What Is the Block Size Limit and Why Does It Matter?
What Is All the Block Size Debate About?
If you are unfamiliar with the ongoing block size debate, then you must be new to the crypto world. The block size debate is about what solutions can be implemented to scale up Bitcoin to increase its usability in the coming years.
On one side there are those that believe that block capacity should be increased, while the others believe that this would go against the decentralized design of the currency.
What Are Blocks?
Blocks are a set of transactions which are validated and then shared on Bitcoin’s public ledger, the blockchain.
Why the limit?
In the early days of the currency, a block was designed to carry up to 36MB of transaction data. However, in 2010, this was reduced to 1MB to decrease the threat of spam and potential denial-of-service attacks on the network.
DDoS attacks could be carried out by making many large blocks with dust transactions (transactions that have insignificant amounts of Bitcoins). Dust transactions can still enter the network even in spite of the 1MB block limit size, yet with less data on the blocks for miners to process, the time necessary to complete introducing them on the chain is reduced.
This limit still stands today, however as more transactions are being added to Bitcoin’s blocks, the closer it’s getting towards this 1MB line.
Here is where the issue began. One side thinks the Bitcoin block size should be increased to accommodate the waves of people that are adhering to the currency. This side of the debate argues that the currency needs to scale up in order to generate mass adoption.
On the other hand, those against arguing that, an increased block size would result in a higher need for processing power, while mining would be even more centralized as hardware requirements would have to increase along with the block size limit.
Increasing the block size
A very obvious solution to this block size issue would be to just increase it.
For Bitcoin block sizes to be scaled the entire mining community should agree upon the size, otherwise there will be forks that result in the creation of new altcoins. Which is exactly what happened when Bitcoin Cash was created.
However, the disadvantage that would result from this implementation would be that it encourages centralization. By just increasing the block size, this would generate higher costs for running a full node on a blockchain-based network. As a result, fewer people would be able to manage to pay for a full node with an increased block size, therefore making the network more centralized.
What Other Options Are There Available?
Another block size solution would be to leave the protocol as it is.
Rather than increasing capacity, some experts maintain that limiting block size in the short-term will generate a self-regulating market for transaction fees. This will also lead to the miners’ incentives for process transactions to increase, from which will benefit the network entirely.
Other solutions include various mechanisms that relocate the many tiny transactions on the Bitcoin network – such as those resulted in gambling sites and faucets – ‘off-chain’.
A known solution called the Lightning Network enables two parties to transact in private, then puts their data back on the blockchain at a settled time. However, this implementation also requires a soft fork of the protocol.
Sidechains, which have been put forth by the Blockstream startup, have also been considered to be used in the scalability issue. Sidechains allow developers to make tests on separate chains which are linked to the Bitcoin blockchain. However, some of the developers behind this concept say this isn’t entirely accurate.
Luke Jr, one of several Core developers involved with Blockstream, recently comment regarding the use of sidechains in scaling:
“Sidechains aren’t about scaling, they’re about improving bitcoin’s functionality. Some of those features may be useful to improve scaling – for example, the softforks needed for Lightning – but sidechains themselves don’t do it.”
As more proposals emerge, the question still remains whether the cryptocurrency should scale and become a cheap, fast payment channel that rivals Visa, or should it remain a premium and rare store of value to which other services can be attached? It remains to be seen if the two sides will agree on a unanimous scale or if the community will look for further viable solutions.