It has been roughly eleven years since Satoshi Nakamoto published that whitepaper and inaugurated digital currencies to this world. He had a radical vision of a decentralized electronic cash system which a decade later is groundbreaking. The cryptocurrency industry is currently worth around $210 billion worldwide; plus there are about a thousand more separate tokens circulating in the market.
Despite this success, the technology is yet to be fully perceived. Cryptocurrencies and analogous phrases are now popular. The awareness of them is at an all-time high. However, uptake and consumption of Nakamoto’s vision have been confined to a narrow subset of society.
Achieving the mass adoption of new technology is a tough and slow process. According to a new report by The Startup, there are challenges that need to be resolved to accelerate this process. The last couple of years have seen Bitcoin in its greatest pace and mass adoption. Thanks to that grand rally back at the end of 2017 when cryptocurrencies were everywhere in the mainstream media. For Bitcoin to reach its peak, there are a few more things that need to happen.
Higher Transactions per Second (TPS)
Currently, Bitcoin supports only about seven transactions per second. This figure is not even close to the required figure if everybody in the world was using it. Visa supports 24,000 transactions per second.
Ethereum doubles Bitcoin’s TPS at around 15 which is also very slow for daily usage. Ripple is by far the better alternative boasting 1,500 TPS of XRP. However, it is faced by other centralization challenges. The technological progress in Lightning Network might aid Bitcoin’s course in terms of TPS.
Transaction Fee Reduction
The report claims that the mining fees should be reduced to aid in bitcoin’s practical use. At the moment, the fees for validation of a transaction is at around $0.3. This does not, however, depend on the amount transacted.
The transaction fees catapult during the network’s peak when the transaction volume is high. Back in 2017, the fees reached $30 for a single transaction. This is not practical for mass adoption. It will only result in huge volumes which may even be bigger than the all-time high.
Improvement on Transaction Confirmation Time
Moving forward, the bitcoin network has to improve on the validation of near-instantaneous transactions for it to be considered a viable peer-to-peer currency. According to the report,
“It is unimaginable for a merchant to make a customer wait 10 minutes before the Bitcoin transaction is fully validated.”
In addition, this time increases dramatically whenever the network is overloaded. The increased time is damaging at times of market volatility. The Lightning Network has been created to enable micropayment channels to ease this challenge but it has a long way to go.
In addition to the Lightning Network layer, more technology is required directly on the Bitcoin Blockchain to lower transaction validation times in the future.
Decentralization of Bitcoin Mining
The major challenge right now is the centralization of Bitcoin mining. China alone accounts for almost two-thirds of the total hash power on the network. This means that the country can exercise some control over bitcoin.
Moreover, Bitmain which is based in China controls some of the world’s largest mining pools. This adds to the centralization concerns. Mining farms are being set up outside China which is starting to relieve this concern but the hardware providers are still centralized.
Bitcoin has these concerns and many others to tackle; before it can take the place of the current financial system; as a truly decentralized form of payment.