Why did Bitcoin choose 2MB for expansion?

The debate over the expansion route, segregated witness, 2MB hard fork, and lightning network has been going on for some time. Recently, someone in the community proposed the "Terminator Plan", and the expansion issue has caused an uproar again. How did the Bitcoin expansion problem come about? Why did we choose 2MB for expansion? Is the hard fork solution feasible? This article is excerpted from the book "Blockchain: From Digital Currency to Credit Society" (CITIC Press), and the author is Pan Zhibiao, Director of Software Development at Bitmain.

Over the years, with the rapid development of Bitcoin, the number of Bitcoin transactions has increased, and the maximum size of a single block is limited to 1MB, so the free space in the block has become smaller and smaller. As shown in the figure, the median block size has doubled in 2015, from 292KB in January to 749KB in December.

Bitcoin block size (Source: blockmeta.com)

The issue of capacity expansion received sufficient attention and discussion in 2015. In June 2015, many capacity expansion plans were launched, including BIP100, BIP101, BIP102, BIP109, BIP248 and other plans (Table X).

Although various plans have been proposed, they can basically be divided into two categories: long-term rule-based and short-term shelving. The long-term faction is more idealistic and rule-based. They will not make any more changes once they are finalized. Typical representatives include BIP101/103, which sets a growth rule and will not adjust it. The short-term faction believes that the future is unpredictable and fixed rules are too simple and violent to solve the problem. They hope to set a short-term plan of several years to temporarily avoid it and shelve it until the future. The representative is BIP100, but due to the complicated voting process, it was later simplified to BIP102/109, etc., while BIP248 was postponed to 2020. In recent years, it has simply adopted a doubling growth.

After more than half a year of extensive and repeated discussions since June 2015, the long-term rule faction has basically been defeated. After Pieter Wuille proposed Segregated Witness at the Bitcoin Hong Kong Scaling Conference in December 2015, the scaling issue has even been simplified to only upgrading to 2MB, but it has fallen into a debate about the implementation time point.

A seemingly simple technical issue of capacity expansion has caused the Bitcoin community to spend more than half a year, hold several global technical conferences, and engage in countless private verbal battles, but still no clear conclusion has been reached. The profound reason behind this is that raising the block limit value cannot truly solve the Bitcoin capacity expansion problem.

Scaling Issues

In general, based on the understanding of the Bitcoin network, there are two divisions: clearing system and cash system.

Clearing System

The Bitcoin blockchain is a global, distributed, limited-capacity, and expensive system. The value of each transaction is different. When the block capacity is insufficient, we should ensure that high-value transactions are included in the block. High-value transactions are willing and able to pay high enough network fees to obtain high enough priority to be included in the block.

As Bitcoin prospers, the number of transactions will increase, and the limited block capacity will prevent low-value transactions (such as sending 1 cent) from ever being included in the block, because low-value transactions cannot pay high network fees. As a result, the network degenerates into a clearing system, and low-value transactions are driven out, and these transactions are replaced by third-party accounting systems.

Before the emergence of the Lightning Network, third-party accounting systems were mainly off-chain wallet providers. Users trusted a third-party wallet platform and deposited bitcoins into it. Transfers between users on the same platform only resulted in changes in account balances, and no bitcoin transactions were generated.

Cash System

The cash system means that all transactions should be included in the block. When the block capacity is insufficient, the block size limit should be increased in time to expand the system. There may be a short-term blockage of transactions, but in the long run, all transactions should be able to enter the block. Everyone enjoys the great convenience and advantages brought by the Bitcoin system.

Expansion size selection

Let's make a simple estimate, assuming that each transaction size is 512 bytes and the handling fee unit is 0.0004/KB. Then we have the following table:

According to VISA records in 2015, a total of 92,064 million payment transactions were generated throughout the year, equivalent to Bitcoin network data:

If the block size limit is raised to 30MB, the biggest problem will not be the CPU computing power bottleneck, but the propagation and storage of blocks.

The 30MB block may cause a significant increase in the orphan block rate and empty block rate of the entire network. The 1.5TB of blockchain data produced in a year also exceeds the hard disk capacity of most node machines. Based on this 1.5TB of data, blockchain browsers, wallet service providers, etc. may expand 10 times to 15TB, which is far beyond the disk capacity of ordinary machines/databases at present.

Admittedly, these data are not very challenging for a neutral system, but they are very challenging for a global distributed system. They will greatly reduce the number of nodes, increase the threshold for development access, and make Bitcoin centralized.

At the end of the debate on capacity expansion, people tend to favor 2MB, which makes the upgrade process more controllable and less risky.