"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.
