Bitcoin Scaling Debate for Dummies

A lot has been said about the possible upcoming Bitcoin Hardfork. It is all quite technical and complicated. I want to give the lay man the tools to get into a discussion about what is the Scaling Debate and what is currently going on.

Scaling Problem:

Back in the day, one of Bitcoin's flagship was stating that "you can send money anywhere in the world for a few cents". That recently ceased to be true, largely due to the rise in Bitcoin's popularity.

What happens is that the Bitcoin blockchain can process a limited number of transactions per second, and as it grew in popularity, this number became easily surpassed. In order to cope with that, people creating transactions had to increase the fees they pay miners. By doing so, the days of nearly-free transactions were over.

It doesn't have to be that way though.

Solutions

There are infinite solutions to this problem. The caveat though, is that every one of them implies in changing the canonical, untouched, bitcoin/blockchain source code. Some solutions became more popular, and as a decentralized network, any given Bitcoin solution would require consensus to be implemented.

Blocksize increase

One factor that limits the processed transactions per second rate is the network's Blocksize. That is a hardforked number, initially coded by Satoshi Nakamoto that decides the amount of info that can be mined at once. "So just increase the damn thing?" you say. Well, one could do that. An implication of it is that it is automatically more expensive to be a miner, since the blockchain will grow faster. Another possible implication is that, if we do that to mitigate the increase in fees, we are again jeopardizing the returns in mining. And, as we all know, mining is a very important part of bitcoin. Actually it's the heart of it. The costlier it is to mine, the more centralized the network gets.

Segregated Witness (SegWit) / Lightning Network

SegWit is a highly technical structural change to Bitcoin nodes that is explained in detail by bitcoinmagazine. Effectively what it does is: It allows signatures not to be included in mined blocks, and usually signatures account for at least half of the blocksize. Thus, the block is smaller, allowing the block limit not to be increased. Also, it is worth knowing that its implementation can be done without a fork and without full consensus. This means that even nodes that do not implement it, will keep validating transactions normally.

SegWit2x - The New York Agreement

SegWit2x is the "meet me half way" of the scaling debate.

Basically it is a proposal that starts with the SegWit implementation and then builds up to a hard-forked increase in the Bitcoin block size.

Currently, over 70% of the total mining power on the network has been signaling support to the agreement by including the letters "NYA" on the blocks they mine.

Although, even supporters can't know whether they will follow through with the whole of the NYA, since the code isn't even out yet.

Done !

That should be enough to wrap your head around of all the debate and help you start forming your own opinion. Main thing to keep in mind is that everyone is trying to achieve the same, a scalable network for us to keep using the same old bitcoin, and not recurring to other coins. There are some risks concerning this possible Hardfork. To be safe and not be jeopardized by it all, make sure to take a look at out Be careful with the Hardfork post.

Cheers !

Bitcoin Hardfork for Dummies