๐๐ฎ๐ฝ๐ฝ๐ ๐๐จ๐ ๐๐ฟ๐ถ๐ฑ๐ฎ๐!
Let's see what we have this week. ๐
"๐ฝ๐๐ฉ๐๐ค๐๐ฃ ๐๐๐ฃ ๐ค๐ฃ๐ก๐ฎ ๐จ๐ช๐ฅ๐ฅ๐ค๐ง๐ฉ ๐ ๐๐๐ฌ ๐ฉ๐ง๐๐ฃ๐จ๐๐๐ฉ๐๐ค๐ฃ๐จ ๐ฅ๐๐ง ๐จ๐๐๐ค๐ฃ๐, ๐จ๐ค ๐๐ค๐ฌ ๐๐ค๐ช๐ก๐ ๐๐ฉ ๐๐ซ๐๐ง ๐จ๐ช๐ฅ๐ฅ๐ค๐ง๐ฉ ๐ ๐๐ก๐ค๐๐๐ก ๐๐๐ค๐ฃ๐ค๐ข๐ฎ?"
Heard this one before? Iโm sure you have. No stress. ๐๐ผ๐ผ๐ธ๐บ๐ฎ๐ฟ๐ธ this tweet, so the next time you come across it, you'll be ready to bust this FUD.
Itโs true that Bitcoin's base layer alone can't support a global economy due to its limited transaction capacity. However, this limitation was anticipated and strategically addressed by Bitcoin's creator, Satoshi Nakamoto.
As the "Blockchain Trilemma" model describes, a blockchain can only optimize for any 2 out of the 3 qualities of ๐ฑ๐ฒ๐ฐ๐ฒ๐ป๐๐ฟ๐ฎ๐น๐ถ๐๐ฎ๐๐ถ๐ผ๐ป, ๐๐ฒ๐ฐ๐๐ฟ๐ถ๐๐, and ๐๐ฐ๐ฎ๐น๐ฎ๐ฏ๐ถ๐น๐ถ๐๐, but not all 3. Satoshi chose to focus on security and decentralization for Bitcoin's base layer, ensuring the network's integrity and openness, and allowing for further development to be built atop it.
Using layers to scale is not a novel concept. Consider the internet, where basic connection and addressing occur at the TCP/IP layer. Applications like HTTP for websites, SMTP for email, and DNS for domain names operate on higher layers, streamlining specific functions while the base layer manages connectivity.
The existing global monetary system also employs layers. For instance, in the United States, large transactions between banks are settled through the Federal Reserve's network, Fedwire, which processes a comparable number of transactions per second as Bitcoin's base layer. Many more layers are built on top of this base layer, creating various payment networks like ACH, Visa, and PayPal, which offer different trade-offs in terms of speed, cost, and security.
๐ง๐ต๐ฒ ๐ธ๐ฒ๐ ๐ฑ๐ถ๐๐๐ถ๐ป๐ฐ๐๐ถ๐ผ๐ป ๐๐ถ๐๐ต ๐๐ถ๐๐ฐ๐ผ๐ถ๐ป ๐ถ๐ ๐ถ๐๐ ๐ฝ๐ฒ๐ฟ๐บ๐ถ๐๐๐ถ๐ผ๐ป๐น๐ฒ๐๐ ๐ป๐ฎ๐๐๐ฟ๐ฒ ๐ฎ๐ป๐ฑ ๐๐ฟ๐ฎ๐ป๐๐ฝ๐ฎ๐ฟ๐ฒ๐ป๐ ๐๐ฟ๐ฎ๐ป๐๐ฎ๐ฐ๐๐ถ๐ผ๐ป ๐ต๐ถ๐๐๐ผ๐ฟ๐. Anyone can verify transaction records, confirm the 21 million supply cap, and move value without needing permission, and do so with a high degree of certainty.
To address Bitcoinโs scaling needs, several higher layer solutions have been developed or are still in development, such as the Lightning and Liquid networks, Fedi, and Ark. These technologies enable ๐ป๐ฒ๐ฎ๐ฟ-๐ถ๐ป๐๐๐ฎ๐ป๐ ๐๐ฟ๐ฎ๐ป๐๐ฎ๐ฐ๐๐ถ๐ผ๐ป๐ ๐ฎ๐ ๐บ๐ถ๐ป๐ถ๐บ๐ฎ๐น ๐ฐ๐ผ๐๐, offering significant scalability improvements while preserving the security and decentralization of the base layer.
The Lightning Network, for example, has the potential to scale to ๐ฎ๐ช๐ญ๐ญ๐ช๐ฐ๐ฏ๐ด of transactions per second, dwarfing closed systems like Visa, which can handle only around 24,000 transactions per second. As Bitcoin adoption grows, more transactions will be conducted using these faster, lower-cost higher layer solutions, while the base layer will cater to maintaining the settlement assurances necessary for these high layers to function securely, while also being used for more critical transactions among institutions, nation-states and citadels.
In summary, Bitcoin's design incorporates layered scaling to address its transaction limitations. This approach ensures that the base layer remains a secure and decentralized foundation while enabling higher layer technologies to handle the demands of a global economy. This adaptability and innovation are preparing Bitcoin to become the ideal money to be used by ๐ฃ๐ช๐ญ๐ญ๐ช๐ฐ๐ฏ๐ด the world over.
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