There are a lot of reasons why Bitcoin can't scale up, but I think a lot of people would be surprised to hear the 'real' reason. The 'main' reason most people are looking at is the tech itself. 10 minute POW blocks that only contain 1 megabyte of information is not a good scaling solution. Terrible even given the exponential demand to use the BTC network.
This is actually a very weird problem to have, because the 1 MB limit was chosen by Nakamoto completely randomly. It's arbitrary unit-bias. He likely never considered that the Bitcoin network would still be stuck at this level and refuses to scale up (on purpose), but that's exactly what has happened.
The reason why the 1 MB limit exists to begin with is because, at the time 1 MB was exponentially more than enough to support the entire network, and not having a limit leaves the network open to attack by bad actors.
The Wash-Trade attack.
Without a limit on blocksize, any miner that solved a block could unleash a devastating attack on the network. This is actually something I only learned about in the last year or two during some of the random research that I do. The way it works is that when a miner solves the hash lottery they are allowed to post the next block on the chain. Anyone who's studied Bitcoin already knows this. But what if that block was full of garbage?
If the miner had malicious intent and there was no limit to how big their block could be, they could proceed to fill up that block with as many junk transactions as they wanted. What if they inflated their block to a Terabyte in size? Then, every node on the Bitcoin network would essentially be force to save this Terabyte garbage block until the end of time. Should this attack happen over and over again, it would be impossible unprofitable for nodes to continue operations and the entire network would essentially be destroyed just because there was no blocksize limit.
But don't operations on Bitcoin have a price?
Oh yeah, I know what you're thinking. Shouldn't the high price of Bitcoin transactions stop this attack from happening? Surely even if each transaction only cost $1 then filling up one block to a terabyte in size would cost the attacker a ton of money! This is actually incorrect for two different reasons.
When a miner earns the right to post a block to the chain, they do not have to process the transactions with the highest fees. On a technical level, the miner can do whatever they want, and if they win the block then they can ignore everyone's requests and leave it blank (empty block attack) or they can fill the block up to the maximum blocksize with garbage wash-trade transactions using accounts they control for zero fee.
Who do the fees for transactions get paid to? OOPS! They get paid to, you guessed it, the miner that won the block. Thus even if the miner was forced to pay transaction fees on the garbage block he'd simply get all the money back after it was posted to the chain.
It's easy to see that the vast majority of security is derived from the process of POW mining. This is why it is laughable when uninformed liberal sheep pop in on the scene and act like it's "a waste of energy", when really they are just barfing up propaganda and have no fucking idea what they are talking about. This is especially frustrating for me personally because, in general, my politics are quite liberal. Radically so even.
This is yet another one of the "not entitled to your opinion" moments (or perhaps even Democracy is Trash). The same people who craft anti-Bitcoin propaganda are the ones creating the most pollution and investing in infinite war and economic slavery across the globe. But I guess that's just par for the course when dealing with geo-political issues. There is no shortage of hypocrisy or manipulation of the data.
The reality of the situation is that Bitcoin and crypto in general are going to solve so many of humanity's problems going forward that there will likely be a period of time where we are just trying to figure out what we should be complaining about next (and coming up short). Crypto is the solution to the energy crisis, not the cause. The solving of the Byzantine Generals Problem was a miracle, a miracle that is exponentially more intriguing by the fact that the genius who solved it is anonymous.
So if Bitcoin can just increase the blocksize and scale up, why don't they?
That is the question, isn't it?
It is the exact reason that the Bitcoin Cash fork was created. The Bitcoin community split over this issue that should not have been controversial at all.
Conspiracy theorists will tell you that Blockstream (main Bitcoin development team) stopped it from happening in order to centralize and control the network. The idea here is that if operations on the main chain are expensive then Bitcoin activity will be outsourced to centralized agents and custodians like exchanges (or other corporations) and the Lightning Network (which is also centralized and very strange).
Blockstream would tell us that they lobbied to keep the blocksize at 1 MB because this actually helps to decentralize the network. If blocksize is low then many more people will be able to run a Bitcoin node on the cheap. The actual truth of the matter is largely unclear, but I'm sure it's really a little of everything, or at least that's the safest guess.
At the end of the day there's really little excuse to not increase the blocksize at least a little bit, and if it were up to me personally I would 10x the blocksize instantly. I bought my computer 5 years ago and my 256 GB solid state drive cost $200 at that time. Today I can buy a 1 TB SSD for $100. Roughly over the last five years the cost of storage has dropped by a factor of 8, but the max blocksize for Bitcoin is still the same? That's obviously absurd, but yet here we are.
And this is the REAL reason why Bitcoin can't scale.
It can't scale because the toxic community won't allow it to scale. And I wish I was just talking about blocksize, but the Bitcoin community itself is toxic, tribalist, greedy, and hypocritical to the core. It's embarrassing really. Satoshi Nakamoto would be embarrassed to see what a clusterfuck this has become.
Bitcoin maximalist see all other cryptocurrencies as a threat rather than what they actually are, which is a growing network of synergistic entities. Each network is a community, and each community has value they can bring to the table, but Maximalists simply do not care; you're either holding Bitcoin or you're holding a shitcoin. To them: this is the only truth there is; they are delusional.
Just recently at the Bitcoin conference in Florida someone on a panel had everyone in the audience raise their hand if they owned Ethereum and then proceeded to talk trash about them right there to their face.
Oh you gotta leave then; I thought this was a Bitcoin conference.
Like... wow... you idiots.
So really Bitcoin's inability to scale has absolutely nothing to do with the tech itself and everything to do with the community and culture of the network (emphasis on "cult"). Spoiler alert: cults and tight-knit toxic communities do not scale. Period the end game over. You lose bitcoin; only a matter of time before first move advantage is gone.
And that's fine.
As I've stated before, Bitcoin does not derive value from deflation, it derives its value from security. Bitcoin is not a store of value, but a store of security. By definition, Bitcoin's security will no longer really be required once we achieve mainstream adoption and the legacy economy becomes absorbed by crypto. Why would we need all that security when the thing we are fighting against dies or becomes co-opted by us? Think about it.
At the end of the day, the actual purpose of Bitcoin has become extremely ironic. In the context of a network that specializes in security, we need the highest security for the biggest transactions. And who needs to make the biggest transactions? The rich people. The billionaires. The corporations. The Banks. The governments. Bitcoin is going to be taken over by the very entities it was made to disrupt, and again... that's fine. Once they capitulate and buy Bitcoin, consider them disrupted. The plan was never to destroy them, it was to disrupt them. It's in the name: disrupt. If they are suddenly using Bitcoin that's exactly what happened.
But think about what happens next.
Because if the powers that be accept Bitcoin and are all trying to make their own shitcoins in the form of CBDCs... well then we've really already won. The narrative becomes broken and the conflict of interest becomes overwhelmingly obvious. It's impossible at that point to pass a law that makes Bitcoin or a CBDC legal while keeping other networks/communities illegal. It would be just as easy to make all cars illegal except Ford brand (again, can't happen as there is no way to justify the law).
Conclusion
Bitcoin can't scale, and that's actually a great thing. In fact, it seems like it's all going exactly according to plan. Trickle-Down Theory is in full effect. The entire crypto sphere is the scaling solution. No single entity will be able to take over, which means everything is working exactly as intended.
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