Bitcoin block size is fundamental to how the Bitcoin blockchain works, but many may need to learn its actual size and why it matters.
You must discuss block size when explaining the intricacies and features that make major cryptocurrencies like Bitcoin and Ethereum unique.
Over the years, controversies have surrounded the Bitcoin block size limit, which is currently 1MB. However, present transaction block sizes exceed the 1MB limit. Could these pose a threat to the future of bitcoin? Should the limit be increased? You will find answers to these and other questions in this article.
A block is a data set in crypto, and most cryptocurrencies are related to transactions. Bitcoin mining is primarily a business of adding blocks of transaction information to the public database called the public ledger. It's one of the various ways Bitcoiners can profit from cryptocurrency, and profitable in low-energy cost countries such as China, Eastern Europe, and more. Crypto mining is also reasonably popular in Malaysia, where it's been shown that it can be profitable.
The public ledger is a record-keeping system that keeps participants' identities safe and anonymous and serves as a record book of all unique and successful transactions fulfilled between network users. The transactions are only processed when the blocks storing their data have been mined.
However, the block size is the maximum amount of data stored in each block. More data amounts to more transactions being added to the ledger simultaneously. Also, more computing power will be required to mine such blocks within the chain. Just as it takes more time to send a high-quality image, it also takes longer to mine a bigger block.
In 2015, Gavin Andresen, the lead Bitcoin developer, warned that the Bitcoin block size was an imminent problem for the blockchain. In his statement, he said:
"If the network of transactions waiting gets large enough, the result will be an over-saturated network, busy doing nothing productive. I don't think that is likely - it is more likely people stop using Bitcoin because transaction confirmation becomes increasingly unreliable."
As of 2015, the bitcoin network was running at about 40% capacity. However, Andresen continued to issue the warning. Andresen went ahead to publish Bitcoin Improvement Proposal 101 (BIP 101) to solve the impending block size problem of bitcoin.
BIP proposed to replace the fixed 1MB maximum block size with a maximum size that expands over the years at a predictable rate. According to the BIP 101 proposal, the max block size would increase to 8MB in January 2016 and double in size every 730 days until January 2036.
Though BIP 101 solved the block size issue, it failed to pull enough support from other Bitcoin developers. Large mining pools were greatly interested in the proposal, but that wasn't enough to convince Bitcoin core developers to support the movement.
BIP 101 was integrated into Bitcoin XT, a Bitcoin hard fork. Bitcoin XT merged the BIP 101 code into their client but failed to take off. In January 2016, the Bitcoin XT team eventually stopped the BIP 101 integration, choosing to increase the block size to 2 megabytes, resulting in a massive exit from Bitcoin XT.
The main challenge confronting any proposal to expand Bitcoin block size is that it must gain massive adoption on the Bitcoin blockchain. Else, increasing Bitcoin block size by 1MB and creating a branch from Bitcoin as hard forks, fulfilling a new vision for the future of Bitcoin. This is why many Bitcoin forks exist.
A large portion of a Bitcoin block transaction size is used with each transaction "witness". Every Bitcoin transaction has a transaction witness that verifies the transaction data -- a signature.
Segregated Witness (SegWit) offered to separate the witness verification side of Bitcoin transactions. Therefore, SegWit allowed the block size to increase to 4MB, although it would have increased to 2MB originally. SegWit also allows the extension of Bitcoin into Bitcoin Layer two protocols like Lightning Network.
In other words, Segwit is a soft fork, a more efficient solution to the block size issue than the hard fork. The soft fork would free up the transaction space of every bitcoin block and increase the block capacity simultaneously. This would radically increase the transaction output.
Segwit has been activated on the blockchain since August 2017, but Segwit's adoption of the main Bitcoin Blockchain is shallow. As of the time of writing this article, only 10% of all Bitcoin transactions are using SegWit.
The size of a Bitcoin block is important because it directly impacts the number of transactions the Bitcoin network processes. Being the largest and most popular blockchain in the world, the Bitcoin blockchain runs at full capacity.
When the Bitcoin network runs at full capacity, processing Bitcoin transactions and other services take more time. Bitcoin transactions contain data describing how Bitcoins should be moved across the network. They are small, amounting to hundreds of kilobytes each. Bitcoin transactions are therefore bundled into larger blocks up to 1MB.
With a 1MB block size limit, the Bitcoin network can only process a maximum of about seven transactions every second. This is small when comparing Ethereum and Bitcoin Cash, with each network processing around 15 and 65 transactions per second, respectively. Therefore, the Bitcoin block size directly influences the speed of Bitcoin transactions.
The blocks generated by the BTC network now exceed the 1MB limit that was in place before the introduction of the SegWit in 2017.
Expanding the block size limit became germane as transaction fees were drastically increasing at the end of 2017. The only solution was implementing SegWit via soft fork, which was an optional upgrade. It took several months for users to see the benefits of SegWit, such as lower fees and larger blocks.
With the drop in the price of bitcoin and with SegWit transactions now more than 10% of all Bitcoin transactions, the cost of sending BTC has reduced considerably. Transaction fees can be as low as 1 satoshi (sat) per byte, the smallest fee in bitcoin. Due to this change, users can send huge amounts of up to $12,000 in BTC for as little as a penny.
This is an important question that continues to loom in the Bitcoin space. Sometimes, Bitcoin transactions can be frustratingly slow, but there are ways to speed up the transaction time. To ensure fast processing of essential transactions, increase the transaction fee.
As proposals to solve the block size issue surface, the question of BTC's future still remains. Will it ever be a cheap and fast payment channel like Visa and Mastercard? While the bitcoin ecosystem is still evolving, it is uncertain if the underlying code that governs it will be altered.
One thing is for sure, and a larger block size should solve the scalability issue that is an inherent problem in blockchain technology today. But whether or not we'll see that happening in the near future still remains a question mark.
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