Cryptocurrencies, based on and led by the veritable powerhouse, Bitcoin, have shown promise as infrastructure for semi Anonymous online payments, cheap remittance, trustless digital asset exchange, and smart contracts. However, Bitcoin-derived blockchain protocols have inherent scalability limits that compromise between throughput and latency, which negates the full realization of this potential.
When it first appeared on the cryptocurrency scene, Bitcoin, with the novelty factor, provided a glimpse, to financial pundits and enthusiasts, a sneak peek into the future of trading. Digital assets and their online lives have never been so interesting before. With Bitcoin, remaining semi-anonymous and yet making free or dirt cheap transactions, with no third-party bureaucratic oversight, became a reality. Transfers were lightning fast and the technology on which it was based, blockchain, seemingly impregnable. Hence, a security system with no scope of monetary fraud became an instant hit. Over a period in time, hundreds and perhaps, if you consider the ones that do early deaths, thousands of copies of Bitcoins, flooded the cryptocurrency scene. Each crypto came up with its own version of transaction modes and enhanced services. This led to an overall increment in technology as well as appreciation from a discernible crowd.
Despite its potential, blockchain protocols face a significant scalability barrier. The maximum rate at which these systems can process transactions is capped by the choice of two parameters: block size and block interval. Increasing block size improves throughput, but the resulting bigger blocks take longer to propagate in the network. Reducing the block interval reduces latency, but leads to instability where the system is in disagreement and the blockchain is subject to reorganization. Bitcoin currently targets a conservative 10 minutes between blocks, yielding 10-minute expected latencies for transactions to be encoded in the blockchain. The block size is currently set at 1MB, yielding only 1 to 3.5 transactions per second for Bitcoin for typical transaction sizes. Proposals for increasing the block size are the topic of heated debate within the Bitcoin community. To overcome this issue, Bitcoin came up with Bitcoin NG, a scalable version of Bitcoin. A blockchain protocol built on the same trust model but sans the limitations. Bitcoin-NG’s latency is limited only by the propagation delay of the network, and its bandwidth is limited only by the processing capacity of the individual nodes. Bitcoin-NG achieves this performance improvement by decoupling Bitcoin’s blockchain operation into two planes: leader election and transaction serialization.