Bitcoin blockchain scalability

bitcoin blockchain scalability

Bitcoin has shown great utility around the world with the drastic increase in its value and global consensus method of proof-of-work (POW). From the moment Bitcoin was first announced, scalability has been brought up as one of the great challenges of digital currency. In a decentralized system. Tremendous growth in cryptocurrency usage is exposing the inherent scalability issues with permissionless blockchain technology. RANDOM CRYPTO Bitcoin blockchain scalability 4.25962241 btc

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Bitcoin blockchain scalability Please click "I accept cookies" to let us know you're okay with our use of all cookies. Akash is an early adopter of new technology, a passionate technology enthusiast, and an investor in AI and IoT startups. In order to achieve this goal, the problem of the poor scalability of the Bitcoin protocol has to be solved first. Bitcoin's fundamental goal is to provide a digital and decentralized replacement of traditional currencies. The hard fork proposal was rejected, and some of the funds were recovered after negotiations and bitcoin blockchain scalability payment.
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However, achieving optimal decentralization tends to decrease network throughput. As more miners secure a Proof-of-Work PoW network through consensus, transaction speeds may drop — which is considered a hurdle to widespread adoption. To increase network throughput on a blockchain network, there's an incentive to reduce the distribution of blockchain nodes either geographically, in number, or both.

However, this pivot toward greater centralization reduces security on PoW networks. By overwhelming a network, hackers can hijack the network and manipulate transactions for financial gain. This allowed the perpetrators to manipulate data and double spend its ETC currency, resulting in the loss of millions of dollars in value on the network. Blockchain security is a critical network aspect that cannot be compromised. Blockchains that perform poorly as adoption increases are said to lack scalability.

The Blockchain Trilemma tells us that greater scalability is possible, but security, decentralization, or both, will suffer as a consequence. Scalability is the only way for blockchain networks to reasonably compete with legacy, centralized platforms whose network settlement times and usability are, at this point, far superior.

So how can we solve the Blockchain Trilemma and achieve decentralization, security, and scalability simultaneously? The answer comes in the form of Layer-1 and Layer-2 solutions. In the decentralized ecosystem, Layer 1 refers to blockchain protocols like Bitcoin, Litecoin , and Ethereum. There are a number of methods currently in development or practice that seek to improve the scalability of blockchain networks directly.

Consensus Protocol Improvements: Proof of Work is the consensus protocol currently in use on popular blockchain networks like Bitcoin. Although PoW is secure, it can be slow. For instance, Bitcoin only achieves seven TPS. Instead of requiring miners to solve cryptographic algorithms using substantial computing power, the PoS consensus protocol determines validator status based on a stake in the network.

This is expected to dramatically and fundamentally increase the capacity of the Ethereum network, while increasing decentralization and ensuring security. Sharding: Sharding is adapted from distributed databases and has become one of the most popular Layer-1 scaling solutions, despite its somewhat experimental nature within the blockchain sector.

Sharding breaks transactions into smaller datasets called "shards. Further, instead of having each network node hold a copy of every block from its genesis block to present, this information could be split and held by different nodes, with each remaining consistent with itself. Shards provide proofs to the mainchain and interact with one another to share addresses, balances, and general states using cross-shard communication protocols.

Ethereum 2. In blockchain, Layer 2 refers to a network or technology that operates atop an underlying blockchain protocol to improve its scalability and efficiency. For instance, Bitcoin is a Layer-1 protocol, and the Lightning Network is a Layer-2 solution built to improve transaction speeds on the Bitcoin network.

Layer-2 protocols have undergone immense growth in recent years, and could be the most efficient way to overcome scalability challenges for PoW networks in particular. Nested Blockchains: A nested blockchain is a decentralized network infrastructure that utilizes a main blockchain to set parameters for the broader network, while executions are undertaken on an interconnected web of secondary chains.

Multiple blockchain levels are built on this mainchain, with these levels using a parent-child connection. The parent chain delegates work to child chains, which process and return it to the parent after completion. The underlying base blockchain does not take part in network functions unless dispute resolution is necessary. The OMG Plasma project is an example of Layer-2 nested blockchain infrastructure that is utilized atop Layer-1 Ethereum to facilitate faster and cheaper transactions.

The distribution of work under this model reduces the processing burden on the mainchain to exponentially improve scalability. State Channels: A state channel facilitates two-way communication between a blockchain and off-chain transactional channels using various mechanisms to improve overall transaction capacity and speed.

A state channel does not require immediate miner involvement to validate the transaction. Instead, it is a network-adjacent resource that is sealed off by using a multi-signature or smart contract mechanism. In the trilemma tradeoff, state channels sacrifice some degree of decentralization to achieve greater scalability.

Sidechains: A sidechain is a blockchain-adjacent transactional chain used for large batch transactions. Sidechains use an independent consensus mechanism to that of the original chain, which can be optimized for speed and scalability. Utility tokens are often used as part of the data transferral mechanism between side and mainchains. The primary role of the mainchain is to maintain overall security and dispute resolution.

Sidechains differentiate from state channels in a number of integral ways. Further, sidechain security breaches do not affect the mainchain or other sidechains. Establishing a sidechain requires substantial effort as infrastructure is built from the ground up. Although the Blockchain Trilemma presents significant challenges to adopting blockchain technology, emerging solutions may solve the puzzle. The bitcoin blockchain is a massively replicated, append-only ledger.

Its entries are transactions of various types, including transfers from one pseudonymous public key to another, coinbase transactions which mint new bitcoins , and transactions that encode and store some sort of metadata on the blockchain. Full nodes must store the entire blockchain for the following reasons and more :. The bitcoin blockchain is presently about 25 GB in size.

Downloading the blockchain peer-to-peer takes about 48 hours, and of course 25 GB of disk space. A log plot of the size of the blockchain over the last two years reveals an approximately linear trend:. Computing a best fit line to the logarithmic data reveals an approximate factor of 1.

To assess the extent to which disk space is a problem, we need to compare to projections for disk space. Hard disk capacities per dollar have been flat for a few years , breaking a mostly exponential trend. As mentioned before, bitcoin balances are equivalent to the set of unspent transaction outputs on the blockchain. Each transaction creates one or more new unspent transaction outputs. To verify a new transfer from public key A to public key B, the bitcoin client does or did a search across the whole blockchain for transactions involving transaction outputs involving public key A, to verify that the unspent transaction output referenced in the transfer is truly unspent.

A possible optimization to this protocol is simply to store the set of currently unspent transaction outputs, rather than the whole blockchain history. Its growth probably tracks the size of the entire blockchain. One can use advanced data structures similar to Patricia trees to ensure that data encoding is efficient and that lookups are very fast. Light clients allow the end user to interact with the bitcoin blockchain and to make and confirm transactions without committing the disk space and without the user experience overhead headache.

Light clients do not store the whole bitcoin blockchain, nor even the UTXO set. Rather, light clients allow users to receive lightweight proofs of the existence of certain UTXOs from miners, thus allowing the users to verify their balances.

Light clients assume a certain amount of trust in miners to significantly reduce resource overhead. Suppose that a killer app emerges that massively increases the bitcoin transaction volume, far beyond the exponent predicted above. What could we do then, to allow the average user to still run the full verification algorithm and be assured of his bitcoin holdings?

One approach is a partial-sharding of the blockchain. Before we start rolling out the distributed hash tables, we assert that content-addressable solutions to blockchain storage are not immediately applicable. The reason is that distributed responsibility schemes are not sybil proof — such schemes allow actors to be the judge in their own case s , so to speak, by pretending to be many distinct identities.

We could potentially shard the blockchain by replacing it with many independent blockchains, interoperating in a semi-trusted manner via cross-chain miners. Cross-chain miners would facilitate transfers across different chains and respond to requests for lightweight proofs of the existence of transactions on distant chains.

The end user could run a full mining and validating client on his main chain perhaps coded geographically or otherwise and could run light clients on other chains of interest. Assuming that all these chains are mined, this brings up the immediate problem of security. The argument goes as follows — suppose there is a fixed universe of computational power to secure all the chains, and consider two scenarios:. A possible solution to this problem is merge-mining. Merge-mining refers to the possibility of mining blocks simultaneously across different chains.

Namecoin , a sort of blockchain-based DNS protocol, is merge-mined. One approach that has been suggested for scalability is for there to exist lightweight blockchains that are separate, but merge-mined with each other for security.

However, the problem is that in this setup, all miners would need to keep track of all blockchains or at least a majority of them for the merge-mining to be secure, and at this point there once again arises the need for a class of nodes to exist that process nearly every transaction, so we are right back at square one.

Such schemes might involve some combination of multiple strategies. This means that an attacker would need to take over a substantial percentage of the entire blockchain in order to successfully corrupt even one shard, but at the same time only a very small number of validators need to actually process every transaction. Solutions to this problem will differ depending on the specific approach. An average bitcoin transaction is about bytes.

A cable modem, running optimally at 10 megabits per second can therefore facilitate 5, bitcoin transactions per second. Bitcoin is nowhere near this bandwidth cap. Bitcoin blocks are hard-capped at 1 MB in size. Considering the amount of data that each transaction creates and the fact that the mining algorithm is set up to allow a new block every 10 minutes on average , this implies a theoretical limit of about seven transactions per second.

When bitcoin transaction volume starts to push that limit, we might see fees go up or possibly changes to the bitcoin core.

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