Scalability

I am going to split this section into a few different sections so we can work out the finer details of Bitcoins scalability.

How is block size measured?

Block size is the size in bytes of the block which includes number of transactions, block header and the transactions completed.

Block size limit

The block size limit of Bitcoin is currently 1mb.  This is because Satoshi Nakamoto realized in late 2010 that if there was not a limit on block size miners might create larger blocks than some miners were willing or able to accept causing a split in the chain.

Why limit block size?

People often ask why Satoshi limited the blocksize in the first place and why not make it bigger like 6mb?  There are several reasons. At the time the largest blocks didn’t come near the 1mb limit. Also he knew that changing the size within the Bitcoin source code was easy to do as he just substituted the 1mb for 6mb for example.  The larger the block size the larger the technicalities and chances of things going wrong.

Segregated Witness or Segwit

By attaching a piece of code called Segregated Witness or Segwit for short.  Bitcoin was able to separate digital signatures and transactions. This allowed the network to create much larger blocks than 1mb but still see them as 1mb duo to the block only seeing the size of the transactions.

Lightning networks effect on block size

The lightning network was designed to open trustless permanent channels between buyers and sellers or customers and merchants without the need for every transaction to be recorded or written onto the blockchain.  This sub-network would still have to transact with the blockchain periodically to maintain truth and order meanwhile allowing a much larger transaction capacity while reducing block size.

Hard fork – Scalability

A hard fork can change scalability by changing core code then splitting from the main chain.  If the hard fork is accepted by all of the nodes then it becomes true and any nodes not using the new code will require a software update to adhere to the changes.  If however the old chain continues to be mined and transactions still occur due to anyone not accepting the changes then they separate into two blockchains and can still run completely separate of one another.  For example Ethereum and Ethereum Classic.

Soft fork – Scalability

Soft forks are a change in software protocol that make only prior valid blocks and transactions invalid.  Because older nodes will see the new blocks as correct, a soft fork is seen to be backwards-compatible. If a majority of the miners enforce the new rules the soft fork becomes valid.  Soft forks have been implemented on the Bitcoin Blockchain as well as the Ethereum Blockchain and many more. This allows the implementation of newly upgraded code which is backwards compatible.