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What is Raiden & lightning Protocol? Blockchain Scaling Solutions
While this is a great sign and shows how cryptocurrencies are becoming widely used and accepted, there is a big problem that has reared its ugly head in recent times. Because of the sudden increase in the number of transactions, both Bitcoin and Ethereum are facing severe scalability issues.
The scalability issues stem from the way the open ledger system is designed. Suppose Alice has to send 1 BTC to Bob, how will the process work? Alice can’t physically give Bob the money, bitcoin is digital after all. The way the transaction will take place is simple:
Alice declares that she wants to send 1 BTC to Bob and send the transaction details to the miners.
The miners verify that it is indeed Alice sending the request and no one else and they consequently approve the transaction by putting it in the blocks that they have mined.
Bob gets the 1 BTC.
So, what is the problem in this whole sequence?
The miners become a bottleneck for the entire transaction.
The fact is that the miners simply can’t keep up as the number of transactions keeps on increasing. There is pretty much a backlog which happens as a result of transactions not getting verified fast enough.
Plus, there is also the small matter of transaction fees. Whenever miners mine a block, they become temporary dictators of that block. What that means is that they can charge a nominal “transaction fee” in order to insert transaction data into their blocks. However, in order to get their transactions done faster, and to jump the queue so to speak, people can pay higher transaction fees to incentivize the miners into verifying their transactions first.
Unfortunately, this leads to a big problem.
Normal bitcoin users who pay the normal transaction fees, more often than not need to wait a long time to have their transactions approved. In fact, let’s see how much time would one have to wait, on an average, if they paid the least possible transaction fees.
If you pay the lowest possible transaction fees, then you will have to wait for a median time of 13 mins for your transaction to go through. 13 mins! More often than not, the transactions had to wait until a new block was mined (which is 10 mins in bitcoin), because the older blocks would fill up with transactions.
Now things are looking pretty bleak when it comes to bitcoin. Let’s see how things are looking in Ethereum’s corner.
Theoretically speaking, Ethereum is supposed to process 1000 transactions per second. However, in practice, Ethereum is limited by 6.7 million gas limit on each block.