11/28/18

Bitcoin scaling on the blockchain? About off-chain, on-chain and hardened fronts

Bitcoin Cash wants to use Bitcoin Unlimited to scale the blockchain on-chain. Since the fronts between Bitcoin Cash and Bitcoin are hardened, one side sees this as the only solution, while the other side wants to scale off-chain. But what can you say for and against either solution?

Bitcoin Cash is planning a hard fork to increase the block size once again. The debate over Bitcoin’s scaling has become more drastic in recent years. Accordingly, there are now two “Bitcoin blockchains”. Many wonder what has more potential – which can lead to passionate debates. Whether the pros and cons of Bitcoin Cash and Bitcoin are to be weighed up, the two solutions of Bitcoin Cash and Bitcoin are presented.

Scaling on the Bitcoin secret Baselayer

Bitcoin’s “Baselayer” is the blockchain. Or rather, the most fundamental level on which the Bitcoin secret network is based. It is no secret that the blockchain is slow and expensive. Space in a block is tight, so broadcasters have to compete with their transaction costs. Bitcoin Unlimited’s approach is to eliminate this scarcity and leave the choice of block size to the miners. Read more about it: https://www.onlinebetrug.net/en/bitcoin-secret/

In principle the blockchain can be scaled. It is also the simpler solution and at first glance closer to what Satoshi Nakamoto had in mind. However, this is only a stage win. Let’s assume an average transaction size of one kilobyte and increase the block size to reach the transaction rate of VISA. VISA processes, conservatively estimated, 1,500 transactions per second. Within 10 minutes, that’s 900,000 transactions. With an average transaction size of one kilobyte, you would get a block size of just under one gigabyte.

Other crypto currencies rely on optimizing the block time in addition to the block size. Ethereum has a block time of 15 seconds. This means that forty times as many blocks are generated as with Bitcoin or Bitcoin Cash. Firstly, this short block time still requires a block size of 23 megabytes to process as many transactions as VISA. Secondly, a short block time cannot guarantee that all nodes are aware of a transaction before it is integrated into a block.

In addition, the on-chain solution overlooks the fact that this is counterproductive for the decentralization of the network, whether it is through a short block time or a large block size. Smaller mining pools will be able to produce larger blocks with even less probability, and the block chain will grow faster. This will exclude private node hosters de facto.

Scaling by Second Layer

The alternative solution to the so-called “on-chain scaling” is the – who would have thought it – “off-chain scaling”. In other words, the solution is the Lighning Network. An additional layer is spanned with software across the blockchain, enabling instantaneous and inexpensive transactions. The Lightning Network is comparable to the Internet itself: You can connect to it by opening a payment channel and then send transactions to anyone on the network. The transactions in the Lightning Network are rarely actually written into the blockchain. This saves costs! Nevertheless, the Lightning Network inherits Bitcoin’s security and can interact with it quickly. It is therefore not surprising that other crypto currencies such as Litecoin or Ethereum also deal with such systems.

The Lightning Network is still in its infancy. Users lost their money and some critics are worried that Lightning Nodes is creating a new form of trusteeship. As with the big blocks, decentralization would be sacrificed.