At press time, the Bitcoin network is currently facing a backlog of over 135,000 unconfirmed transactions and fees have soared. This comes days after the proponents of the SegWit2x scaling solution announced they wouldn’t move forward with a doubling of Bitcoin’s block size due to lack of consensus. Since larger blocks are clearly dead in the water, there is only one apparent solution to the scalability problem: lightning network.
The lightning network is scale-free, low-fee solution that has the potential to solve Bitcoin’s scalability problem. As transaction volume on the Bitcoin network increases and the amount of data that can fit in a block remains the same, the Bitcoin economy suffers from a congested network. It is beginning to take longer than usual–up to several hours–for a transaction to be confirmed on the Bitcoin network and high transaction fees plague the network once again.
Bitcoin’s scalability problem
Bitcoin’s blocks are limited to 1MB in size and the transaction volume on the Bitcoin network is rapidly increasing. The current block size is not sufficient to manage the number of transactions taking place on the Bitcoin network. The scalability problem can be thought of as feeding a large number of inputs through a narrow funnel. As large amounts of Bitcoin transaction data enter into the wide mouth of the funnel, the current amount of block space restricts the amount of transactions that the Bitcoin network can effectively process…