“Design and security analysis of Bitcoin infrastructure using application deployed on Google Apps Engine.”

ThePiachu

Scalability

Scalability of the Bitcoin Network to handle high volume of Transactions appear to the main failing of the current implementation of Bitcoin. It was mainly described by Dan Kaminsky, a well-known computer security expert [121]. Reaching the current transaction volume of Visa (2000 transactions per second) would require a creation and propagation of 1.14GB Block each 10 minutes [122]. Propagating such a large Block through the Network would require a very high speed connection (an order of 8Gb/s assuming transmission of the entire Block to 60 peers in 60 seconds), while storing the entire Block Chain would require an increasing amount of hard drive space (estimating growth of 1TB per week, with hardware cost of about 67$ [123]), not to mention the computational speed needed to verify each Transaction as it arrives. Such high demand of bandwidth and storage space would facilitate an emergence of “supernodes”.

A supernode would be a Node tasked with handling of all the data for other Clients. As such Nodes would be essential for running the Bitcoin Network in that scenario, the model would stop being entirely peer-to-peer, and turn into an oligopoly (a monopoly ran by a small number of parties, instead of one party).

The current implementation of the Bitcoin Protocol does not support such scalability. As a standard Transaction on average is at least 0.23kB in size and the maximum Block size is 1MB, the entire Block would be filled at most with 4348 Transactions. As each Block should be generated every 10 minutes, the Protocol can handle about 8 Transactions per second. The current peak usage of Bitcoin was about 14,000 Transactions in a day [124], averaging to about 0.16 Transactions per second.

A way around the issue of scalability could be a model similar to the one used by banks. Each “Bitcoin bank” could manage its user’s Bitcoins using a small amount of Addresses, which would store all the Coins owned by all the users of a given bank. Banks would communicate with one another over a secure channel about the transfers between the banks, and settle the differences in the balance once every set amount of time, thus decreasing the amount of Transactions that would be relayed over the Bitcoin Network.

If this potential weakness of Bitcoin was left unaddressed while Bitcoin would rise in popularity, it could hamper the effectiveness of the system. However, the issue is not pressing enough to take any decisive actions yet. With the emergence of both bank-like functionality in the Bitcoin infrastructure (in the form of Exchanges and eWallets), and a supernode-like structures (the Overlay Network [65]), it is unclear which solution will be more popular in the future.