Bitcoin has long been slated for its lack of scalability, and supposedly the Lightning Network will fix this. Bitcoin is currently limited in the sense it can only handle a certain amount of transactions per second, with this number being nowhere near what Visa or MasterCard can currently process – when they are online that is. This is the one hurdle that has stood in the way of Bitcoin for too long, with some seeing it as the only real remaining barrier Bitcoin has to overcome before it can replace fiat as a global currency. The handful of solutions that have been implemented into the Bitcoin Network – such as SegWit and the Lightning Network – have only improved scalability slightly, but not enough to compete with the fiat’s true heavy hitters.
Compression Infrastructure Could be the Key
A team from bloXroute Labs and Northwestern University are proposing adding a new layer to the network, however this layer would be underneath as opposed to on top like SegWit and the Lightning Network. Their proposal is for an underlying transport layer. This essentially involves systemwide caching that enables faster propagation, gigabyte size blocks, and cut-through routing that enables swift and efficient transmission of blocks through the network. According to the whitepaper, this should be enough to help the Bitcoin Network scale over its Transactions Per Second (TPS) 1000 times more than what it is currently capable of.
A few years back, a group of Bitcoin Core developers had a disagreement and half wanted to implement SegWit -, and half didn’t. This resulted in a hard fork where the half that wanted SegWit created Bitcoin Cash, and the remaining developers carried on with Bitcoin Core. They are essentially the same code that the infamous Satoshi Nakamoto created, but with a handful of tweaks made during and post hard fork. However, this situation won’t occur with this solution, as it simply requires a few parameter changes rather than a whole new protocol or consensus. This new layer on the Bitcoin Network also boasts the ability to reduce the risk of forking as well as providing real-time support for immediate transactions with zero-confirmation (0-conf). All of this means that Bitcoin will become faster and more decentralized – essentially making Bitcoin the fiat killer it has always had the potential to be.
Technological Advancements Drive Bitcoin Demand
As we have seen over the past few years, if an exchange is hacked or there is negative news surrounding the technology of Bitcoin the price tends to slump. A great example of this is with the recent SEC decision to postpone a Bitcoin ETF verdict. This caused the markets to bleed tremendously and they are only just starting to recover. However, great news like this drives up investor confidence in the pioneering cryptocurrency and brings in a new wave of market optimism. As the cryptocurrency and its technology become stronger, better, and more secure, so too will its levels of supporters and the number of people adopting it will increase.
While the team is still some way off completing the project, it has run a handful of tests and has managed to scale a private Bitcoin Network by up to 100x the current maximum TPS. This is encouraging news. The group is seeking to perfect this new layer and increase it to a minimum of 1000x the current TPS. Until then, we will hodl hard and weather the storm!