At its inception, Bitcoin was an ingenious piece of software, a decentralized online payment system that would allow different parties to send money to each other without going through financial institutions. Some hardcore Bitcoin fans believed it would one day replace payment services and become the main way we pay for goods and services every day.
But as Bitcoin became increasingly popular and more and more people started using the cryptocurrency to transfer money and to support payments in online applications, it ran into problems that its creator(s) had not predicted. Most prominent among these problems was slow payments and high transaction fees.
Bitcoin developers were divided over how to solve the problem, and a lack of consensus in the community led to hard forks, a process in which an alternate version of Bitcoin is created. The most popular fork is Bitcoin Cash, which addresses the problems of Bitcoin by raising the block size to support more transactions per hour.
But not everyone is convinced that an upgrade to the block size is the solution to Bitcoin's problems.
Bitcoin's scalability problem
Bitcoin has been designed to compile new transactions into 1-megabyte blocks and append them to the blockchain, the ledger that stores the history of all Bitcoin payments. Instead of being stored on a centralized server, the blockchain is replicated and updated on a decentralized network of volunteer computers, called nodes.
In order to prevent malicious actors from compromising the network, Bitcoin has set a ten-minute interval between blocks. At this rate, the Bitcoin network processes an average of 8 transactions per second.
This limit was not a problem in the early years of Bitcoin's life, when the number of transactions never surpassed the network's capacity. But as the cryptocurrency rose in popularity, more people started using it, and the network started becoming clogged with unprocessed transactions. At one point, the mempool, the buffer where unconfirmed transactions are stored, contained more than 280,000 payments waiting to be processed.