Is the Scaling War Over?

A Look Back

For nearly four years, the bitcoin community has debated on how best to scale its nascent technology. During Bitcoin's earliest days, an artificial block size limit of 1mb was implemented as a temporary measure, meant to reduce the potential for spam attacks. As Bitcoin's popularity rose, the number of daily transactions likewise increased. Eventually, this led to havoc as transactions became bottlenecked by long confirmation times and high fees. Bitcoin's current Core developers recognized the issue, but most found a block size increase to be undesirable for a myriad of reasons.

The Centralization Problem

Some felt that an increased block size was likely to contribute to miner centralization by making full nodes more expensive to operate, thereby decreasing the number of individual users willing to keep their nodes running. Others recognized that such a change would require a hard fork, and would risk splitting the network. Many agreed that no amount of block size increase would be substantial enough to perpetually compensate for Bitcoin's rapid rate of adoption or transaction volume.

Alternatives included a greater focus on off-chain transactions, such as those proposed by the ‘Lightning Network’ (a method of instantaneous, low cost transaction occurring outside the normal blockchain), and a separation of transactions and signature data, by way of Segregated Witness (SegWit). By segregating signature data from Bitcoin transactions, it was suggested that the size of individual transactions may be decreased by as much as 60%. This would effectively increase the number of transactions that could be confirmed in each new Block at a similar rate.

Finally, an agreeable solution

Amidst threats of a user activated soft fork, a new solution proposed a best-of-both-worlds scenario, wherein the block size would be doubled to 2MB following the activation of SegWit. This concession was later dubbed ‘SegWit2x’. As of July 20th, 2017, BIP91 (the soft fork that will activate SegWit) has been locked in, with approx. 90 percent of all hash power signaling for its adoption. Barring any unforeseen difficulties, BIP91 should officially reach the necessary 95 percent adoption required activate on or around August 1st, 2017.

With the adoption of this improvement plan, the likelihood of a Bitcoin split has been significantly reduced. Some question whether the second half of the proposal will be upheld once SegWit has been implemented, as the agreement to increase the bitcoin block size to 2mb has largely been an informal one. While it is probable that Bitcoin's scaling timeline will be complicated by unanticipated bumps in the road, we are well on our way to resolving the scaling debate, and Bitcoin is stronger for it.