Originally posted in Diginomics
In order for bitcoin to reach its potential as a technology, scaling the current blocksize needs to occur within the near future.
Hardly anyone is in disagreement that the bitcoin blocksize needs to be increased. Yet, what we are currently seeing in the bitcoin community today, as the blocksize debate rages on, is a dispute about what users envision the bitcoin payment system to become in the months and years ahead. In this article, we will examine the recently proposed BitcoinXT fork (BIP101), and how exactly developers should proceed in scaling the bitcoin technology with adherence to its inventor’s original vision – an apolitical, distributed consensus system.
BITCOINXT: BITCOIN IMPROVEMENT PROPOSAL 101
A hard fork of the bitcoin protocol would carry dramatic implications. One of which would be an incompatible division of blockchain records. Because we are dealing with a protocol technology for the transfer of value, in this scenario it is winner takes all. If a split in the blockchain would occur, one would absorb the entirety of the network purchasing power while the other would be sapped of all relevance. This is a scenario which should be avoided at all costs simply because the alternatives that exist for accomplishing the same end (achieving scalability of the bitcoin payment system) are numerous and less of a security risk.
Putting into effect BIP101 would result in an increase to 8MB after January 11, 2016. In order to gain consensus, the number of nodes running the bitcoinxt client would need to reach a supermajority of 75%. After that point, there would be a 2 week window to transition to the new fork as the old blockchain becomes incompatible with bitcoinxt. From there, the blocksize limit is set to increase linearly to a maximum of 8GB in 2036. Once started, the block limit doubling schedule cannot be stopped until 8Gb is reached.
Visa currently has a transaction processing capability of 50,000 per second. If this 8GB blocksize were to be instantiated, then bitcoin would potentially be able to compete with the likes of traditional payment systems, but is that what it has been originally designed for?
If Bitcoin comes to depend on bureaucrats rather than protocol, you might as well use Visa. They know how to do that far better.
– Nick Szabo, August 21, 2015
The current blocksize limit stands at 1MB – a limit which carries with it the risk of transaction backlogging and reducing the overall effectiveness of the payment system as previous patterns of growth are expected to continue. As we have seen in years past, the largest periods of user growth tend to be seasonal and happen in the winter months. Currently, the bitcoin network is operating at 30% of this capacity. If we remain at the current blocksize, we can expect problems to arise in 2 – 8 months due to the constraints on transaction throughput. In a situation where the transaction queue becomes backlogged, you can expect payment confirmations to become less reliable, as each node would require more memory to process this growing list of delayed transactions...
See the full article in Diginomics here.