IOTA’s Scalability Solution
The full article was originally published by Chris Mueller on HelloIOTA. Read the full article here.
VISA is capable of thousands of transactions per second (TPS), but anybody can achieve those numbers on centralized systems. Problems start to arise when you want to decentralize your data and have a trustless scheme. A trustless and immutable data architecture is achieved when lots of people all simultaneously have a copy of the data. The bigger the data holder’s pool, the more trustless the system becomes. Scalability is the golden goose in the world of “trustless” and “immutable”.
The Bitcoin protocol could be considered the first implementation of a decentralized, trustless and immutable system that allows for the transfer data representing value. Satoshi Nakamoto designed Bitcoin with a data structure called Blockchain. Despite the fact that discussing Blockchain is outside the scope of this article, we will see briefly how it works, and why it will never scale to VISA levels.
Scalability problems in Blockchain are simple to grasp: you have linear blocks containing a discrete amount of transactions (i.e. people sending Bitcoin), added to a chain every x time. For Bitcoin, the x variable is 10 minutes, and the amount of transactions that fit into each block only allows a current maximum of 5 TPS. This creates an inherent bottleneck.
While other cryptocurrencies apply variations to the Blockchain variables in order to achieve increased TPS, they all have this inherent bottleneck in common, preventing them from approaching VISA’s processing numbers. It is fair to say that Satoshi’s method of achieving a decentralized system for digital money does not seem to be ideal for everyday payments. If you have more than 4 users willing to pay for a coffee with Bitcoin at the same time, you have a problem.