What is Scaling Problem?

The Scaling Problem reflects the limitations of blockchain technology. Specifically, the network's throughput. In essence, the scaling problem has a great impact on the speed and the costs of blockchain transactions.

It stems from the way that a decentralized network handles blocks of transactions that are tied to block sizes and time. It is time-consuming since it takes a significant amount of time to create a new block.

This issue came to light when Bitcoin users had to suffer through slow transfers and increased fees due to usage spikes.

It’s important to keep in mind that block size and frequency are limited. However, it’s possible to expand it. This is how Bitcoin decided to tackle the scaling problem within its blockchain. Bitcoin increased the limit from one megabyte to two megabytes in 2015. 

This change received various reactions. The main critique was that Bitcoin’s protocol could eventually become centralized due to these kinds of modifications. This is derived from the fact that each block carries data, and the more transactions exist, the more data exists in each block. Over time it would result in unreasonable storage levels just to hold a copy of the full blockchain.

It became evident that a choice will have to be made whether to focus on scalability or decentralization. The users of Bitcoin voted for decentralization. It brought up some controversial opinions within the crypto community.  

In order to start scaling, a consensus must be reached between different network participants which can turn out to be a very laborious process. 

One possible solution to this problem could be a hard fork. This way the blockchain is split into two and continues to run with different upgrades.

Ignoring the scaling problem will eventually lead to sluggish transaction speeds and increased fees. This is a guaranteed way to lose users in the long run and turn the blockchain stale.