Bitcoin Block Size, Explained

A block comprises a file in which information pertaining to the most contempo transactions on the Bitcoin (BTC) network is permanently recorded. Each block can be likened to a folio of a ledger, with the blocks “chaining” together to comprise the decentralized ledger that underpins the Bitcoin network.

Those bundled transactions are confirmed by miners earlier they are added to the Bitcoin blockchain as new blocks. The size of a block creates a limit on the number of transactions that can exist verified with each block. Equally such, larger blocks require greater ciphering power and volition have longer to be mined. Blocks exceeding the limit will be rejected by the network.

During Bitcoin’south infancy, blocks were express to carry no more than than 36 megabytes of transaction data each. However, the block size was reduced to 1 MB on July fourteen, 2022 in order to counter both the threat of transactional spam clogging up the network and potential distributed denial-of-service (DDoS) attacks. 

However, universal consensus regarding an platonic block size was not establish, and core developers predicted that the rate of transactions hosted by the network may exceed the available block space in future, arguing in favor of an increase to the 1 MB limit shortly after it was put in place. Since the introduction of the 1 MB block limit, the number of transactions processed per second by the BTC network has largely oscillated betwixt 2 and seven.

Chart of Bitcoin transactions per second

Source: Blockchain.com

Why does block size matter?

The size of a block imposes a limit on the number of transactions that the Bitcoin network is capable of processing per second and thus can be seen to inhibit the network’s ability to calibration. When blocks fill, the network becomes congested, and transaction fees rising dramatically.

At the offset of 2022, the average Bitcoin cake size was approximately 125 kilobytes. Past May 2022, increasing adoption had led to a 240% rising in block size since 2022 — from 125 KB to roughly 425 KB — notwithstanding, crypto merchandise tool provider TradeBlock then estimated that blocks were hitting the one MB limit at least iv times daily on average. 

By 2022, the increasing prevalence of blocks near the limit of transactional data began to pervade the mainstream cryptocurrency zeitgeist, with concerns pertaining to a significant slowdown in the processing of transactions and an increase in fees being brought to the fore.

The resulting increased fees and delays in the processing of transactions were seen to undermine the cadre utilities underpinning BTC, with many within the customs concerned that network congestion and an increase in the cost of transfers would return Bitcoin redundant as a means of exchange. 

At the time, TradeBlock estimated that “at least some otherwise-acceptable transactions are seeing delayed confirmations due to capacity issues on the network 3% of the time since the outset of the year.”

Why increase the cake size?

Over the years, Bitcoin has seen numerous proposals advocating that an increase is needed in order to reduce fees, process more than transactions per second and allow Bitcoin to calibration to compete with mainstream payments technologies.  

On May four, 2022, Gavin Andresen published an article titled “Why increasing the max block size is urgent,” further escalating the perceived gravity of the block size debate, despite the average BTC block then beingness just 30-twoscore% total. Andresen warned:

“If the number of transactions waiting gets large plenty, the stop result volition be an over-saturated network, busy doing nix productive. I don’t retrieve that is likely — information technology is more likely people but cease using Bitcoin considering transaction confirmation becomes increasingly unreliable.”

Subsequently that month, Andresen asserted that he would shift his work toward alternative client Bitcoin XT should the community fail to reach consensus regarding the implementation of a cake size increase. The 0.10 version of Bitcoin XT had been launched during December 2022 by Bitcoin Core developer and prominent critic of the one MB block limit Mike Hearn.

On June 4, 2022, Andresen advocated that the miners and node operators should be able to autonomously decide the size of blocks, arguing that the customs should either maintain the limit and “run across how high transactions fees must rise until miners realize they’re ‘leaving money on the table’ and raise the -blockmaxsie themselves” or alternatively “replace the limit with a ‘go along with the crowd’ rule that means any miner that doesn’t care will create blocks that neither increase nor subtract the average block size.”

On June 12, 2022, a statement requesting the introduction viii MB blocks that had been signed by major Chinese mining pools F2pool, BTCChina, Antpool, Huobi and BW surfaced online, indicating transnational demand for larger blocks.

On June 22, 2022, Andresen published Bitcoin Comeback Proposal (BIP) 101, which advocated “replacing the fixed one-megabyte maximum block size with a maximum size that grows over fourth dimension at a predictable rate.”

BIP101 proposed that the maximum block size be raised to viii MB as of Jan. 11, 2022, before increasing linearly to double every 730 days until January 2036. 

The 8 MB limit was estimated to be able to facilitate the processing of 24 transactions per 2d. The BIP101 proposal was well-received by large segments of the public, including leading Chinese mining pools.

Still, the Bitcoin customs remained divided on the issue of cake size, with Bram Cohen, the creator of Bittorrent, publishing an article titled “Bitcoin’due south Ironic Crunch” on June 23, 2022, in which Cohen argued in favor of transactions fees being determined by market forces amid the maintenance of the 1 MB cake limit:

“The proposed ‘solution’ to the ‘problem’ of hitting the transaction rate limit is to raise the limit from 1 megabyte to xx megabytes. This sort of modify flies directly in the face of the ethos of Bitcoin.”

Cohen asserted that the prevalence of high fees would evidence Bitcoin to be “providing real value” and emphasized the incentive such an selection would offer to miners in substitution for securing the network. Furthermore, Cohen added:

“In the long term the mining rewards for Bitcoin will go away completely (in that location’due south a strict schedule for this) and all that’southward left will be transaction fees. Attempting to ‘solve’ the problem of transaction fees would in the long run undermine the security of Bitcoin even if it were done perfectly.”

On Aug. 16, 2022, Andresen’s BIP101 was merged into the code of Bitcoin XT. Despite BIP101 receiving widespread back up from the crypto community, the inclusion of BIP101 into Bitcoin XT’s protocol failed to spark widespread adoption of the culling client. During the second half of 2022, users of Bitcoin XT alleged that they were the victims of a coordinated attack against the chain.

Which block size increase proposals garnered community support?

Bitcoin XT, Bitcoin Unlimited, Bitcoin Archetype and Segwit2x were amidst the initiatives to increase Bitcoin block size that received the greatest community support during 2022, merely none have succeeded in forcing a cake size increase.

In January 2022, BIP101 was removed from Bitcoin XT’southward protocol in favor of a one-time cake size increment to 2 MB, which preceded the rapid collapse of support for Bitcoin XT. By January 2022, less than thirty Bitcoin XT nodes were maintained by miners — down from approximately 650 one year prior. Despite the plummet of Bitcoin XT, proposals in favor of a block size increase proliferated, such as Bitcoin Unlimited, which was launched in January 2022 and allowed users to signal block sizes.

At the fourth dimension, Bitcoin Classic emerged as the ways to a block size increase that appeared to garner the greatest community support following its launch on February. 10, 2022. The proposed fork would support a erstwhile 2 MB block size increase, with the Wall Street Periodical’s Paul Vigna describing the proposal as having “emerged from the ashes of the XT/Core debate.” Despite appearing to chop-chop proceeds support, Bitcoin Classic failed to attract support from more 75% of miners and, as such, failed to emerge as the dominant chain. Bitcoin Classic would eventually cease operations after the project’s developers pledged support for the Bitcoin Greenbacks chain during 2022. 

On Feb. 20, 2022, Bitcoin Roundtable — a consortium representing many of the leading businesses, exchanges, wallets and mining pools of 2022 — outlined a plan for a hard fork of the Bitcoin blockchain that would force the introduction of the Segregated Witness (SegWit) protocol alongside a 2 MB cake size increase.

Segregated Witness, or SegWit, is a process by which the data capacity of a cake is increased by removing signature data from a Bitcoin transaction. When certain parts of a transaction are removed, chapters is freed upward to add more transactions to a block. WIth SegWit, each byte of information only counts every bit one-quarter of a block, facilitating four times as many transfers to be recorded within a block.

Following a year of intensifying contend regarding the block size limit, a proposal for SegWit 2 MB was published on March 31, 2022. The proposal advocated the activation of Segregated Witness via a soft fork and then a subsequent hard fork to raise the block size to 2 MB.

During the post-obit month, Digital Currency Group published an article titled “Bitcoin Scaling Understanding at Consensus 2022.” Information technology outlined what became known as “The New York Understanding,” expressed a delivery to the activation of SegWit and the implementation of a ii MB block size limit on behalf of the 58 major Bitcoin companies that and then controlled 83.28% of hashing power and represented $five.1 billion in monthly on-chain transaction value. Despite attracting notable support from leading actors within the cryptocurrency industry, the “SegWit2x” fork was canceled just days from its scheduled activation.

Why did Bitcoin fork and carve up?

The disability of the community to observe consensus regarding a proposal to increase the cake size resulted in a user-activated hard fork of the Bitcoin blockchain in August 2022.

While numerous proposals advocating a alter to the block size limit had failed to get together the back up required to manifest modify, transaction fees had skyrocketed by mid-2017. During August 2022, the average BTC transaction fee was just $0.l. Even so, by June 2022, median fees had increased 10x to guess $5. With nigh one-half of the world’due south population living on less than $5.50 per day, high fees appeared to have rendered BTC completely unusable for the world’s developing populations, driving a renewed push from inside the crypto community to conduct a user-activated difficult fork that would raise Bitcoin’southward block size limit. 

On Aug. 1, 2022, Bitcoin Greenbacks (BCH) successfully forked away from BTC, splitting the Bitcoin network in two. BCH introduced a cake size limit of eight MB, in improver to implementing a difficulty adjustment algorithm. The fork also rejected the implementation of the Segregated Witness soft fork, which was activated on BTC on July 21, 2022. Rather than explicitly increase the BTC block size, SegWit introduced a “block weight” of 4 MB for Segregated Witness transactions.

During May 2022, BCH underwent a hard fork to increase the cake size to 32 MB. However, information technology and so went on to undergo a hard fork once once more during November in a network split that saw the emergence of rival chain Bitcoin SV. Initially supporting a block size of 128 MB, Bitcoin SV’due south Quasar upgrade farther lifted the maximum cake size to 2 gigabytes in July 2022.