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How the Solution To Bitcoin’s Scaling Problem Could Change Your Networks

by Max Emelianov
March 19, 2018
in Blockchain, FinTech
Home Tech Trends Blockchain
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It’s impossible to discuss cryptocurrency without at least mentioning Bitcoin. It is, after all, the functional forefather of the cryptocurrency space. It’s the currency that everyone thinks about when you mention crypto, and the one by which virtually every other contender in the field is measured.

It also has a pretty serious, currently unresolved problem – one that’s getting progressively worse as time goes on.

Table of Contents

  • Bitcoin’s big problem
  • Finding a solution
  • What Lightning could mean for you

Bitcoin’s big problem

Simply put, ​Bitcoin was never designed to become as popular as it has​. It’s grown exponentially since its inception in the late 2000s, from a few groups of enthusiasts to tens of millions of concurrent users. This growing user base has consequently increased the number of daily transactions by an exponential rate, as well – to the extent that the Bitcoin network can no longer cope with the strain.

The issue is largely tied to Bitcoin’s block size limit. For the uninitiated, Bitcoin works on something known as the blockchain. This is a public, enduring ledger of every single transaction that’s ever taken place on the Bitcoin network, right from the beginning.


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That “chain” is made up of “blocks.” Each block is itself an encrypted ledger of every transaction that’s taken place on the network in the past ten minutes, and each transaction is used to validate each other transaction. Here’s where the problem lies. 

In 2010, Bitcoin’s creator, Satoshi Nakamoto, introduced a one megabyte block size limit as a security measure. Any block that was over that size limit would automatically be rejected by the network and deemed invalid. Unfortunately, we’re rapidly approaching the point at which that size will be too small – and it’s only getting worse.  

Finding a solution

A group of startups believe they’ve found a solution to the problem, and it can be applied to far more than just cryptocurrency. 

“Called Lightning, the project aims to build a fast, scalable and cryptographically secure payment network layered on top of the existing Bitcoin network,” ​writes Ars Technica’s Timothy B. Lee.​ “Essentially, Lightning aims to solve the big problem that has loomed over Bitcoin in recent years: Satoshi Nakamoto’s design for Bitcoin is comically unscalable. It requires every full node in Bitcoin’s peer-to-peer network to receive and store a copy of every transaction ever made on the network.”

How Lightning aims to fix Bitcoin is simple: It intends to remove routine Bitcoin payments outside the blockchain, instead using something known as payment channels. In essence, these are private “conversations” between two parties exchanging transactions that aren’t yet submitted to the Bitcoin network. Once one of the users is satisfied with the transactions, they can “cash out,” submit the transaction to the blockchain and collect their coin.

Here’s where things get kind of cool. Lightning has the capacity to chain these payment channels together with one another, creating, as Ars Technica puts it, “the possibility of stitching together millions of people into a single global payment network.”

What Lightning could mean for you

What does any of this have to do with your business? In the same way that Blockchain could mean great things for cybersecurity, Lightning – which builds on blockchain – provides a means by which it can scale to a potentially infinite degree. 

While it’s going to be a while before Lightning sees widespread adoption, I’d expect to see the core principles of the technology applied to enterprise networks around the world. Given that we’re rapidly moving into the era of the Internet of Things, that innovation could not have come soon enough.

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