Bitcoin’s $5k rise and the 80k backlog
On October 12th, 2017, Bitcoin broke through the $5,000 price threshold. Over the next few days, volume on exchanges spiked, and the number of transactions processed over the Bitcoin network spiked too. Unsurprisingly, as a consequence to the increasing number of transactions, the length of time it took for transactions to complete increased, and the cost to use the network rose as well.
These negative consequences are unsurprising because this scenario has a prior history. This has happened before. When the price spikes dramatically, significantly more money is exchanging hands, and this means significantly more transactions conducted on the network. In these scenarios, a flood of transactions pours onto the network within a short time-frame, and suddenly, it becomes very “busy.”
Unfortunately, due to its limited capacity, Bitcoin chugs along at its own pace regardless of how many transactions are waiting for it. This results in congestion, and the congestion results in much slower transaction times with much higher fees. In business, they call the situation where capacity cannot fulfill demand a bottleneck. When bottlenecks form, the customer’s experience is generally poor, and ultimately unsatisfactory. Bottlenecks are not fun for anyone, and a prudent businessperson solves this problem as quickly as possible in order to avoid missing out on sales, to prevent a negative reputation, and to simply keep the customers happy.
Naturally, things do get better when bottlenecks subside and transaction levels go back to normal, but doesn’t it beg the question whether this has to happen in the first place? Is this something we really have to experience?
The truth is there is no good reason why this should happen. It is not something we should have to experience. The problem is a limited capacity (1MB blocksize) which allows for only a small number of transactions to be processed per second. If the capacity is increased (increased blocksize), the network is then able to process more transactions per second. Problem solved. No more bottleneck, no more slow confirmation times, no more high fees, and no more poor user experiences. The network can then handle the spikes in transactions, in addition to the inevitable increases of new users going forward. Unfortunately, you’re not going to get that with the old, unupgraded Bitcoin network. You’re only going to get that with the newly upgraded version of Bitcoin. That is, Bitcoin Cash.
We know these periods of high demand are going to occur again, so why would we keep our capacity at a level where it can’t keep up? Why would we keep it at a level where transaction times are slow and fees are high? Does that really make sense when we have the upgraded version of Bitcoin that solves these problems sitting there waiting to be used?
Not to me, how about you?