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Bitcoin, Blockchain Forks Lightning Computerphile

Bitcoin, Blockchain Forks Lightning Computerphile

Bitcoin, Blockchain Forks Lightning Computerphile So over the past year the Bitcoin network has reached his maximum Capacity all the blocks are becoming full and as a result theres been a lot of debate about how we can scale Bitcoin in the future So im gonna talk a little bit about some of those proposals, and what they could mean and whats the tradeoffs? 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 Whats 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 whats 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 theres a potential problem here of Whats 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 hardcoded 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 weve reached a point.

Bitcoin, Blockchain Forks Lightning Computerphile

Where blocks are becoming full Theyve 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 isnt 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 Its 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, Whats 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 wasnt 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, Its a much bigger space so now each change needs a lot more Consensus if youd like because if you were to if you wanted to increase the block size this would create whats called a hard fork You would essentially create a blockchain thats 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 whats called on chained scaling and people who are advocates of whats 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 theyll run Bitcoin anyway if you have a Bitcoin wallet on your On your phone, or if you use a web wallet Its 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 Moores Law would catch up with the blockchain size So thats regardless. It wasnt mega expensive for someone to store a copy of blockchain.

But unfortunately Moores law hasnt, 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 Its kind of stopped, and thats kind of created a problem So thats what on chained scaling is about.The idea of off chain scaling is that lets 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 lets only put big or important transactions on the blockchain and lets put all of those micro transactions off the blockchain and One of Percivals 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 lets see what is the final balance and lets 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 lets 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 persontoperson 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 dont 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 dont have the upfront capital so people expect Whats 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 Theres 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 its possible that some people but the value of Bitcoin has risen

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