Cryptocurrency, otherwise known as virtual currency is quite popular now. It has unquestionably grown over its limits and beyond the expectations of developers. Bitcoin is one of the cryptocurrencies that formed the industry of cryptocurrency as it is today with its name established in the market very early on into the development of blockchain technologies. But there are some technical issues which are obstructing its path in some way.
At the initial phase, the major concern of developers in 2010 were its scalability which came into consideration when there was an unsuccessful DAO attack. In layman’s terms, scalability is defined as keeping the maximum size of blocks to let them work in a streamlined manner and to secure them from cyber-attacks.
Bitcoin transactions are executed on a public ledger known as Blockchain. The blockchain is a chain of blocks in which all the transactions get recorded and each new block keeps on adding in the chain of existing blocks. These transactions are recorded on the permanent basis and encrypted by algorithms for security purposes. At that time, Bitcoin’s founder ‘Satoshi Nakamoto’ kept bitcoin block size to a size limit of 1 MB which meant that the transactions over 1 MB size will be automatically declined by the network. This was specifically done to check and avert attacks by hackers who could potentially disrupt the entire network.
Although this factor contributed to the augmentation process of security measures of the network yet it created different issues in the network. Limiting the size of the block certainly limits the network’s transaction capacity. Every transaction contains some information about the sender and the receiver, how much amount is to be transacted and requires a lot of space for data transfer. The data consumes the large amount of space available on the network and within the 1 MB limit, limiting it to 3 to 7 transactions per second.
With the growing user base, the situation got worse as Bitcoin gained too much popularity and users must wait hours to have their transactions processed. Also, it has created a hustle-bustle in the market as the speed of the transaction also depends on the miner’s fee. Now for Bitcoin, users are setting higher fees and now transaction amounts are consistently changing. In earlier times, users had to pay just a few cents for their transactions, but now hefty amounts are being charged as the transaction fee.
The slow transaction execution rate and a limited number of operations have challenged the Bitcoin’s development team. The transaction fee is also increasing exponentially which has become a major concern. They are worried about the fact that users have started considering the Bitcoin platform comparable to banks.
To solve the scalability problem of Bitcoin, the developmental team delivers different solutions such as BIP 100, BIP 101, and SegWit. Out of these solutions, some have already been implemented while some of them are yet to show potential.
Now the team has given the assurance of resolving the scalability issues, while at the same time not compromising the security, transparency, and integrity of the platform.