As Bitcoin experiences greater levels of mainstream adoption, many cryptocurrency industry observers are beginning to express concerns about its scalability. While cryptocurrency proponents, analysts, and even astrophysicists are projecting a $6,000 Bitcoin beginning to 2018, transaction processing speed is becoming a growing problem.
Over the course of 2017, processing speed for Bitcoin for has reached an all-time low. Historically, Bitcoin transactions have taken only ten minutes. Recently, however, Bitcoin transactions have taken up to 30 hours to complete, leaving traders in limbo. In May this year, transactions remained extremely slow, with more than 20,000 transactions stuck in an extensive backlog.
This transaction speed issue has brought the blockchain to its knees. The original 1MB block size was created in order to protect the Bitcoin network from denial of service attacks, automatically blocking any transaction over the size limit. With the ever increasing amount of transactions, however, Bitcoin has struggled to keep up. As a result, transaction fees have increased, transaction speed has decreased, and Bitcoin users have become dissatisfied.
In response, Bitcoin developers have not only been forced to address the original block size issue, but also address another issue- the malleability bug. This bug occurs when a transaction ID becomes mutated, either due to formatting issues created by a wallet, or intentionally by an attacker.
Mutated transaction ID’s create more bookkeeping for the Bitcoin network, which creates problems for exchanges. When mutated ID’s occur on a large scale, they create an issue called a massive distributed denial of service, or DDoS, attack. When this event occurs, transactions are negatively impacted, which in turn negatively impacts the Bitcoin market as a whole.
There Are Two Solutions
In order to address these issues, two solutions have been proposed:
Segregated Witness (SegWit):
This solution proposes what the Bitcoin community refers to as a “hard fork”. By implementing a software upgrade that removes signature data from Bitcoin transactions, this proposal would free up space on the blockchain
This proposal would allow miners to retain power, allowing them to vote on prospective block size increases. This proposal would effectively allow miners to control transaction fees
Which Solution Is Best For Bitcoin?
With both these options presented to the community at large, a large amount of drama has ensued.
The core development team of Bitcoin has refused to support SegWit- core developer Luke Dashjr has stated that he believes a hard for will fail. This has caused a number of platforms and organizations to express similar views.
One of the largest Bitcoin mining platforms, Bitmain, has vehemently opposed the SegWit proposal. Some industry observers, however, maintain the perspective that Bitmain is opposed to the SegWit solution due to their intent to exploit an optimization mechanism that could potentially allow them to mine more Bitcoins with less power.
This potential exploit yield an additional 30% increase in profitability for Bitmain, and is rumored to be incompatible with the proposed SegWith solution. In what is now being referred to as the New York Agreement, or NYA, a compromise between the Bitcoin Unlimited and SegWit solutions has been brokered to create a solution to the argument.
The NYA resulted in the initial SegWit phase being triggered in August, with the second phase slated to occur 12,960 blocks later. The second phase of the NYA rollout, called SegWit2x, will double block size limit from 1MB to 2MB.
This update is planned to launch in the middle of November 2017, at which point the situation could become far more convoluted. The SegWit2x solution can only be activated on one condition- 95% of miners must support it over a period of two weeks before the deadline. Otherwise, another division could potentially eventuate.
Currently, the SegWit2x solution has a 95.1% support rate from miners, but as the recent months leading up to the deadline have demonstrated, there are a number of factors that could potentially influence this. Forks and significant changes to the Bitcoin network have been proven to cause BTC prices to fluctuate wildly. There are even rumors of another potential coin being born from the debate.
Despite this drama, industry experts still maintain that the Bitcoin price should hold strong into 2017, and likely increase to over $6,000. The next few months for Bitcoin, however, is likely to be a bumpy ride.