Bitcoin has been a raging topic amongst enthusiasts and the critics alike. As it is gaining prominence, it is also approaching a technical challenge that can define its future to a great extent. The security measure that was added by the Bitcoin creator, Satoshi Nakamoto, will soon become one of the biggest reasons that can hinder its scalability and eventually hurt its viability too.
What is Bitcoin Block Size debate?
As always, the criticality of the matter is still under conjecture but this is something the Bitcoin aficionados must pay attention to. The matter discussed in the debate will be ability of Bitcoin to be used for everyday transactions as well as complex transfers.
As we all know that Bitcoin uses the blockchain technology, an encrypted ledger system, for all the transactions. This bitcoin is managed by the virtual currency managers and shared by the volunteer nodes. When you transact over the bitcoin network, many computers are involved in completion of that transaction as a new block, also known as ledger page, operated by thousands of bitcoin nodes. Any miner who is able to validate and confirm this new transaction block received freshly minted bitcoins and user fee as set by the user.
The size of the block is determined by the market. The bitcoin users can add a fee to their transactions so that the miners can be quick about their transfers. The miners can make certain profit by maximizing the transaction fee as well rewards earned by prioritizing block sizes. The equilibrium emerges when the aggregate mining supply will equal aggregate mining demand.
However, the challenge will arise the protocol quirk added by Satoshi will prohibit blocks that are higher than 1 MB from being added into the blockchain. This simple restriction can hurt Bitcoin’s potential as a global payment system. The miners cannot add block sizes over 1 MB, despite the profit they can make on it. This will jeopardise the quickness of the transaction in competition with payment systems such as Visa or PayPal that can seamlessly carry out millions of global transactions.
What is the fate then?
As it always happens, when the demand is more than the supply, the price increase happens. For the bitcoin users, they will have to pay higher for the miners to send their transactions first.
The users that are unwilling to pay more may have to wait longer for their transactions to get confirmed. Bitcoin miners, on the other hand, will enjoy much more returns than they deserve. This will eventually undermine the core value of the coin and thus lead to its demise.
What is the solution?
The impending limit issue is being addressed and is said to be increased to up to 20 MB with higher scalability option, if required. Some even suggest undergoing gradual increase in the block size automatically, as bitcoin supply schedule runs. For fundamental changes, the miners and users will have to agree to an upgrade.
The bitcoin developers also fear that uninhibited large block sizes can affect the security and decentralization of the network. Some of these problems are very real and need to be addressed soon if the bitcoin is geared for global mainstream acceptance.