Bitcoin is Closing in On Its Transaction Capacity Limit, For Real This Time

Bitcoin is Closing in On Its Transaction Capacity Limit, For Real This Time

Some individuals in the Bitcoin community have been worried about the prospect of utter blocks for fairly some time now. In perhaps the most notable example of this fear of total blocks, former Bitcoin developer Mike Hearn abandon working on the P2P digital cash system entirely after his preferred solution to the perceived issue of enhanced congestion on the Bitcoin network was not adopted.

In a blog post published in January of last year where Hearn concluded that Bitcoin experiment had failed, Hearn claimed, “The block chain is utter.”

While the Bitcoin network has encountered a backlog of transactions on numerous occasions over the past year, it’s now getting closer to a point where every fresh block will be fully packed.

The Declining Availability of Block Space

According to data provided by Blockchair Lead Developer Nikita Zhavoronkov, there was usually over 300MB of unused block space available per week at the beginning of 2016. At an average transaction size of two hundred twenty five bytes, 300MB leaves space for almost 1.Four million other transactions.

By the very first utter week of 2017, there was toughly 60MB of unused block space available. This is enough room for around 40,000 more transactions per day.

Less Space When Accounting for Empty Blocks

The real amount of block space available on a daily basis is also affected by miners mining empty blocks. Empty blocks are blocks that do not contain any transactions unrelated to the block prize because the miner built on top of a previous block header without knowing which transactions are supposed to go into that block.

Having said that, the number of empty blocks mined has declined since its peak in November 2015.

What Happens When Blocks are Always Total?

So what will happen when blocks are perpetually utter? Mike Hearn wrote another blog post before he left the Bitcoin community where he predicted Bitcoin would become “the MySpace of digital currencies” if this screenplay was permitted to play out.

Hearn cited Dave Hudson, who is the vice president of software architecture at PeerNova, in his post, who had done some calculations on the probable outcomes of a situation where blocks are always utter. CoinJournal reached out to Hudson to get his perspective on the prospect of perpetually total blocks in Bitcoin.

In Hudson’s view, the likely outcome of a situation where blocks are always utter will be that those who are willing to pay the highest fees will basically see no switch in their use of Bitcoin; however, those who do not increase their fee payments will notice delays. “I’d like to model this decently, but I’m pretty certain that this is how things will pan out,” added Hudson.

Hudson collective a combination of viewpoints on whether not a full-blocks screenplay will be good or bad for bitcoin. “As for whether this is or isn’t a bad thing, I think there are several conflicting views to take into account,” he said. “On the one palm it’s undoubtedly in the long-term interests of the network to see mining weaned off the block prize as a primary source of mining revenue, but on the other it does mean that the real costs of transfers are going to be seen by people sending transactions.”

When Hudson talks about the real costs of Bitcoin transactions, he’s referring to the fact that the costs are presently subsidized by the mining prize. As the mining prize proceeds to decline over time, transaction fees will have to make up for that lost revenue. When the mining prize is factored into the calculation, the real cost of a transaction on the Bitcoin network right now is around five or six US dollars.

Hudson noted that the next block prize halving will result in total miner revenue ripping off by nine hundred bitcoin per day. If the number of transactions on the network per day were to remain the same (harshly 300,000), then miner revenue would need an extra 0.003 bitcoin fee per transaction to remain stable.

“That sort of fee level is undoubtedly putting Bitcoin’s main chain way out of it’s original planned aim of being electronic cash, certainly as far as any sort of normal retail payments are worried,” said Hudson. “If we assume one bitcoin is equal to $800, then our mean fee would be $Two.40, so we’d need to be talking about fairly large amounts of cash to make this truly worthwhile.”

In general, Hudson’s views differ from those espoused by Hearn in his post about bitcoin’s possible crash landing caused by utter blocks. “I’m not fairly so sure that block capacity will cause a crash and burn,” explained Hudson. “A serious crash might be possible, but I suspect that it would have to be a result of some other catastrophic event or events. I’m much more inclined to believe that total blocks will simply switch the nature of what people value placing in blocks.”

Hudson added that he believes there is a lot of merit to analogizing the perception that total blocks will lead to Bitcoin’s downfall as “nobody goes to that restaurant anymore because it’s always crowded.”

“I speculated that fees would increase as block capacity got used up as this would be a natural way to ensure quick very first confirmations,” added Hudson.

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