Andresen has concluded that the newest version of Bitcoin Core can handle block sizes of up to 20 MB without significantly compromising Bitcoin network security and decentralization. This analysis will further help the community decide on how to scale up Bitcoin over the coming years to handle a larger number of transactions to compete with payment networks like Visa and PayPal that can handle larger transaction volume than the current Bitcoin network.
Issues of Scalability
Bitcoin, by default, has a 1 MB block-size limit. This translates roughly to 7 transactions per second, but could be lower depending on the size of each signed transaction (e.g. number of inputs and outputs). The presence of scripts, such as multi-sig, can also affect the block size and therefore the ability of the Bitcoin network to scale up. These issues have been identified by the core development team. In contrast, Visa handles about 2000 transactions per second on an average, which scales up much higher during peak spending seasons.
The limit was placed by Satoshi to ensure that the Bitcoin blockchain remains a reasonable size, and anyone with a personal computer could be able to run a full Bitcoin node to keep the network decentralized. Currently, there are over 6800 full Bitcoin nodes running in the world, mostly concentrated in North America and Europe, with United States and Germany leading the group.
The main problem with increasing the block size is the increasingly large size of the Bitcoin blockchain, which means it is harder to run a full Bitcoin node to relay transactions to the network, which results in a higher degree of centralization. There are also issues around CPU usage and network bandwidth if the block size is increased indiscriminately.
Solving Problems Around Scalability
With technology improving every year, from bandwidth to storage to better CPUs, it is only a matter of time before the Bitcoin network can scale up towards higher transactions per second to compete with current payment networks. As Bitcoin gains popularity, many argue that it is best to take the pain right now in scaling up the system than when it is more established. Andresen has been an advocate of increasing the block size, and even proposed doing so with a Bitcoin hard fork, which would increase the block size by 50% per year.
The newest version of Bitcoin core has several optimizations and therefore should scale up better. Andresen wrote in his blog post that he tested out data with 20 MB block sizes, an increase of 20x over the current limit and the reference implementation (Bitcoin core version) ran just fine. This shows promise that the Bitcoin network can be scaled up without compromising on its decentralized nature, something essential to the long-term success of Bitcoin.