Capacity all the blocks are becoming full and as a result there's been a lot of debate about how we can scale

Bitcoin in the future

So i'm gonna talk a little bit about some of those proposals, and what they could mean and what's the trade-offs?

Some of the technical solutions being proposed to improve the scalability of Bitcoin are so that it can handle more and more users

because if Bitcoin was to become mainstream then it needs a lot more scalability that it has right now and

The problem is that when Bitcoin was first created the founder of Bitcoin who originally published the code

About a year after he published a code. He inserted a block size limit well

What's called a block size limit in the code which means that each block has a maximum block size of one megabyte

So to give a quick recap of how the Bitcoin network works

The Bitcoin network is a decentralized system

where anyone can run their own node and these nodes will have a copy of what's called the blockchain and

The blockchain is essentially a series of blocks

That contain all the transactions in the system this creator of Bitcoin realized that there's a potential problem here of

What's called a denial of service attack

someone could potentially spam the network with transactions and make blocks that are very big and

so he

Created a limit that each block should be no bigger than one megabyte and this limit is hard-coded in all of the

Software that you use to run a Bitcoin client or node on your own computer so that means

your software will automatically reject any block that is bigger than one megabyte and

Now we've reached a point. Where blocks are becoming full

They've reached a maximum capacity of one megabyte and so no new transactions can be put in in the blocks so

That gives us a capacity of around three to seven transactions per second which isn't very much

Because there is now more demand for more transactions per second in the network as a network has grown

Is it a simple case of if we were able to make these blocks bigger you could fit more transactions in?

Sure, yes, you can do that if you make the blocks bigger

It's a naive and very simple way of increasing scalability, but the main

Argument against it from its critics has been that

if you increase the block size

Then the block chain itself would get bigger and that means

Every single person who runs a Bitcoin node on their computers,

What's called a full node,

Has to have all the data of the above the whole blockchain in order to verify the whole blockchain correctly

If we increase the block size

you would need more and more storage to store a copy of the blockchain and this is a problem because

The all point of Bitcoin is that as a decentralized system

Anyone should be able to run their own node when this limit was first added in 2009 2010

The Bitcoin wasn't as popular so it was much easier to modify the code and insert

new changes and

uncontroversial, or you know

Protocol rules like that. Now, It's a much bigger space so now each change needs a lot more

Consensus if you'd like because if you were to if you wanted to increase the block size this would create what's called a hard fork

You would essentially create a blockchain that's incompatible with all the existing nodes that run on the Bitcoin network

Because the existing nodes, they will reject any block that is bigger than one megabyte and everyone will have to upgrade all the

Software so this is the kind of change that requires every single person to agree to it or the majority of the ecosystem

To agree to it. People who want, who are thinking about how to scale

Bitcoin kind of really fit into two camps

Camps of the people who are advocates of what's called on chained scaling and people who are advocates of what's called off chain scaling

The idea of on chained scaling is that we want to increase the capacity of the Bitcoin network

by increasing the number of transactions that we actually put in the blockchain itself and

you and you would do that by increasing the block size and

Yes, that would make it more expensive to run a Bitcoin full node

but argument is that the majority of Bitcoin user they'll run Bitcoin anyway if you have a Bitcoin wallet on your

On your phone, or if you use a web wallet

It's not a proper Bitcoin node if your wallet

Trusts a different node or some centralized service to some extent

to get information about the Bitcoin network and get information out of blockchain so

one of the original things that the original creator of Bitcoin said is

that he expects that as the blockchain grows in size and

Ultimately people will no longer be able to run nodes and nodes will become super nodes

you will have to have access to data center to run nodes, and that was kind of part of the plan

But one of the things that the creator of Bitcoin anticipated was that Moore's Law

would catch up with the blockchain size

So that's regardless. It wasn't mega expensive for someone to store a copy of blockchain. But unfortunately Moore's law

hasn't, has been somewhat dead for the past few years. Hard drive storage

Has largely remained at roughly the same cost for the past few years

It's kind of stopped, and that's kind of created a problem

So that's what on chained scaling is about.The idea of off chain scaling is that let's move the transactions out of the blockchain

Do we really do we really need to put every small

Transaction like if you go to a coffee shop and buy coffee

Do we really need to put it on the blockchain and do we really want

Every single person who runs a Bitcoin node to have a copy of that little transaction

so the idea of off chain scaling is let's only put big or

important transactions on the blockchain and let's put all of those micro transactions off the blockchain and

One of Percival's for doing that is a system called the Lightning Network and the Lightning network is basically

using something called payment channels between different individuals

to facilitate off chain payments for example Alice might send Bob ten dollars

And then Bob sends at least five dollars in the next day

So what they do is instead of having every single payment on the blockchain?

They just keep a balance sheet between them and they put all the payments on their balance sheet and then for example after a month

They say let's see what is the final balance and let's set all that balance on the blockchain

So you only need to put that final payment on blockchain rather than every single payment in between

and

You can extend this at least as a payment channel with Bob and Bob has a payment channel with Charlie and let's suppose Alice wants

To pay Charlie Alice kind of route that payment through Bob, which would then send a payment charlie

And this is the idea of lightning network, you use a route or a network of payment channels

And you would find the route

between person-to-person that you can make that payment of the blockchain and

In theory it sounds like a really great idea, but there are some

controversies around it so

some people don't think that it would be very feasible if

This would be able to be used by millions of users, for every single person to find a route between

any other person in a decentralized way because one of the

Things with that network is that

In order to establish a payment channel you have to deposit a

certain amount of money, which is at least a minimum amount of money of how much you expect to

go through that payment channel and

That some people just don't have the upfront capital so people expect

What's called large payment hubs to facilitate that so you would have a large payment hub

That has a large amount of deposit inside of it, and yo you would route your payments to that so in some way

There's a bit of centralization involved with that if you have on chain scaling we have super nodes

But if you have off chain scaling we might have large centralized payment hubs

So it is still bit of centralization involved in both

Bitcoin cash when Bitcoin cash forks off from Bitcoin the value of Bitcoin cash on the first day was something like 500 dollars

So people were 500 dollars per coin for free out of thin air when this fork happened

So it's possible that some people but the value of Bitcoin has risen