With Bitcoin being touted as the future of money and the backbone of the world’s financial system, to achieve this it has to scale.
With decentralization comes the problem of scalability, and at seven transactions a second Bitcoin is no where near anything it promises to be.
Layer two scaling solutions such as Lightning Network are being created, however, and it’s expected that once it is fully operational, everyday payments with BTC will be a seamless and cheap option.
Lightning Network Explained
Transactions on the Lightning Network are off chain transactions, and are not picked up by the Bitcoin miners and will not be added to transactions on the blockchain, thus freeing up space for bigger on-chain transactions.
For any currency to be a mainstream exchangeable asset, it has to be able to scale. VISA is an application on fiat currency and it’s believed it can handle 65,000 transactions per second.
Obviously, at 7 transactions a second Bitcoin is lagging way behind VISA. That’s because of the decentralized nature of Bitcoin.
Every transaction on Bitcoin is picked up and hashed by miners, who are decentralized around the world. They hash them into the blocks, send them onto Nodes, who validate the transactions, before letting miners fight it out with each other to be the one to add the latest block onto the blockchain.
VISA processes everything on their centralized database, and this efficiency is what any true decentralized blockchain cannot compete with. That said, centralized databases, such as VISA cannot compete with the integrity of Bitcoin’s monetary policy, and the costs VISA charges cannot compete with the cost of transactions on the Lightning Network.