Scalability in cryptocurrencies refers to the ability of blockchains to adapt to increases in demand, carrying out more transactions per second without affecting their performance.
Therefore, a blockchain being scalable means that it can go faster and still be efficient. This is very important as it allows your cryptocurrency to compete in a rising market. In this way, it adapts while maintaining security and performance.
For example, let’s imagine that Bitcoin can double the number of transactions it makes per second (tps). In this way, it would go from 7 to 14. It may seem that they are still few, but we are talking about being able to meet twice the demand than before.
Importance of cryptocurrency scalability
Typically, cryptocurrency platforms coming onto the market have enough capacity to meet regular demand. However, the world of digital currencies is very volatile and they have a growing trend that needs to be met.
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This is very relevant to compete with traditional media. Imagine that any credit card can reach tens of thousands of tps, while cryptocurrencies can only carry out a few tens.
We must not forget that these virtual currencies compete, not only with virtual legal money, but also with physical coins and bills. On the other hand, many platforms are based on decentralized decisions, unlike fiat money, and this is not reliable for some users.
the congested network
Why is it imperative to meet demand while maintaining safety and performance? Because the network may become congested or unreliable. This would cause problems that are difficult to solve and that affect the costs and processing of transactions.
Thus, costs increase and with them the commissions charged to users. If, in addition, an acceptable and secure service cannot be offered due to low scalability (or because it is too high), then the user can decide to go elsewhere.
Cryptocurrency scalability solutions
We can classify solutions into three types:
- First of all, those like Ethereum that what they have done is divide their records into sub-registries. In this way, it has significantly increased its scalability.
- One solution that may seem counterintuitive is to reduce the number of transactions. However, it has its reason for being in that there are those who choose to focus on the security of these, since it is an essential incentive for the user.
- Finally, we have consensus algorithms or measures directly aimed at expanding the capacity and number of tps. In this case, the idea is not to compromise performance or security by improving the scalability of the cryptocurrency.