With the constant growth and expansion of the Blockchain world, the number of users has also kept on rising. This increase in the number of individuals involved is obviously accompanied by an increased number of transactions on a daily basis. Unfortunately, the Bitcoin Network has proved to be unable to process such a high number of transactions fast enough.
Bitcoin’s scalability problem:
Technically, there is a limited amount of transactions that the bitcoin network can process. It is caused because of the fact that records: also known as blocks, in the bitcoin blockchain are limited in size and frequency. The transactions are included in those blocks on the bitcoin network.
So, why exactly hasn’t Bitcoin fulfilled its promise of being truly scalable yet? The answer can be found in the fact that there’s a variable called “ a block size limit” and the limit is inadequate and insufficient to process such constantly-increasing number of transactions.
This contributed in creating a need for every message or transaction, no matter how small, to be computed and shared with all of the computers in the network which made Bitcoin slow and expensive.
All those factors are leading to the same questions that all Blockchain users are craving to know the answers: Will Bitcoin ever reach its digital payments’ role even with its scalability issues? Will it ever be able to process thousands of transactions in such a short time? If so, then when?
It is a decentralized network, proposed by Joseph Poon and Tadge Dryja in 2015, that is based on blockchain and uses its own smart contract scripting language in order to enable instant payments across a network of users. The latter, will be able to perform transactions at a high level of speed on private channels outside of the main network.
These off-chain channels will ensure scalable, fast and secure payment transactions. This can be done by allowing Bitcoin users to create “payment channels” with each other in which, Bitcoin transactions can be sent without the normal wait time. Thus, allowing payments to be faster, and more private than ordinary bitcoin payments.
Also, in the project’s white paper, it’s mentioned that “Core channels in the Lightning Network can conduct billions of transactions without a need for significant storage costs.” As a result, fees, that are paid directly between participants within the channel, will most likely be much lower than blockchain transaction fees.
Lightning Network seems like a breakthrough payment solution. It is supported by Blockstream that launched its merchandise store to support Lightning payment.
The solution is most likely to be adopted by Coingaming Group, the famous Bitcoin gaming operator.
However, the Lightning Network has been under active development for about two years now, with major efforts and support from ACINQ, Blockstream and Lightning Labs.
That’s why it’s crucial to remember that it is highly experimental. It is still in the alpha stage, even though the network is currently live for public tests. There’s no concrete information on when the network will be enterprise-grade.
There’s no actual date on when the Lightning Network will be launched on the Bitcoin mainnet, but most probably it’ll be sometime this year since the founder of ACINQ, Pierre-Marie Padiou stated that they’re almost there.
One of the limitations that this off-chain network has is the fact that it can experience some problems closing a payment channel when one of the peers is unresponsive. That will make the other party wait, sometimes for hours. And, users can not pay someone who is offline. Another problem is that large funds might not be transferred through payment channels.
Another Scalable Blockchain Alternative has been put recently on the table:
A paper on a new scalable BlockDAG, which is an alternative network structure to Blockchain protocol called PHANTOM, has been released recently by the researchers behind the SPECTRE and GHOST: PhD candidate Yonatan Sompolinsky and Dr. Aviv Zohar, both from the Hebrew University of Jerusalem.
This Protocol is suggested and placed as a way out that can provide confirmation of the transaction, which is “protected under any bandwidth that can support network”. It confirms transactions with recursive voting of previous blocks.
The team promotes the technology as “a generalization of Satoshi’s chain which better suits a setup of fast or large blocks.”
In fact, PHANTOM will use a “greedy algorithm” on a BlockDAG protocol to create a more linear block structure by “distinguishing between blocks mined properly by honest nodes and those mined by non-cooperating nodes that deviated from the DAG mining protocol.”
Unlike off-chain solutions, such as Lightning Network, PHANTOM proposes an on-chain in order to achieve scalability.
It focuses mainly on the need to enable the linear ordering of blocks, which is not possible in the SPECTRE protocol.
On one hand, finding an optimal solution for the problem of linear ordering permit PHANTOM to scale any computation; smart contracts included.
On the other hand, the linear structure of PHANTOM means sacrificing the faster confirmation times that come with SPECTRE.
You may have heard about both projects already. The solutions for Bitcoin’s scalability problem, offered by both technologies, may seem too good to be true. However, it’s high time developers found a way out of this issue that Blockchain users have been facing for years now. It will be really revolutionary if any or both of the projects will actually end up being an optimal solution for the matter discussed.