SCX| Crypto Insights #4
Can Bitcoin Scale?
With an ever-increasing number of Bitcoin transactions arises the question: can Bitcoin scale?
One of the most high-profile debates surrounding Bitcoin concerns is the question of scaling or in other words the increasing transaction capacity. Bitcoins 1-megabyte blocks mean that the capacity for transactions is around less than 500’000 transactions per day. Bitcoin has already approached these levels and as a result the transaction fees have risen sharply. It is clear that there will be a hard limit to how many transactions can be processed over the Bitcoin blockchain, due to the decentralized and distributed nature of Bitcoin. Because of that we will now look at two scaling solutions for Bitcoin.
Segwit:
Segwit is an on-chain scaling solution for Bitcoin. It changes the way and the structure of how data is stored. That way it can free up more space and capacity for more transactions to be stored in Bitcoin’s 1megabyte capacity blocks. Therefore, removing it would save tremendous space that allows more transactions to be included in the block. Segwit has already been implemented in Litecoin
To read more about Segwit check out this article.
Lightning Network:
The Lightning Network is different compared to Segwit in that it is a second layer solution. Or in other words it is off-chain. It incorporates smart contract functionalities on top of Bitcoin’s blockchain, allowing for the creation of private, off-chain channels to facilitate instantaneous transactions with minimal fees. Lightning Network tries to lighten the main blockchain’s load by moving the transactions off the main chain and therefore reducing the congestion on the blockchain itself. Since that the transactions inside payment channels are just between two parties, the transaction won’t need to be broadcasted to the public blockchain network until the parties decide to close the channel. This means that the fees are smaller because there are no fees for the miners and there will be no block confirmation time. This allows transactions executed within the channel to be instant with very low fees.
To read more about the Lightning Network check out this article.
Swiss Crypto Exchange
