- Fees required for fast transactions have gone up some 500% since the start of the year
- Many transactions with lower fees currently sit for hours before being included in a block
- Fears arise that the blockchain might become as bloated as it was in late 2017
According to the latest mempool data Bitcoin transaction fees and wait tims are once more on the rise. Many transactions currently sit hours before being included in a block, with transaction fees required for fast inclusion having rocketed from 7-8 Satoshi at the start of the year to 40-50 Sats at the time of writing.
Bitcoin and Bitcoin Cash
In 2017 the Bitcoin community split over the question of whether to increase block size or not. The advantages of larger blocks are obvious; more transactions can be fit into each block, leading to lower fees and shorter wait times (On average – for high enough fees, any transaction can be guaranteed to go into the very next available block).
However, the downsides of the Bitcoin Cash solution were deemed by many to be too severe. Larger blocks also mean that miners and validators without super fast Internet connections lose more time every time a new block is minted as they try to download the latest block, and, in the case of miners, upload one they mint. With currently some ~$50k on the line for every block minted, many were concerned certain regions of the world would be at a crippling disadvantage in mining due to worse Internet infrastructure. And of course, larger blocks also mean the blockchain takes up more space for everyone wishing to store it locally.
The small block side of the fork ‘won’, in the sense that what we know as Bitcoin is BTC, the chain that did not increase block size, while BCH became an altcoin. The problem of full blocks, high fees and long wait times remains, however.
And then, of course, there are projects that tackle the issue in different ways altogether. Pure currencies like Nano, that don’t even have a blockchain or miners in the traditional sense, but which can achieve confirmed transactions in less than one second.
Even in the current top 10 by market cap, Bitcoin is falling behind on transactions per second.
Lightning Network to the rescue?
There are alternatives to increasing block size. The most widely known and hoped for solution to scaling Bitcoin currently seems to be the Lightning Network, a second layer solution where not every little transaction has to be settled on the Bitcoin blockchain directly.
The Lightning Network promises transactions that are much faster and cheaper than using the base layer directly. Security concerns around cheaters are handled by creating time locks for anyone withdrawing BTC to a different base layer address, while at the same time leaving the account vulnerable to having its funds ‘stolen’ if and only if they have already signed away some of their BTC on the Lightning Network.
While the Lightning Network should work in theory, however, it has a long way to go before it can become the go to solution for scalability. For security to be maintained you have to be ready to punish cheaters, or else delegate that responsibility to a trusted third party. And for any transactions to go through at all you and the recipient must be connected, either through setting up a channel, which requires a transaction on Bitcoin itself, or through third parties who have enough funds to act as go between for you and the recipient. This favours centralization of the Lightning Network, which is not ideal for a second layer solution for Bitcoin and its emphasis on decentralization.
Something’s gotta give
At the end of the day, the Lightning Network is not ready. It may be in time, but it is not yet. And we are approaching full blocks now. With average fees having gone up 500% in three months, it is only a matter of time before Bitcoin bloats up to unusability once more, as it did in December 2017. For those of you who were in the space back then, you may remember what a disaster that was.
If Bitcoin cannot scale, the crypto community will turn to projects that can.
