Can bitcoin scale?
Many have casted doubt on the ability of Bitcoin to scale past the small transaction volumes we see today. Are these claims founded? How long have people been casting doubt on the performanec of Bitcoin, and what will it take to evolve the platform to better handle the increased workload of a modern payment system?
What's up, party people? Chris DeRose here, Community Director of the Counterparty Foundation, and today we are on the PeacemakerMarine.com boat. You can look it up. It's an interesting boat. It's docked here in the Miami downtown harbor area, and it's as good a place as any to talk about Bitcoin so let's get started. Today I wanted to talk about.
"Can Bitcoin scale?" This has been going around a lot. It's not a new question, it's something we talk about every, every couple weeks, it seems like. And the formulas always change, and the actors always change. It's a constant topic in the Bitcoin space. So let's address some of these issues. Bitcoin is itself very new.
We don't exactly know where we're going on this path of Bitcoin, but there's a common theme that if this thing is going to work, it's going to have to scale to a very large degree. Certainly I think it'll definitely have to scale and probably it'll have to scale at a very large degree. Now you look at like credit cards and credit card providers and they're getting, I think like Visa is at about 4,000 transactions per second, roughly, and that's a huge number. It's significantly more than Bitcoin which is at like seven transactions per second, maybe. It's usually even less than that. But the big order of magnitude is it's something we'll have to address.
You know, you talk about what's involved in scaling. There's the bandwidth considerations. There are the computational considerations, and there are the relay considerations and the latency and some of these sort of themes. Everyone likes to find some reason that they claim can't scale, and it's usually one of those three categories. And it's very rare that they ever, ever get something meaty in there. There's a lot of parameters that can be tuned in Bitcoin.
So it's typical for us to see if somebody finds some nuance in the way that things are working now where their calculations show that it won't get past X number of transactions per second. And then typically Jeff will come around and have a post where he talks about, "No, that's only limited this way because of this." Block size is a common concern, the block sizes being limited to one megabyte per block, say. He's going to impact that they want to hold more than so many transactions etc., etc., etc.
You know, you can look at the various things that are probably good concerns about Bitcoin scalability. I think one of the ones that I've seen that I've like more is the amount of shock, power, hashing power, and shock computation power, not on the mining side but on the validation side. We need to be pretty significant. Certainly I think it will be outside the capability of a lot of personal PCs as we get to these Visa network numbers. But I think that in that environment we'll probably be seeing A) very specialized validation nodes. I think big nodes at ISPs with a lot of bandwidth.
These will probably be run by big companies. B) They'll have specialized hardware in the same way we have ASIX now to do money. Those same ASIX to a much smaller degree could be doing validations. C) I think that Intel is probably going to have a double shot instruction at some point the rate things are going, it wouldn't surprise me. And, who knows, arm as well maybe. We'll see these things over time evolve to accommodate the network.
You know, it's important to recognize that we're not going to go to this extreme degree of scalability overnight. It's going to be a constant sort of progression. I don't know the exact progression, but it's going to be at a very manageable rate. And as we grow, we'll start to encounter, no doubt, some encumbrances and there will be meetings, there will be arguments and there will be coding sessions whereby we choose what set of sacrifices we want to make to accommodate the higher transaction numbers. I mean, that's how Bitcoin's always worked. You know, it's not a static project.
We get data in. We determine what the balance is between spam and legit transactions and how to handle it, and then we accommodate that in the Bitcoin source code and continue. So I don't think that Bitcoin is in any way limited in scalability, certainly not in the near term. And as we go through the sort of manifestations of Bitcoin that we have, we are going to be getting better and better at this. We'll be learning a lot, and we'll be tuning the parameters that are set up to be tuned for higher transaction counts. You know, I think, too, Jeff talks about this lately.
Bitcoin may exist as a heartbeat mechanism for larger systems. It may be that all chain transactions are what the bulk of transactions are and that accounts settle to some degree before they hit the block chain. And then they settle on the block chain before they settle up amongst all other providers. And in that way you can see that there's a lot of offloading from the main Bitcoin block chain by these institutions all around. We see that already in various forms in the exchanges and in the coin-based banks and things like that as well. So it's not uncommon for us to see that.
And that's part of Bitcoin as a settlement mechanism theme that we're really seeing here in 2015. But I think that's most of the issues. Any one of those points could probably get its own question. So, I don't know, ask me more. What else do you want to know about Bitcoin scalability? You can tweet me at DeRoseTech on twitter. You can email me at Chris@ChrisDeRose.
com. And if you like this video and you want to see some more, subscribe to the channel and explore it. Thanks, party people.