Bitcoin has grown at an astonishing rate over the last few years, and this has been welcome for the currency itself and the wider cryptocurrency industry, however it has also brought new challenges as well. Processing the level of transaction volume that is generated by so many users is becoming an issue, and finding ways to increase the scalability of Bitcoin has been a priority for the industry for a while. A new paper from the Swiss federal Institute of Technology has offered a potential solution in the form of ByzCoin. This new protocol could be integrated into Bitcoin while retaining backward compatibility, and offer over 100 transactions per second with a 1MB block size, and huge throughout to rival major financial sites such as PayPal with a 4MB blocksize.
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One of the major issues facing Bitcoin as it grows is that of scalability. As the digital currency has grown in use, the amount of transactions that can be processed at any given time has become a problem, and while many solutions to that scalability issue have been put forward, a research paper from the Swiss federal Institute of Technology, situated in Lausanne, may prove to be the workable answer the industry has been looking for.
Published by the Institute’s Decentralized and Distributed Systems lab, the proposal is for an entirely new protocol that can be incorporated into Bitcoin incrementally while maintaining backwards compatibility. The new protocol would allow over one hundred transactions a second with a block size of 1MB, while an increase to 4MB would see transaction levels to rival the major electronic money service PayPal.
Phillip Jovanovic, a post-doctoral researcher and cryptographer on the project, explained that the protocol “uses tree-structures for communication which gives you logarithmic communication overhead. Moreover, blocks that contain transactions do not require Proof-of-Work, but instead are formed by the current leader and sent to the consensus group for signing.”
Known as ByzCoin, this new protocol is divided into both keyblocks and microblocks, a structure that is similar to Bitcoin-NG but with the ability to remove a mining leader through voting. Still in the early stages of development, the proposal faces several engineering challenges before any attempt at a trial could take place. However, the protocol is designed to be platform agnostic, in that it could be used to create a unique digital currency of its own, or integrated into Bitcoin or many other digital currency blockchains to provide the scalability discussed.
Finding a solution to scalability is essential for the future of Bitcoin itself and indeed other digital currencies, popularity and increased use is only useful if the system can cope with the transaction volume that goes with it. While this is just the beginning for ByzCoin, the possibilities of such scalability present a bright future, not just for Bitcoin, but for the digital currency industry as a whole.