Scalability has been one of Bitcoin’s most significant challenges. Find out how Bitcoin could solve the scalability issue.
Bitcoin relies on the blockchain to process payments and currently handling about 7 to 10 transactions per second. However, that is not nearly enough to meet the needs of the almost 8 billion global populations that Bitcoin targets. Scalability remains a significant issue in Bitcoin due to the growing market demand and transaction volumes.
Bitcoin’s blockchain can only process 7 to 10 transactions per second because blocks are created every ten minutes on average. Several Bitcoin users have proposed various suggestions to fix the scalability problem to increase the speed and number of transactions processed on the network. The following are some of the best ways to scale the Bitcoin network.
Scaling the Blockchain
Bitcoin’s inventor, Satoshi Nakamoto, established the 10-minutes interval between blocks, which will not likely change in the future. However, they have changed the limit on the size of each block several times. In 2010, Bitcoin inventor established that no block should exceed 1MB in size.
That limit was later raised to 4MB, courtesy of the SegWit upgrade, but most Bitcoin blocks still hold just about 1.3MB of data. The improvement has steadily spread across the network, increasing transaction capacity and reducing fees.
Bitcoin creators set those limits to prevent the blockchain size from growing too rapidly. Thus, they are not likely to change anytime soon. Therefore, scaling the Bitcoin blockchain should emphasize reducing the data required in transactions. For instance, the Taproot update introduced more efficient transactions to take up less space in a block.
Schnorr signatures provide a way for consolidating signature data, reducing the space it occupies within a Bitcoin block. Also, it goes a long way in enhancing privacy. Combining Schnorr signatures and SegWit could enable the network to process more transactions quickly without altering the block size limit.
Layered Scaling Solutions
Efficiency improvements may not provide a comprehensive solution to scaling Bitcoin but could deliver significant incremental benefits. Layered scaling solutions offer additional methods to transfer Bitcoin. A layer is a different network from the Bitcoin blockchain, allowing users to transact Bitcoin. They enable transactions to represent or settle larger payments in batches.
Layered scaling solutions can help crypto platforms such as bitcoin buyer that usually process larger transaction volumes to boost efficiency. Layers connect to the Bitcoin blockchain but do not broadcast all transactions to the distributed network. The ability to settle larger Bitcoin payments in batches facilitates rapid transaction processing and lower fees.
The Lighting Network
The Lightning Network (LN) is undoubtedly the most prominent layer on top of Bitcoin’s blockchain technology. It facilitates micro-payments, and small daily transactions are considered less economical to the blockchain. The Lighting Network ensures instant and free or nearly free payments between parties.
The LN has dedicated channels, opened and closed, using ordinary Bitcoin transactions and the blockchain. A Bitcoin user can execute many instantaneous transactions once the track is open.
The Liquid Network
Some layers rely on independent blockchains instead of Bitcoin’s underlying technology. The Liquid Network’s blockchain is similar to Bitcoin’s, but different entities and not decentralized entirely govern it. That enables it to guarantee rapid payment settlement and low fees. However, the Liquid Network uses various tokens to represent the real Bitcoin transacted by users.
Enhancing scalable functionality is critical to unlocking the potential of Bitcoin and its underlying blockchain technology as its mass adoption continues worldwide. Experts recommend building additional layers on top of Bitcoin to facilitate seamless, instantaneous, and low-cost Bitcoin transactions. Further improvements to the Bitcoin protocol and innovative new layers would eventually support billions of daily Bitcoin transactions, including small micropayments and international money transfers.
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