Bitcoin is currently enjoying another good run on the market, boasting an increase in market cap and total volume. While the cryptocurrency market as a whole is on the rise, Bitcoin continues to siphon business away from Altcoins. Such success, however, has gotten some crypto watchers concerned that Bitcoin may become more popular than it can handle. Due to limitations in the blockchain technology that powers Bitcoin, it must soon confront its problem with scalability and difficulty in processing high volume transactions. Luckily, there are already solutions being worked on.
The Household Name in Cryptocurrency
The rise of Bitcoin is not a surprising occurrence. Since coming into being in 2008 thanks to the work of Satoshi Nakamoto, it has become synonymous with the term cryptocurrency. It is, by a considerable degree, the most recognized cryptocoin, which is reflected in its dominating market presence. Currently, Bitcoin owns more than half of the cryptocurrency market, with a market cap that hovers around $285 billion.
The Problem of Scalability
Bitcoin, like other cryptocurrencies, uses blockchain technology to create a decentralized system of exchanging money. Transactions are bundled into data groups called “blocks,” which are then verified by other blockchain users. This allows all transactions on the blockchain to be transparent and occur instantly, as there is no third party (such as a bank) that needs to process the transaction.
Currently, blocks have a data size limit of one megabyte, and it takes about ten minutes to create a new block. Such restrictions were not an issue in the early years of Bitcoin. However, as its popularity rises, Bitcoin is becoming increasingly in danger of slow processing times for high volume transactions. Currently, the blockchain can process, on average, seven transactions per second. Such a low rate lags far behind other digital payment methods like Visa or PayPal.
Bitcoin’s problem of scalability must be resolved before it can become the standard way the average person makes payments. Fortunately, the tech industry is well aware of how much is at stake and has been diligently working on it.
One proposed solution is to create ways in which transactions can be made “off” the blockchain. This includes creating an additional data layer over the blockchain in which channels can be opened up between cryptocurrency accounts, allowing individuals to send funds to each other without each transaction appearing on the blockchain. The idea is to take some of the processing load off the main blockchain layer to keep it from being delayed.
Another answer to Bitcoin’s woes that is quickly gaining traction is the use of AI to increase the transaction speed. Some companies have developed self-learning neural nodes that improve the efficiency of the blockchain. By using a genetic algorithm to enhance optimization and introduce a more dynamic process of creating blocks, processing speeds can reach up to 30,000 transactions per second.
More and more people are participating in the cryptocurrency revolution. As Bitcoin moves more frequently between digital wallets, the original cryptocoin will have to rely on evolving technologies to overcome current limitations in the blockchain. Fortunately, the industry is already on the case.