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Author Topic: Is there a limit on number of transactions per hour within the bitcoin system?  (Read 616 times)
towelswan
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April 03, 2013, 10:35:02 AM
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I still don't fully understand the technical aspects of how bitcoin transactions work, with regards to block chains and such.  However I was just reading an article which claimed the following criticism of bitcoins in the big picture:

"To prevent things from becoming completely unwieldy, the Bitcoin protocol limits the size of each “block,” the basic unit of Bitcoin’s shared transaction register, to one megabyte. Since one block is created every 10 minutes, on average, this places a hard limit on the number of transactions the network can process each hour.

Right now, the network is operating well below the limit. But it’s not that far below the limit. If the Bitcoin economy continues to grow rapidly, we’re likely to hit it in the next few years."


I really don't understand what exactly he's saying, so I am struggling to express myself clearly.  My question is, would the bitcoins system struggle to keep up with the growing number of transactions if it became widespread?  Or is this criticism unwarrented?

Here's the original article:
http://www.forbes.com/sites/timothylee/2013/04/03/four-reason-you-shouldnt-buy-bitcoins/
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greyhawk
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April 03, 2013, 11:36:46 AM
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My question is, would the bitcoins system struggle to keep up with the growing number of transactions if it became widespread?  

What do you mean "would" and "if"? This is already happening.
DannyHamilton
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April 03, 2013, 01:09:29 PM
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"the network is operating well below the limit. But it’s not that far below the limit."

That's awkwardly phrased.  Which is it, "well below the limit", or "not that far below the limit"?

"the Bitcoin protocol limits the size of each “block,” the basic unit of Bitcoin’s shared transaction register, to one megabyte. Since one block is created every 10 minutes, on average, this places a hard limit on the number of transactions the network can process each hour"

At the moment, this is technically true.  Given an average sized transaction, I think I read recently that bitcoin can handle approximately 25,200 transaction per hour.

There are 2 long term possibilities:

First, everyone could agree to change the maximum size of the block.  For this to happen smoothly it would require that an overwhelming majority agree and upgrade their software to accept the new maximum blocksize. There should be an extended period of time (months? years?) from when all the major wallets programs are first modified until the first block is allowed to actually be larger than 1 megabyte to allow almost everyone to upgrade.  There has already been discussion about this possibility

Second, the maximum blocksize could be left alone and market forces would be self-regulating.  When the number of transactions created regularly exceeds the limit, people will begin voluntarily increasing the transaction fee that they include in order to increase the likelihood that a miner will include their transaction in the next block.  Transactions for small amounts of bitcoins will become cost prohibitive, and people will stop sending them.  If this continues the blockchain could eventually become a form of "clearing house" for other forms of payment that occur off the blockchain.  As an example, someone could start a low fee bitcoin payment service.  Consumers could acquire a "payment card" (something like a pre-paid Visa), and merchants could sign contracts with the payment service.  The payment service would track all the payments between all the consumers and merchants.  Then on a regular basis (daily?), they could perform a single transaction on the blockchain that removes bitcoin from the consumer accounts and sends a single large payment to each merchant.

towelswan
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April 03, 2013, 06:43:12 PM
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My question is, would the bitcoins system struggle to keep up with the growing number of transactions if it became widespread?  

What do you mean "would" and "if"? This is already happening.

Can you elaborate on this?  There are currently people trying to make transactions that won't go through ever?  Or do you mean the people who aren't providing any transaction fee are having to wait a few hours for their transaction to make it to the to of the queue?
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April 03, 2013, 06:46:07 PM
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My question is, would the bitcoins system struggle to keep up with the growing number of transactions if it became widespread?  

What do you mean "would" and "if"? This is already happening.

Can you elaborate on this?  There are currently people trying to make transactions that won't go through ever?  Or do you mean the people who aren't providing any transaction fee are having to wait a few hours for their transaction to make it to the to of the queue?

Days, not hours, days.

Let's see. The oldest one in here not picked up yet is of 31 March: http://blockchain.info/de/unconfirmed-transactions
towelswan
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April 03, 2013, 06:56:46 PM
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Hmm ok.  Does the bitcoin community in general consider this to be a problem, and threat to to long-term implementations of bitcoins?

The whole bitcoin system seems to be very eloquently conceived, built to handle a huge amount of growth.  Is this something the system did not initially predict and/or miscalculated?
DannyHamilton
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April 03, 2013, 07:32:30 PM
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Hmm ok.  Does the bitcoin community in general consider this to be a problem, and threat to to long-term implementations of bitcoins?

The whole bitcoin system seems to be very eloquently conceived, built to handle a huge amount of growth.  Is this something the system did not initially predict and/or miscalculated?

This was predicted.  This is not unexpected.  Unfortunately there are competing opinions on how this should be handled.

Many in the community believe that the limit should be left where it is and that the fees and confirmation times will be self-regulating.  Most of those feel that as the market increases the fees that are paid, alternative "off-blockchain" solutions will come into existence.

Many others in the community believe that the limit should be increased to keep fees manageable and allow more time for "off-blockchain" solutions to be created.

There are benefits and drawbacks to both solutions.  Search the forum for variations of "maxblocksize" and you'll find plenty of discussion on the matter.

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