A transaction block, a rate of 1 in 16 trillion is validated in approximately 10 minutes within scaling difficulty levels and a huge network of users validating transactions. But it's important to remember that 10 minutes is a goal, not a rule.
The Bitcoin network is running just under four transactions per second as of August 2020, and transactions are recorded on the blockchain every 10 minutes.
For comparison; it can be considered that Visa processes around 65,000 transactions per second. As the Bitcoin users network continues to grow, the number of transactions made in 10 minutes will exceed the number of transactions that can be processed in 10 minutes. At this point, as long as there is no change in the bitcoin protocol, waiting times for transactions will start and the time will continue to increase gradually.
This problem at the heart of the Bitcoin protocol is known as "scaling." While Bitcoin miners generally agree that something needs to be done to address scaling, there is no consensus on how to do this. There are two main solutions proposed to address the scaling problem: The developers have proposed creating a secondary "off-chain" tier to Bitcoin or increasing the number of transactions each block will store, allowing faster transactions to be verified later by the blockchain. The first solution will make transactions faster and cheaper for miners, with less data to be verified per block. The second solution is about scaling by increasing the block size, allowing more information to be processed every 10 minutes.
In July 2017, bitcoin miners and mining companies, representing about 80% to 90% of the network's computing power, voted to include a program that would reduce the amount of data required to validate each block.
The program that miners vote to add to the bitcoin protocol is called segregated witness, or SegWit for short. This term is a combination of "Segregated" and "Witness" meaning "signatures in bitcoin transaction". Segregated Witness means separating transaction signatures from a block and adding them as an expanded block. While adding a single program to the Bitcoin protocol does not seem like a significant improvement towards a solution, signature data is estimated to account for 65% of the data processed in each transaction block.
In August 2017, a group of miners and developers initiated a hard fork, leaving the bitcoin network to create a new currency using the same codebase as bitcoin. While this group agreed on the need for a solution to scale, they felt that adopting separated witness technology would not fully solve the scaling problem.
Instead, they opted for the second solution. A currency called "bitcoin cash" emerged. This currency increased the block size to 8MB to speed up the validation process, allowing for around 2 million transaction throughput per day. On August 16, 2020, the value of Bitcoin Cash was about 302 USD, but the value of Bitcoin was around 11,800 USD.
- CandleFocus Editor
History of Bitcoin Mining