Bitcoin processes seven transactions per second on average. Ripple, the fastest major cryptocurrency, can process approximately 1,500. Visa processes approximately 24,000 transactions per second.
As Bitcoin’s popularity boomed in 2017, the cryptocurrency’s scalability issues became increasingly clear. Solving this is viewed as key to Bitcoin fulfilling its potential as the ‘money of the future’.
Timeline for Breaking banks
- March 13, 2019
The Lightning Network is often tipped as the solution. This second layer protocol operates on top of a cryptocurrency, allowing two parties to set up permanent ‘direct lines’ to one another that significantly speeds up transaction processing times and lowers transaction fees.
By relying on a network of smaller payment channels, Bitcoin could potentially be scaled to handle billions of transactions a day.
Bitcoin Lightning Network: Not the answer to scalability issues
However, despite the initial success of the Lightning Network – which passed a capacity of 600 Bitcoin last month – experts don’t believe that the Lightning Network will be the answer to Bitcoin’s problems.
A new report by GlobalData, exploring the trends and developments expected in the technology industry over the next 12 months, claims that while off-chain technologies are seeing increased use, interest in these layer 2 protocols will eventually “fizzle out”.
“Off-chain technologies like the Lightning Network will see an uptick in interest before fizzling out,” the report states. “Although superficially attractive, off-chain cryptocurrency transactions simply add complexity, and tend towards the centralisation of the network while, in the real world, contactless payments and faster payment services continue to see rapid growth in adoption.”
According to the researchers, Bitcoin will continue to be plagued by the same problems with performance in 2019 and, while there is a solution, “ignorance” will continue to hold the crypto space back.
“While some cryptocurrencies have shown promising signs of tackling the challenge of transaction throughput – EOS, QuarkChain, and Zilliqa are worth watching – market interest remains focused on the likes of Bitcoin and Ethereum, largely due to ignorance.”
EOS, QuarkChain and Zilliqa are all working on fixes for cryptocurrency’s scalability issues. EOS, for example, uses parallel processing technology, which allows apps (like CryptoKitties) to operate on the blockchain while transactions are simultaneously being processed, helping to reduce the load on the network.
Could Bitcoin’s problems get worse in 2019?
For the cryptocurrency market, scalability could be moved down the list of concerns by increasing regulation from authorities.
GlobalData predicts that tax authorities will increase their interest in cryptocurrencies in 2019. This will make things difficult for many exchanges and, if they are unable to adapt, for cryptocurrency investors too.
3 Things That Will Change the World Today
“Cryptocurrency exchanges will come under increasing scrutiny from regulatory and tax authorities. A number will fail over the course of 2019 – leaving many customers out of pocket – while the survivors will have to adapt to a regulatory environment that will see them increasingly treated like banks.”