What Is the Scalability Problem? | Cryptocurrency Glossary

Bitcoin's Scalability Issues Affecting Confirmation Speed

When making a payment or settlement using Bitcoin, the process isn’t complete simply by specifying the recipient’s Bitcoin address, entering the amount to be paid, and sending it.

After sending the transaction, it must be verified by miners on the network and added to a new block in the blockchain—which records transaction history—before the transaction is finalized and the funds are sent to the recipient.

The system is designed to generate a new block approximately every 10 minutes, but as of October 2017, the data size limit for transactions that can fit into a single block is 1 MB.

When a large volume of transactions is occurring, a long queue of transactions awaiting confirmation forms on the network. If the 1MB limit is reached, you must wait until the next block is generated. If
that block also reaches its data limit immediately, you will have to wait again, resulting in a long delay before the funds are actually transferred.

In practice, confirmations are not processed on a first-come, first-served basis; instead, there is a mechanism whereby miners prioritize transactions with higher transaction fees. Therefore, if you want your transaction confirmed immediately, you must pay higher fees. This has led to discussions about whether it would be better to increase the block size, a problem known as the scalability issue.