Scalability has always been an issue with Bitcoin. When it was first created, the promise was that of a system which would overcome all the issues the modern banking system faced. Tech bottlenecks, bureaucracy and high transaction fees. Bitcoin started with a capacity of seven transactions a second. Those were early days and it was perfectly standard for the system to be able to process that rate. The tragedy is that the rate has not done up ever since. This has led to slow transaction speeds, delays, and a slowly rising fees. The entire premise of ease of usage is slowly getting hampered due to the limitations arising out of this issue.
To put things into perspective, Bitcoin intends to become an alternative to the current payment systems. Visa handles a normal rate of 24000 transactions a second. Peak hour rates go as high as 50000 per second. Now compare this with the measly 7 transactions per second Bitcoin handles currently. Get the drift. It still has a long way to go before it can really challenge the current contenders.
Over a period in time, several proposals have popped up from different quarters to improve the Bitcoin mess. The resultant being, numerous different systems have come up based on the Bitcoin model, with none of them being able to provide a lasting solution.
But like every proverbial tunnel, there is light here too.
The Lightning network is what it’s being called. Currently being tested, the Lightning network seems to be the answer to all our woes pertaining to Bitcoin.
The model is simple. It does away with recording each and every transaction in the appended ledger. Instead, it adds another layer to the Bitcoin blockchain and lets users create payment channels instead. What this does is increases the speed of transactions manifold.
And the best part is, at no extra cost. The financials if such transactions automatically come down. With greater demand and more hits to the system, it would finally stabilize and become a near costless exchange.
These personal channels can exist for as long as necessary and required.
However, the concern here could be that of security. The Lightning Network would use the Bitcoin protocol but not the security. Hence, to begin with, the transaction amount would be limited to smaller degrees. Large transactions would still require the usage of the decentralized system.