Every ten minutes or so, a new Bitcoin block is broadcast to the Bitcoin network. Bitcoin miners are trying to mine a block in order to receive a block reward, as well as any transaction fees... The bitcoin block size limit is 1MB, but some argue that it should increase.
What is the size of the block of bitcoins and why is it so important for many Bitcoin users?
What is a Bitcoin block?
The Bitcoin block contains transactions of the Bitcoin network pending processing. Each block combines transactions ready for miners. Once the Bitcoin block is mined, transactions are completed and pending payments are processed.
At the very beginning, Bitcoin blocks were limited to a transaction volume of 36 MB. However, in 2010, the bitcoin block size dropped to 1MB per block. The massive cut was supposed to help reduce block mining time, counter transaction spam, and provide protection from external network threats.
Why does the size of a bitcoin block matter?
The block size of Bitcoin matters as it directly affects the number of transactions that the Bitcoin network processes. Bitcoin blockchain remains the most popular in the world. Consequently, it often runs at full capacity. When the Bitcoin blocks are full and the network is operating at full capacity, Bitcoin transactions and other services take longer to complete their activities.
Bitcoin transactions contain data on how certain amounts of bitcoins are supposed to move throughout the bitcoin network. Instead of physical coins, data is a currency. Bitcoin transactions are small, in the tens or hundreds of kilobytes each. This is why bitcoin transactions are combined into larger blocks, up to 1MB.
However, this 1MB block size limit also limits the number of transactions that the Bitcoin network processes. With a block size limit of 1 MB, the Bitcoin network processes a maximum of about seven transactions per second (there are anomalies). By comparison, Ethereum processes about 15 transactions per second, Bitcoin Cash processes about 65 transactions per second, and the Visa network can process over 1700 transactions per second.
Thus, you see that the size of the block of bitcoins directly affects the transaction speed of bitcoins.
Bitcoin block reward and transaction fee
Bitcoin miners validate and secure the Bitcoin network. Each mined block contains transactions associated with a transaction fee. Miner or the winning mining pool receives a block reward (12,5 BTC at the time of writing) as well as transaction fees.
Transaction fees vary depending on the demand on the Bitcoin network. If the block size of bitcoins increases and the demand for the network decreases, the transaction fees will also decrease. Conversely, if the bitcoin block size increases and the demand for the network increases, the bitcoin transaction fees will increase.
What is the height of the block of bitcoins?
The bitcoin block height is the measurement between the genesis block and any specific block in the bitcoin block chain. Bitcoin block height has little to do with block size. However, at a certain block height, the Bitcoin reward will be halved.
The next Bitcoin event is due to happen in May 2020 of the year. The bitcoin block reward will be halved, and miners will receive 6,25 BTC for each block.
A Brief History of Bitcoin Block Size
In the middle of 2015, the leading Bitcoin developer Gavin Andresen warned that the block size of bitcoins is a problem for the bitcoin network.
“If the number of pending transactions becomes large enough, the result will be an oversaturated network, busy with fruitless work. I don't think it's likely - most likely people will stop using Bitcoin because transaction confirmation becomes more and more unreliable.”
At the time, the Bitcoin network was only running at about 40% throughput. Andresen did not stop with a warning. Instead, as the lead Bitcoin developer, Andresen posted Proposal to improve Bitcoin 101 (BIP 101), which suggested "replacing a fixed maximum block size of one megabyte with a maximum size that grows with predictable speed over time."
The maximum block size will increase to 8 MB in January of the 2016 year, and then doubles in size every 730 days until January of the 2036 year.
BIP 101 has failed to gain sufficient support among Bitcoin core developers despite the interest of many large mining pools. (what is mining pool ?) However, BIP 101 has not disappeared. A Bitcoin hard fork, Bitcoin XT, leaked the code for BIP 101 into its client, but it never took off. The Bitcoin XT development team removed BIP 101 in January 2016, deciding to increase the block size to 2MB, which caused a huge exodus from Bitcoin XT.
The problem faced by any proposal to increase the bitcoin block size is that it should be widely adopted in the main bitcoin blockchain. Otherwise, one megabyte will increase the size of bitcoin block shards from bitcoins as hard forks, realizing a new vision for the future of bitcoin. For this reason, there are many Bitcoin hard forks.
SegWit and SegWit2x
A large percentage of the transaction space of Bitcoin blocks is allocated to each “witness” of the transaction. Each Bitcoin transaction contains a transaction witness who checks the transaction values, such as a signature.
Segregated Witness (SegWit) proposed to separate the aspect of verifying the witnesses of Bitcoin transactions. SegWit will have two positive results:
- Increasing the maximum Bitcoin block size to 4 MB, although initially the block size would increase to 2 MB.
- Allowing Bitcoin to be extended to Layer 2 Bitcoin protocols such as Lightning Network.
SegWit is a soft fork, not a hard fork. A software fork simultaneously frees up transaction space in each Bitcoin block while increasing the block capacity, dramatically increasing transaction throughput.
SegWit was activated in August 2017 of the year. However, at the time of writing 2019 in September, the adoption of SegWit on the main chain of bitcoin blocks remains low, and only 10% of all bitcoin transactions use SegWit.
SegWit2x was the second proposal to have Segregated Witness involved, but it was also a hard fork. SegWit2x has proposed increasing the Bitcoin block size to 2MB, among other developments. At the time, SegWit2x was highly controversial as it aimed to undermine the main bitcoin blockchain and transfer more development opportunities to dominant miners.
The SegWit2x hard fork was scheduled to take place on November 16, November 2017. However, on November 8 on November 2017, the SegWit2x development team canceled the hard fork, citing strife and lack of consensus on the project.
Bitcoin Cash Hard Fork
Bitcoin Cash is a Bitcoin hard fork that increases the block size of Bitcoin (Cash) to 32MB, allowing the BCH network to process around 65 transactions per second. The hard fork of Bitcoin Cash took place in August 2017, shortly before the completion of the SegWit and SegWit2x smash. In many ways, the bitcoin cash movement and hard fork were the result of a lack of leadership in the latest project.
After the Bitcoin Cash hard fork, the development team initially increased the block size to 8MB. It is important to note that BCH uses a variable difficulty level, which depends on the speed of transactions and verification, and not on the total number of miners (e.g. bitcoins).
Bitcoin Cash has also evolved into its own hash fork war, but that's another story.
Should Bitcoin Block Size Increase?
This is a good question that continues to dominate bitcoin development. At times, bitcoin transactions are excruciatingly slow. But there are mechanisms you can use to process transactions faster, such as increasing transaction fees. If you want to secure important transaction processes in the next block or two, adjust your fee accordingly - miners will pick it up faster!
In addition, the advent of 2 level protocol applications, such as the Lightning Network, will allow you to quickly process transactions out of the chain, which means that you do not need to wait until the block is processed before making a purchase.
In short, there are other popular blockchains and bitcoin hard forks that offer faster transaction processing by increasing the block size.