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.
Why It Matters
The fundamental issue is that as Bitcoin adoption increases, transaction costs rise and processing times slow, making it impractical for everyday transactions. This creates a critical contradiction in Bitcoin's purpose:
Bitcoin was originally designed to replace the traditional financial system and its fractional reserve, debt-based money creation. However, its current implementation forces users back to fiat currencies for daily transactions due to these scaling limitations.
The Hard Transaction Limit
Let's look at the raw numbers: Bitcoin's network can process approximately 7 transactions per second. This creates a fundamental ceiling on adoption:
× 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. This means even if Bitcoin is viewed solely as a store of value, only 220 million people could make a single blockchain transaction per year into their cold storage - regardless of whether transaction fees are $1 or $1,000.
In reality, the active user count would be dramatically lower since people need multiple transactions for activities like opening Lightning Network channels, securing funds, or rebalancing portfolios.
The critical question becomes: How do you onboard billions of users to Bitcoin when the base layer can only handle 220 million transactions annually without introducing custodians? This is the scaling dilemma we must solve.
Another Look: Time to Global Adoption
Let's consider how long it would take to onboard a billion people onto Bitcoin. For this thought experiment, we'll make a simplifying assumption: each person makes only one transaction onto the base layer to open a Lightning channel with a custodian that's connected to every other Lightning channel.
This assumption isn't realistic, but it helps illustrate the fundamental constraint:
It would take nearly 5 years to onboard just one billion people using only one single Bitcoin transaction per person. And this represents an absolute best-case scenario.
Of course, it would take much longer in reality because most Bitcoiners make up to a dozen transactions per year. Even moderate users need transactions for receiving funds, making payments, adjusting channel liquidity, and managing cold storage. This could easily extend the onboarding timeline to 50+ years for meaningful global adoption.
This represents a fundamental failure of Bitcoin's potential even as a store of value. The common refrain that "Bitcoin doesn't need to be a medium of exchange, it just needs to be digital gold" ignores the mathematical reality that even in this limited role, it cannot scale to global adoption without introducing the very centralized institutions it was designed to circumvent.
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.