Should Bitcoin Network Incorporate the Kaizen ‘Improvement’ Philosophy?


Should Bitcoin Network Incorporate Kaizen Philosophy?

It’s been clear for a while now that Bitcoin has a scaling problem. The original network designed by Satoshi with a 1MB block size was simply not meant to handle the amount of traffic that is currently on the Bitcoin network. As more users send and receive Bitcoin, transactions can take hours or even days before finally being confirmed, a process that should normally take around 10 minutes. We’ve never been further from the original vision of a P2P electronic cash system.

2017 was the peak of this scaling debate which ended with a group of big block supporting enthusiasts breaking off to form competing cryptocurrency bitcoin cash and bitcoin getting the long-awaited code upgrade Segregated Witness (SegWit).

Scaling Bitcoin conference, a 2-day event held at Keio University in Tokyo revolved around little updates that could make a big difference in terms of efficiency of the network. This, in essence, is the widely popular Kaizen philosophy deeply rooted in the Japanese culture.

From figuring out what to do with the vast amount of so-called dust (an output with tiny pieces of a bitcoin in them, small enough that the fees for sending eclipse the amount sent) on the network to fine-tuning the lightning network, Scaling Bitcoin seemed to present a much more relaxed and focused developer community.

Jameson Lopp, a bitcoin developer and engineer at bitcoin security startup Casa, holds similar views.

“Most of the presentations were of small improvements that seem fairly likely to be implemented, which is arguably preferable to huge overhauls that promise significant improvements but add a lot of complexity and would be contentious.”

He added:

“Lots of small improvements add up over time too large improvements.”

The Problem of Bitcoin Dust

One area of small improvements that several presentations touched on was the massive amount of UTXOs, or unspent transaction outputs – especially those holding bitcoin dust. For Sergi Delgado Segura, a cryptocurrency researcher at the Autonomous University of Barcelona, the question is

“how many unspent outputs are actually worth spending; how much space is devoted to storing not-worth-spending outputs?”

About 50% of UTXOs are actually dust – meaning those pieces of bitcoin are unlikely to ever be spent. The same research was applied to Litecoin and it was found that almost 80% of UTXOs are dust.

As bitcoin attracts more users the amount of dust-based UTXOs will grow, and it will grow unbounded because that's how the system was built. While Segura said that's not because anyone did anything wrong, there does need to be some real thought put into the proposals out there to mitigate this.

For one, everyone should be consolidating outputs when fees are low – like they are right now. Secondly, a good coin selection algorithm, which decides which bits of date come together to create a user's bitcoin transaction, will also help.

Layer Two Scaling Technology

As the lightning network gains popularity, it's no surprise that the layer-two scaling technology for driving transactions off-chain got a significant amount of time. On day two of the conference, lightning had its own category – representing three talks that covered rebalancing (or the idea of closing a channel after a number of transactions have been performed) of lightning network channels; lightning benchmarks; and incentivizing watchtowers, the entities responsible for watching lightning channels to make sure no fraud occurs.

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