The bitcoin scalability problem refers to the discussion concerning the limits on the bitcoin number of transactions of transactions the bitcoin network can process. The on chain transaction processing capacity of the bitcoin network is limited by the average block creation time of 10 minutes and the block size limit.
These jointly constrain the network’s throughput. The transaction processing capacity maximum is estimated between 3. 3 and 7 transactions per second. There are various proposed and activated solutions to address this issue. The block size limit has created a bottleneck in bitcoin, resulting in increasing transaction fees and delayed processing of transactions that cannot be fit into a block. Various proposals have come forth on how to scale bitcoin, and a contentious debate has resulted.
Increasing the network’s transaction processing limit requires making changes to the technical workings of bitcoin, in a process known as a fork. A hard fork is a rule change such that the software validating according to the old rules will see the blocks produced according to the new rules as invalid. In case of a hard fork, all nodes meant to work in accordance with the new rules need to upgrade their software. If one group of nodes continues to use the old software while the other nodes use the new software, a split can occur. For example, Ethereum has hard-forked to “make whole” the investors in The DAO, which had been hacked by exploiting a vulnerability in its code. Alternatively, to prevent a permanent split, a majority of nodes using the new software may return to the old rules, as was the case of bitcoin split on 12 March 2013.