This a genuine question I have. I’ve been reading about this alleged solution to Bitcoin’s scalability issues for some time now, but when I think about it carefully, I still have my doubts whether it actually has this potential. Let me tell you why.

Firstly, let’s look at the current status of the Bitcoin network in terms of scale. Have a look at the chart below.

Confirmed transactions per day on the Bitcoin network
(source: https://www.blockchain.com/charts/n-transactions)

A rough estimate puts the average of daily Bitcoin transactions on say 300.000, and growing. This is slightly less than 210 transactions per minute, or 3.5 per second. Most of these transactions (almost all of them, in fact) are carried out through exchanges by traders. There’s almost no actual payments happening as of yet.

If we compare this number to the current worldwide total of daily non-cash transactions, it is like comparing an ant to an elephant. Daily non-cash transactions in the richest countries in the world were already close to 1.5 billion in 2011. This has of course risen dramatically since then and will continue to do so even more rapidly.

source: https://www.gfmag.com/global-data/economic-data/26gzj8-payments-volumes-worldwide

This is 5000 times more transactions than are currently handled through the Bitcoin network. (Let’s forget for the moment that one of the biggest opportunities for cryptocurrencies is to negate the necessity for a bank, freeing up the potential for digital transactions for the billions of us who do not have access to the banking system. Think about the increase of transactions…)

This means that in order for the Lightning Network to carry the load for the Bitcoin Network, it would need to cluster 5000 transactions in each settled bill. I do not see this happening. Even if the average transaction size is 1 Euro or 1 Dollar. People will not be carrying that much money in their Lightning wallet. Most people don’t even have that kind of money.

The Lightning Network visualized

In 2015, the average transaction size for credit card transactions was $86.30. (Source: https://www.creditcards.com/credit-card-news/online-payment-statistics-1276.php) Although this is way higher than is to be expected for the average transaction size on the Lightning Network (considering it’s famous use case example of ‘buying a cup of coffee’), we would still need to cluster more than 5000 transactions per instance in order to settle all the bills on the Bitcoin network. Can you see this happening?

Please keep in mind that I’ve used very careful (i.e. ‘friendly’ for the idea of the Lightning Network) estimates for these amounts. The amount of digital transactions is going to skyrocket the coming years and this increase will mostly consist of micro-transactions, nowhere near the $86.30 mentioned above.

Exponential growth is required for the capacity of the Bitcoin Network in order to survive.

This means the Bitcoin network capacity for handling transactions will need to grow not only very, very much, but also very, very quickly. Because if it doesn’t, what is to stop other crypto’s, that don’t have to deal with this issue of scalability (or to a lesser extent) from overtaking Bitcoin? As soon as ‘the world is ready’ for mass adoption of Bitcoin, it will also be ready for other cryptocurrencies. If these present a faster, cheaper, more efficient way of handling such large amounts of transactions, Bitcoin’s future is in the shape of a store of value, at best.

I am very curious how these scalability issues could be solved for Bitcoin. I am not a developer, nor a computer scientist. So if I am missing something, or you have another perspective on the issue, please let me know. Because I would truly like this to work.

Published by Chiel

Oprichter van Conscious Web Consultancy Founder of Conscious Web Consultancy

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