Numerous arguments abound in regard to scaling blockchain-based systems such as Bitcoin or the BTC system (Khan, Jung, & Hashmani, 2021; Kusunoki, 2021). When proponents of other, related systems such as Hyperledger discuss the same topic, the argument clearly revolves around the transaction volume (Gorenflo et al., 2020). The OED refers to scaling as something that can be measured or graded according to a scale. In reference to a blockchain-based system, the scale or grade represents the transaction volume that the system can handle.
Li et al. (2018) discussed methodologies to increase the number of transactions being processed to around 6400 transactions per second (TPS). The arguments for and against scaling should be simple. Increasing the scale of the blockchain represents an increase in the number of transactions that can be processed in any particular time period. By definition, any blockchain presents a system that collects and processes a set of transactions by building them into a block that a set of paid and funded node operators process through a competitive process such as proof of work, whereby they subsequently publish a verification that other nodes may check for validity.
The arguments around scaling on-chain and off-chain are not arguments over scaling. All transactions are maintained on the blockchain and publicly visible. The use of the network allows client systems to verify any transaction and validate the block headers, which are published widely. The security of Bitcoin lies not in the hashing algorithm, as some people suppose, but is rather derived from the wide publication of the block hashes, that are distributed to individuals who use the system. For the same reason, the notion of a ‘private blockchain’ is antithetical to the functioning of the technology. If the information being hashed is not publicised, multiple copies of the blockchain can be run simultaneously—in the same format that fraudulent accounting records can be maintained in separate sets of books.
Therefore, the notion of a ‘private blockchain’ cannot exist. By not publishing data, the system is not a blockchain system. The requirement that the blockchain “works by taking a hash of a block of items to be timestamped and widely publishing the hash” (Wright, 2009, p. 2) is defined in the original white paper. Every transaction processed in a system such as Bitcoin is public. It is the same publicity that some individuals seek to remove. The argument presented by those opposing scaling is touted as being related to scaling, yet represents an effort to find methodologies of removing the ability to trace every transaction within Bitcoin.
The direct definition of a Bitcoin node, as set out in the original white paper (Wright, 2008, pp. 3–4), is exclusively focused on machines that create and validate blocks. They are limited in scope and number, with only 10 to 15 nodes operating across the entire BTC network and the required 51% control of the network being held by 3 to 4 nodes at any time. The argument that there would be thousands of nodes represents a media-based Sybil attack on the network, whereby individuals define systems that have never created or validated blocks on the Bitcoin network as nodes, despite the fact that such systems do not fulfil the requirements specified by the network.
The validation of a transaction follows the publishing of a block and the building of new blocks on top of the old block. A node that has found a block will only be paid, and the block will only be completely final, when the network has reached a respective depth of 100 blocks. At that point, the network allows the node operator to spend the transaction fees and subsidy that they have received in recompense for validating the transactions and ordering them in a block. The creation of blocks presents a necessary component of any blockchain, and a block must contain all transactions. Leaving aside spurious arguments about the required block size, moving from 1000 transactions a second to 10,000 transactions a second requires increasing the number of transactions that are processed and stored.
Increasing the number of transactions is the only method to scale a system. Any arguments in favour of the ability to process large numbers of transactions need to focus on the ability of nodes to process and distribute large blocks. By definition, the size of the blockchain will always increase with the number of transactions, which presents an inevitable function of how blockchains operate. Consequently, arguments against increasing the block size are not arguments for scaling but rather arguments against creating a system that can be tracked. What some individuals falsely describe as layer-2 networks are, in fact, separate networks, designed to allow the exchange of transactions without leaving a record on the blockchain.
Such an argument disguises the desire to create an anonymous money system outside the reach of government and other sources that will facilitate criminal activity as a scaling argument. The scaling argument should be simple. How do nodes obtain a copy of a large database and ensure that it is updated across all the nodes? When considering such a question, it is important to understand that there is only a small number of nodes on the network, and that they operate as commercial entities, competing for a share of revenue that exceeds US$31.5 million per day at the current market rates . It follows that the top three nodes each earn over US$5 million in revenue per day.
The argument that a commercial operator earning US$5 million in revenue per day cannot invest in the necessary bandwidth and hard drive space to process even terabytes of information a day is logically flawed. The transaction fees that come with increased volumes of transactions on the network would more than fund the purchase of the hardware that would be required to increase the network bandwidth and provide additional storage.
The only rational conclusion that can be derived from an analysis of the system and the evidence lies in accepting that individuals involved with the BTC network and other blockchain systems are misapplying and misrepresenting the terminology of scaling to hide the development of “privacy” solutions, which are really designed to help hide transactions. In other words, the Orwellian doublespeak means referring to scaling when the argument should really be about the nature of a blockchain and the requirement that the system provides complete traceability of all transactions.
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Gorenflo, C., Lee, S., Golab, L., & Keshav, S. (2020). FastFabric: Scaling hyperledger fabric to 20 000 transactions per second. International Journal of Network Management, 30(5), e2099.
Khan, D., Jung, L. T., & Hashmani, M. A. (2021). Systematic Literature Review of Challenges in Blockchain Scalability. Applied Sciences, 11(20), 9372.
Kusunoki, M. (2021). The Myth of “Blockchain is Scalable” and Real Challenges. Blockchain Gaps, 59-66. Springer, Singapore.
Li, C., Li, P., Zhou, D., Xu, W., Long, F., & Yao, A. (2018). Scaling nakamoto consensus to thousands of transactions per second. arXiv preprint arXiv:1805.03870.
Wright, C. S. (2008). Bitcoin: a peer-to-peer electronic cash system. Available at SSRN 3440802.