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What Is Bitcoin Block Size and Why Does It Matter?

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bitcoin block size feature
Image Credit: @markusspiske

Every ten minutes or so, a new Bitcoin block broadcasts to the Bitcoin network. Bitcoin network miners attempt to mine the block to claim the block reward, as well as any transaction fees. The Bitcoin block size limit is 1MB, but some argue it should increase.

What is the Bitcoin block size, and why does it matter to so many Bitcoin users?

What Is a Bitcoin Block?

A Bitcoin block contains the Bitcoin network transactions waiting for processing. Each block bundles transactions together, ready for miners to mine. Once the Bitcoin block is mined, the transactions complete and the waiting payments finish processing.

In the very early days, Bitcoin blocks were limited to 36MB transaction data. However, in 2010, the Bitcoin block size decreased to 1MB per block. The massive reduction was to help decrease block mining time, counter transaction spam, and provide security against external network threats.

Why Does Bitcoin Block Size Matter?

The size of a Bitcoin block matters because it directly influences the number of transactions the Bitcoin network processes. The Bitcoin blockchain remains the most popular in the world. Consequently, it frequently runs at capacity. When Bitcoin blocks are “full,” and the network runs at capacity, it takes longer for Bitcoin transactions and other services to complete their activities.

Bitcoin transactions contain data detailing how certain amounts of Bitcoin should move throughout the Bitcoin network. Rather than physical coins, data is the currency. Bitcoin transactions are small, in the tens or hundreds of kilobytes each. That’s why Bitcoin transactions bundle into larger blocks, up to 1MB.

However, that 1MB block size limit also restricts the number of transactions the Bitcoin network processes. With a 1MB block size limit, the Bitcoin network processes a maximum of around seven transactions per second (there are anomalies). For comparison, Ethereum processes about 15 transactions per second, Bitcoin Cash process around 65 transactions per second, and the Visa network can process over 1,700 fiat transactions per second.

You see, then, that the Bitcoin block size has a direct effect on Bitcoin transaction speed.

Bitcoin Block Reward and Transaction Fees

Bitcoin miners confirm and secure the Bitcoin network. Each mined block contains transactions, attached with a transaction fee. The winning miner or mining pool receives a block reward (12.5 BTC at the time of writing), plus any transaction fees.

Transaction fees change based upon the Bitcoin network demand. If the Bitcoin block size were to rise and network demand decreased, transaction fees would also decrease. Conversely, if the Bitcoin block size were to rise and network demand increased, Bitcoin transaction fees would increase.

What Is the Bitcoin Block Height?

Bitcoin block height is the measurement between the genesis block and any given block on the Bitcoin blockchain. Bitcoin block height doesn’t have much to do with block size. However, at a certain block height, the Bitcoin block reward will half.

The next Bitcoin halving event is due in May 2020. The Bitcoin block reward will halve, rewarding miners with 6.25 BTC for each block.

A Short History of Bitcoin Block Size

In mid-2015, the then-lead Bitcoin developer, Gavin Andresen, issued a warning that the Bitcoin block size was an impending issue for the Bitcoin network.

“If the number of transactions waiting gets large enough, the result will be an over-saturated network, busy doing nothing productive. I don’t think that is likely—it is more likely people stop using Bitcoin because transaction confirmation becomes increasingly unreliable.”

At the time, the Bitcoin network was only running at around 40% capacity. Andresen didn’t stop with the warning. Instead, as a lead Bitcoin developer, Andresen published Bitcoin Improvement Proposal 101 (BIP 101) which proposed “replacing the fixed one megabyte maximum block size with a maximum size that grows over time at a predictable rate.”

The maximum block size would increase to 8MB in January 2016, before doubling in size every 730 days until January 2036.

BIP 101 failed to gain enough support amongst Bitcoin core developers, despite interest from many large mining pools. (What is a mining pool, anyway?) However, BIP 101 didn’t disappear. Bitcoin hard fork, Bitcoin XT, merged the code for BIP 101 into their client—but it still didn’t take off. The Bitcoin XT development team removed BIP 101 in January 2016, opting to increase the block size to 2MB, precipitating an enormous exodus from Bitcoin XT.

The problem facing any proposal to increase the Bitcoin block size is that it must achieve widespread adoption on the main Bitcoin blockchain. Otherwise, one-megabyte to increase Bitcoin block size splinter from Bitcoin as hard forks, implementing a new vision for the future of Bitcoin. Many Bitcoin hard forks exist for this reason.

SegWit and SegWit2x

A large percentage of a Bitcoin blocks transaction space is taken up with each transactions “witness.” Each Bitcoin transaction contains a transaction witness which verifies transaction values, sort of like a signature.

Segregated Witness (SegWit) proposed segregating the witness verification aspect of Bitcoin transactions. SegWit would have two positive outcomes:

  1. Increasing the block size limit to a maximum of 4MB, although the block size would have increased to 2MB initially.
  2. Allowing the extension of Bitcoin into Bitcoin Layer 2 protocols, such as the Lightning Network.

SegWit is a soft fork, rather than a hard fork. The soft fork would simultaneously free up transaction space within each Bitcoin block while increasing the block capacity, drastically increasing transaction throughput.

SegWit was activated in August 2017. However, at the time of writing in September 2019, SegWit adoption on the main Bitcoin blockchain remains low, with only 10% of all Bitcoin transactions using SegWit.

SegWit2x was a second proposal involving Segregated Witness but was also a hard fork. SegWit2x proposed increasing the Bitcoin block size to 2MB, amongst other developments. At the time, SegWit2x was highly controversial as it aimed to subvert the main Bitcoin blockchain and hand more power of development to dominant miners.

The SegWit2x hard fork was due on November 16, 2017. However, on November 8, 2017, the SegWit2x development team canceled the hard fork, citing infighting and a lack of consensus regarding the project.

Bitcoin Cash Hard Fork

Bitcoin Cash is a Bitcoin hard fork that raises the Bitcoin (Cash) block size to 32MB, allowing the BCH network to process around 65 transactions per second. The Bitcoin Cash hard fork took place in August 2017, just before the conclusion of the SegWit and SegWit2x debacle. In many ways, the Bitcoin Cash movement and hard fork was a result of the lack of direction by the latter project.

After the Bitcoin Cash hard fork, the development team increased the block size to 8MB initially. Importantly, BCH uses a variable difficulty level that responds to transaction and verification speed, rather than the overall number of miners (like Bitcoin).

Bitcoin Cash also devolved into its own hard fork hash war, but that’s another story.

Should the Bitcoin Block Size Increase?

It is a good question and one that continues to dominate Bitcoin development. Bitcoin transactions are, at times, painfully slow. But there are mechanisms you can use to process transactions faster, such as increasing your transaction fee. If you want to ensure an important transaction processes in the next block or two, adjust your fee accordingly—miners will snap it up!

Furthermore, the advent of Layer 2 protocol applications like the Lightning Network will allow rapid off-chain transaction processing, meaning you don’t have to wait for a block to process before making your purchase.

In short, there are other popular blockchains and Bitcoin hard forks that offer faster transaction processing through increased block size.

Want to know more about Bitcoin hard forks? Here are eight Bitcoin forks you need to know about!

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Gavin Phillips
Gavin is the SEO Manager and a Senior Writer for Blocks Decoded. He’s been invested in Bitcoin since 2010 and has contributed to several crypto and blockchain publications, including Envilope. Gavin loves real-world applications of blockchain technology, such as Civic and uPort, and how blockchain technology can help protect privacy. Gavin is also a Senior Writer for MakeUseOf.
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