Capacity increases for the Bitcoin system.

Summary:

The Scaling Bitcoin Workshop in Hong Kong recently concluded, and several proposals were presented. The author of the text believes that the community is ready to deliver a clear forward path with a shared vision that addresses the needs of the system while upholding its values. To guide the ongoing development of the Bitcoin system, the author outlines some relevant principles. These include minimizing trust costs through cryptographic proof and decentralized networks, balancing scale and decentralization, and addressing the root problem with conventional currency.The author notes that there are fundamental trade-offs between scale and decentralization, but fortunately, several great technologies are in the works that make navigating these trade-offs easier. For instance, Bitcoin Core has recently merged libsecp256k1, which results in a huge increase in signature validation performance. Versionbits (BIP9) is approaching maturity and will allow the Bitcoin network to have multiple in-flight soft-forks.At Scaling Bitcoin Hong Kong, Pieter Wuille presented on bringing Segregated Witness to Bitcoin. This proposal amounts to a soft-fork that increases Bitcoin's scalability and capacity by reorganizing data in blocks to handle the signatures separately, taking them outside the scope of the current blocksize limit. The design has numerous other features like making further enhancements safer, eliminating signature malleability problems, and offering fraud proofs that make violations of the Bitcoin system provable with a compact proof. If widely used, this proposal gives a 2x capacity increase, but most importantly, it makes that additional capacity--and future capacity beyond it--safer by increasing efficiency and allowing more trade-offs. A working implementation is available at https://github.com/sipa/bitcoin/commits/segwit.The author proposes the immediate implementation of the segwit 4MB block soft-fork to increase scalability and capacity, which can be deployed in a non-contentious manner without needing further hardforks. There is also ongoing work on more efficient block relay techniques that will reduce propagation latency. The author highlights the importance of non-bandwidth scaling mechanisms such as transaction cut-through and bidirectional payment channels, which increase Bitcoin's capacity and speed using smart contracts. These approaches could allow for very high capacity and decentralization. Further proposals related to flex caps or incentive-aligned dynamic block size controls are being worked on to preserve the alignment of incentives between miners and general node operators.Finally, the author emphasizes the need to keep patches ready to implement moderate block size increases when improvements and understanding render their risks widely acceptable relative to the risks of not deploying them. Overall, the author believes that recent and current progress has well positioned the Bitcoin ecosystem to handle its current capacity needs while putting it in a good position for further improvement and evolution.

Updated on: 2023-05-19T22:31:58.422915+00:00