Bitcoin is the name that appears in our minds whenever someone talks about cryptocurrency. There is no doubt that it is the most famous virtual currency out there. Furthermore, it has also reached an all-time maximum rate too. From the very beginning, bitcoin was never meant to be a payment network. Therefore, it does not work like that.
However, because of the popularity and fame it got, you can use it as payment. However, because it is not up to the level of a payment network, therefore, your transactions will be late. The most common problem that you will face is the transaction time.
This crypto network is only capable of handling 7 transactions per second. This is quite a low transaction level if we compare it to the Visa payments. The Visa network supports 2000 to 4000 transactions per minute.
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An advantage over other payment networks
Although bitcoin has a slow transaction speed in comparison to real-world currencies, it still has some advantages over them. This cryptocurrency is free from several regulations, therefore, you can use it comfortably. Furthermore, its technical structure is also better than the Visa and Western Union systems.
Can Bitcoin ever become a payment network?
Because of the very reason of no regulation, bitcoin can’t become a payment network. No authority controls this cryptocurrency. Furthermore, there is no limit to its use. That is why it is highly likely that people use it for illegal activities and to buy drugs and weapons. Because of these very reasons, several developing and underdeveloped countries have yet not legalized its use.
The maximum someone uses it for is for making profits. Till now, there are several countries where only buying and selling these coins is legal. They can only use it to make profits by waiting for the right time to sell them. This is just like working with the stock market.
If we want to make Bitcoin a payment network, we have to make sure that it follows regulatory guidance. In addition to this, there should also be intermediaries that can manage the flow of payments. Despite that, if the international financial system wants to isolate bitcoin, they can do so with some effort. They can easily threaten the states to limit the use of crypto because of their decentralized nature.
Scalability of blockchain
Although the bitcoin scale can help the cryptocurrency to become a major payment network but there are still some factors. There are two major methods that you can use to scale the blockchain. One method is to increase the size of the block. The other method is reducing the block time, you can do so by decreasing the hash complexity.
Irrespective of the method that you use, you can reach the maximum way before it reaches the transaction limit of Visa payments. Visa networks handle around 150 million transactions each day, which is not possible for bitcoin. This means that around 1700 transactions every second.
However, even if you increase the block size to its maximum and decrease the time, you cannot reach this number. The current means do not allow you to do so.
Right now, the block size for bitcoins is set for 1 MB. Even after a lot of work, you can take it to 4 MB and not more than that. Furthermore, the generation or mining time for every block is around 10 minutes. So if you have to mine a new block, it will take about 10 minutes. Thus, with these results, it is evident that bitcoin can only handle 4.6 transactions in a second.
Compare this to the visa platform that is capable of handling 1700 transactions. There is a huge difference in it.
Decreasing mining time and increasing the block size
Firstly, with our current technology and resources, it is quite difficult to surpass this size and time. However, even if we do so, it is not possible to take bitcoin in front of Visa. Both cannot compare.
In order to compete with Visa, bitcoin has to increase its transactions per second to 377.5 times more.
Furthermore, the mining time should be decreased from 10 minutes to 1.6 seconds. This is easy to be said than do practically. Theoretically, if we try to adjust both these parameters, we can achieve better results.
But the question is, are we capable of doing so? Do we have enough technology and resources to achieve such results?
According to the Karlsruhe Institute of Technology, it took around 14 seconds to propagate 99 percent of the blockchain network. Although it is a great breakthrough but we cannot decrease the time any further. Because if we do so, it means that we are mining a new block even before the previous one reaches the network.
Available approaches to deal with scalability
1. Making batch payments
One method to deal with the problem of scalability is to decrease the size of transactions. You can put multiple transactions into one block. Thus, you can make more payments with a single block. This can increase the transaction per second. However, it cannot manage transactions through multiple wallets because then, there will be a risk of privacy.
2. Bitcoin cash
If you use cash, it is possible to store multiple transactions in a single block. However, it is only a temporary option. You still cannot reach 1700 TPS.
3. Using the lightning network
Another option that you can use is the Lightning Network that allows instant transactions among parties. However, it happens off the chain and requires a lightning node. Furthermore, it is limited to only blockchains that are based on Bitcoin-core.