Bitcoin's Scaling Problem: Why We Still Need a Solution
Posted on March 03, 2025
This video breaks down the ongoing scaling challenges and why they matter.
The 220 Million Yearly Hard Transaction Limit
Let's look at the raw numbers: Bitcoin's network can process approximately 7 transactions per second. This creates a theoretical ceiling on yearly transactions:
× 60 seconds/minute
× 60 minutes/hour
× 24 hours/day
× 365 days/year
= 220,752,000 transactions/year
That's roughly 220 million transactions per year for the entire planet.
So What? The Real-World Impact of 220 Million Transactions
Few realize how this strict limit sabotages Bitcoin's most treasured use cases. Let's examine each one closely.
1. Bitcoin as a Pure Store of Value (Cold Storage Focus)
If Bitcoin's primary use case becomes infrequent, large-value transactions (e.g., moving funds to and from cold storage, major institutional settlements), then 220 million transactions might suffice for a niche, global settlement layer. However, this vision starkly contrasts with the "peer-to-peer electronic cash" described in the whitepaper. It implies Bitcoin is not for everyday purchases or small, frequent use by the average global citizen.
2. Bitcoin as a medium of exchange
Consider what 220 million transactions mean for individual users. If, optimistically, an active user makes only two on-chain transactions per year (e.g., one to acquire Bitcoin, one to move it to a Layer 2 solution or a new wallet), the network could support a maximum of 110 million active on-chain users globally. This is a tiny fraction of the world's population and far from mass adoption. If users transact more frequently on-chain, the number of unique users it can support plummets further.
3. Implications for Lightning Network Onboarding
The Lightning Network requires at least one on-chain transaction to open a channel and one to close it (though cooperative closes can be batched, and watchtowers add complexity). If millions or billions of users are to be onboarded to Lightning, they each need at least one initial on-chain transaction. The 220 million limit creates a severe bottleneck for Lightning adoption itself, potentially taking many years to onboard a significant user base if each user requires a unique on-chain footprint.
Stated Goals of Bitcoin (as of 2025)
Decentralization
[Content to be added regarding decentralization and its relation to scaling.]
Trustless
[Content to be added regarding the trustless nature and how scaling impacts it.]
Permissionless
[Content to be added regarding permissionless access and scaling constraints.]
Limited Supply
[Content to be added regarding limited supply, store of value, and accessibility at scale.]
Security and Immutability
[Content to be added regarding security, immutability, and how network load/fees might affect them.]
Misguided but Well-Intentioned Narratives
The "Spend, Don't Just HODL" Argument
This noble sentiment ends nowhere. Every layer 2 solution (existing or even theoretical ones in the future) requires at least one on chain transaction to open.
Let's orange pill the world! (onbaording limits)
Beyond Lightning, any Layer 2 solution or sidechain that relies on the Bitcoin base layer for settlement or security will contribute to this transaction pressure. The limited capacity means that onboarding the "next billion users" directly onto the Bitcoin ecosystem (even onto Layer 2s that require initial on-chain transactions) is arithmetically impossible without significant changes to Bitcoin's base layer capacity or a fundamental shift towards custodial solutions, which undermines Bitcoin's core value proposition.
"Small Blocks for Maximum Decentralization" Dogma
[Content to be added, discussing the trade-offs with accessibility and global adoption.]
"Fix the money, fix the world"
[Content to be added]
With Bitcoin we'll be able to leave or 'opt-out' of the traditional finance system!
[Content to be added]
Stated Solutions
[Content to be added regarding proposed solutions to the scaling problem, e.g., Layer 2, sidechains, block size increases, protocol changes, etc., and their viability in light of the 220M limit and core Bitcoin principles.]
Some future layer 2 solution will fix this!
Unfortunately, this is not possible. ALL layer 2 solutions require at least one on chain transaction to open. Otherwise, the new solution is just another distinct coin, not BTC.
Without solving this scaling dilemma, Bitcoin faces an inevitable centralization pressure. As more people seek exposure, they will be forced to use custodial solutions, exchanges, and other intermediaries because the base layer simply cannot accommodate direct ownership for billions of users. This centralization reintroduces all the vulnerabilities, censorship risks, and counterparty exposures that Bitcoin was specifically created to eliminate.