In December the value of Bitcoin (BTC) shot up to over $19,000, leading to a surge in volumes as demand increased. But this also exposed one major problem that Bitcoin has, and that’s the problem of scalability. Bitcoin couldn’t handle the increased volumes, and transactions costs increased as speeds slowed. Now that the price is rising again, we are likely to see the problem recurring.
So what’s the solution? The lightning network has been taunted as a solution for some time now, but is it really viable? To a large extent, it can solve bitcoin (BTC)’s scalability problem, given that it takes the load off the main chain. Unfortunately, it creates another problem, and that’s the problem of centralization.
That’s because for the lightning network to work, it requires some large centralized entities known as lightning hubs to handle the off-chain transactions. These hubs work in a similar way to traditional deposit-taking banks. This defeats the whole essence of bitcoin in the first place. After all, bitcoin was created to be a decentralized peer-to-peer currency that operates without any centralized control.
The other option would be to increase the bitcoin block size, but this too leads to the same problem of centralized control. Only that this time, the control would be in the hands of deep-pocketed mining pools. Such mining pools would have the capacity to manipulate the value of bitcoin, making it highly unstable for any real-world use.
The Ripple (XRP) way
In essence, the solution to the problem of bitcoin (BTC) scalability can be solved by taking any of the two options above, and deal with some level of centralization in the bitcoin ecosystem. Taking this approach would be a rational but humbling admission that complete decentralization is not possible, when creating a highly efficient global transaction system.
The approach of caving in to some level of centralized control could see Bitcoin get mass adoption, just like what ripple has achieved. Ripple which has some level of centralization to it, has some of the lowest transaction fees in the blockchain ecosystem. It also has some of the highest transaction speeds, irrespective of the volumes. That’s precisely why banks are adopting it enmasse, making it a prime candidate to replace the SWIFT system that is currently used in making global international financial transactions.
The Gold route
Alternatively, bitcoin can be left to be bitcoin, with all its flaws, and become a digital store of value. Let’s face it, at the moment there are tons of altcoins that are way better than bitcoin in multiple aspects, including speed and transaction costs. However, bitcoin still manages to hold its value, and to a large extent determine the direction of the entire crypto market. This is an indicator that bitcoin can work as digital gold. It doesn’t have to be faster or cheaper, it just needs to hold its value.
Whatever direction bitcoin (BTC) takes could make all the difference, between its success or failure in the long-run. This is ultimate test on whether complete decentralization in possible, especially in the world of finance.