On-chain Scalability Solutions

What Possible On-chain Scalability Solutions Can Bitcoin Use To Resolve Scalability Issues?

Nobody will deny that blockchain technology has the potential to disrupt traditionally centralized systems.

But, before it can be a real alternative to its centralized counterparts, blockchain needs to be able to scale and process transactions at a much speed than it does currently.

The number one limitation that’s holding blockchain to achieve this is ‘The Scalability’. It is hard for blockchain to grow and support the increasing number of transactions. To visualize this, Visa and MasterCard can process thousands of transactions every second while Bitcoin can only process approx 7 transactions per second.

It is evident that solutions must be introduced to further enhance the capabilities of the blockchain.

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Overview of On-Chain Scalability Solutions

How about taking a look at the different scaling solutions being worked upon in the crypto community? Scalability issues can be resolved with on-chain first-layer solutions.

First-Layer Solutions

The first-layer solution needs changes to be made onto its codebase of the actual blockchain. This is something that entails enhancing the core features and characteristics of the blockchain.

A few examples of first layer solutions incorporate increasing the size limit of a block from 1 MB to 10 MB or reducing the creation time of a block from 10 minutes to 5 minutes.

It is imperative to note that any structural or fundamental change to the property of a blockchain needs a hard fork. It requires the whole community to transit into a new and enhanced chain.

Generally, there are 3 popular on-chain scalability solutions in the community that bitcoin can use –

1. Segregated Witness (SegWit)

Segregated Witness is a protocol upgrade for Bitcoin that changes the structure of how data is stored. By removing the signature data for every transaction, it sets up free space for more transactions to be stored in Bitcoin’s 1 MB-capacity blocks.

The signature data makes up nearly 70% of the entire space of a transaction. Thus, removing it would save huge space allowing more transactions to be included in the block. A great example of it can be seen its implementation in Litecoin.

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2. Sharding (Ethereum)

Sharding involves breaking down the blockchain into small yet manageable parts that run simultaneously to one another. Each shard (part) is in-charge of processing transactions inside the group, thereby increasing processing output throughout the board. Breaking up the network into different small parts is what allows the Ethereum blockchain to function as the amount of its parts, instead of being limited by the speed of each individual node.

Sharding is proposed to be utilized once Ethereum moves to a Proof of Stake model, most probably in 2020.

3. Hard Fork (New Currency)

Though hard forking is a need when using first-layer on-chain solutions, yet this category refers to hard forks which creates new coins. It is often referred to as a controversial hard fork owing to a split in the community.

This happens at the time when a portion of the community disagrees with the core community on specific problems and decide to ‘fork-away’ by implementing structural changes to the underlying code base and creating a new coin.

Then, this new coin will be supported by the portion of the community that agrees with the ideology of blockchain scalability.

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