earnest. Bitcoin transaction fees in August 2017, were topping almost $8. The need for better Bitcoin scaling was, therefore, the chief driving force behind the then Bitcoin Cash hardfork. Did you know, though, that Bitcoin was designed to scale automatically by none other than Satoshi Nakamoto himself?
Satoshi Nakamoto Designed Bitcoin to Scale Automatically
In 2010, Bitcoin creator Satoshi Nakamoto, announced that Bitcoin network could easily scale to the same size as the then Visa network. In fact, scaling concerns weren’t a concern at all for Nakamoto. Instead, Bitcoin’s creator assumed that future developers would automatically increase transaction block sizes, as traffic on the blockchain increased.
Why is Bitcoin Scaling a Concern Today?
To understand why Bitcoin scaling is a concern today, it is important to understand how Bitcoin itself works.
Unlike with fiat cash payment systems, the Bitcoin blockchain processes transactions in blocks. At present, these blocks are limited to just 1MB in size. As a result, fixed limits on how many transactions can fit into individual blocks slows payment processing.
Why Do Blocks Have Fixed Sizes?
The original Bitcoin blockchain didn’t feature a fixed block size. In fact, if we were using the original blockchain today, transactions would settle instantly and completely fee-free. However, in 2010, a 1MB transaction block size was introduced at the recommendation of blockchain contributor, Hal Finney.
Finney had realized that not limiting block sizes offered hackers the opportunity to attempt to take down Bitcoin using DDOS attacks. Moreover, so few people were using Bitcoin, that even with a 1MB block size, transactions could still settle instantly and fee-free.
The Original Satoshi Nakamoto Scaling Plan for Bitcoin
After introducing a 1MB block size, neither Hal Finney or Satoshi Nakamoto believed that scaling would be a problem going forward. Satoshi himself merely assumed that block sizes would be increased by future devs, as and when they needed to be.
Why Scaling Has Become an Issue Since 2010
Today, Bitcoin and blockchain scaling has become a concern for several reasons.
Firstly, the disappearance of Nakamoto himself has resulted in there being no clear guidance concerning future development. Secondly, several unforeseen events have come to pass which make increasing block sizes more complicated.
- Without a fixed block size, Industrial ASIC mining would lead to Bitcoin being mined faster and all Bitcoin coming into circulation faster than Satoshi Nakamoto intended
- At present, larger block sizes would remove financial incentives for miners to mine blocks and keep on maintaining the Bitcoin blockchain
- The Bitcoin price has risen more sharply than intended due to ASIC mining. If block sizes were increased today, this could reduce the perceived scarcity and value of Bitcoin already in circulation
How Bitcoin Will Scale in Future
To scale Bitcoin without increasing block sizes, developers today look for ways to add more data to existing blocks. Segwit is a perfect example of this. Moreover, in the future, it is possible that Bitcoin block sizes will increase, as was proposed in 2017 with Segwit2x. This being the case, Bitcoin is scalable – Albeit in a slightly different way to how Satoshi Nakamoto originally intended.