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Scalability is a term that describes the constraints of a network via hash rates to meet increased demand.
In the context of Bitcoin, scalability reflects the issue in which a limited rate can process transactions adequately.
Blocks within the Bitcoin blockchain are limited in both size and frequency.
The overall transaction processing capacity of the network is dictated by the average block creation time of 10 minutes as well as a block size limit of 1 megabyte.
Consequently, this leads to pain points in transaction processing, relative to other cryptos or traditional payments options.
Inherent Scalability Issues with Bitcoin
Bitcoin’s block size limit represents a true bottleneck in its design.
This reflects the potential downside of a Proof-of-Work (PoW) system with Bitcoin's consensus protocol.
Lags in transaction processing capacity can result in increasing transaction fees and delayed processing of transactions that cannot be fit into a block.
This is perhaps one of Bitcoin’s most pressing issues long term, an issue that has since head to the creation of other altcoins or networks to remedy this concern.
There have also been many attempts to solve Bitcoin’s scalability problem through software upgrades.
Increasing the network's transaction processing limit requires making changes to the technical workings of bitcoin.
This is where forks in the network can come into play, be it soft or hard forks.
However, forks have resulted in the creation of entirely new cryptocurrency networks such as Bitcoin Cash, among others.
Technical optimizations have also been floated to decrease the amount of computing resources required to process and record Bitcoin transactions.
Presently there is no consensus on what the best solution to Bitcoin’s scalability is.