Difference between revisions of "Scalability"

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The core BitCoin network can scale to very high [[transactions|transaction]] rates assuming a distributed version of the node software is built. This would not be very complicated.
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[Note: This page is seriously outdated and largely unmaintained; due to past incidents of edit-warring it has not been subject to much peer review.]
  
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A Bitcoin full node could be modified to scale to much higher transaction rates than are seen today, assuming that said node is running on a high end servers rather than a desktop. Bitcoin was designed to support lightweight clients that only process small parts of the block chain (see ''simplified payment verification'' below for more details on this).
  
==Note to readers==
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''Please note that this page exists to give calculations about the scalability of a Bitcoin full node and transactions on the block chain without regards to network security and decentralization. It is not intended to discuss the scalability of alternative protocols or try and summarise philosophical debates. Create alternative pages if you want to do that.''
  
If you're coming here because of Dan Kaminsky's criticisms related to this page you're deserved a forward:
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==Note to Readers==
  
When techies hear about how bitcoin works they frequently stop at the word "flooding" and say "Oh-my-god! that can't scale!".  The purpose of this article is to take an extreme example, the peak transaction rate of Visa, and show that bitcoin _could_ technically reach that kind of rate without any kind of questionable reasoning, changes in the core design, or non-existent overlays.  As such, it's merely an extreme example— not a plan for how bitcoin will grow to address wider needs (as a decentralized system it is the bitcoin using public who will decide how bitcoin grows)— it's just an argument that shows that bitcoin's core design can scale much better than an intelligent person might guess at first.
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When techies hear about how bitcoin works they frequently stop at the word "flooding" and say "Oh-my-god! that can't scale!".  The purpose of this article is to take an extreme example, the peak transaction rate of Visa, and show that bitcoin ''could'' technically reach that kind of rate without any kind of questionable reasoning, changes in the core design, or non-existent overlays.  As such, it's merely an extreme example— not a plan for how bitcoin will grow to address wider needs (as a decentralized system it is the bitcoin using public who will decide how bitcoin grows)— it's just an argument that shows that bitcoin's core design can scale much better than an intelligent person might guess at first.
  
Dan rightly criticizes the analysis presented here— pointing out that operating at this scale would significantly reduce the decentralized nature of bitcoin: If you have to have many terrabytes of disk space to run a "full validating" node then fewer people will do it, and everyone who doesn't will have to trust the ones who do to be honest. Dan appears (from his slides) to have gone too far with that argument: he seems to suggest that this means bitcoins will be controlled by the kind of central banks that are common today. His analysis fails for two reasons (and the second is the fault of this page being a bit misleading):
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Dan rightly criticizes the analysis presented here— pointing out that operating at this scale would significantly reduce the decentralized nature of bitcoin: If you have to have many terabytes of disk space to run a "full validating" node then fewer people will do it, and everyone who doesn't will have to trust the ones who do to be honest. Dan appears (from his slides) to have gone too far with that argument: he seems to suggest that this means bitcoins will be controlled by the kind of central banks that are common today. His analysis fails for two reasons (and the second is the fault of this page being a bit misleading):
  
 
First, even at the astronomic scale presented here the required capacity is well within the realm of (wealthy) private individuals, and certainly would be at some future time when that kind of capacity was required.  A system which puts private individuals, or at least small groups of private parties, on equal footing with central banks could hardly be called a centralized one, though it would be less decentralized than the bitcoin we have today. The system could also not get to this kind of scale without bitcoin users agreeing collectively to increase the maximum block size, so it's not an outcome that can happen without the consent of bitcoin users.
 
First, even at the astronomic scale presented here the required capacity is well within the realm of (wealthy) private individuals, and certainly would be at some future time when that kind of capacity was required.  A system which puts private individuals, or at least small groups of private parties, on equal footing with central banks could hardly be called a centralized one, though it would be less decentralized than the bitcoin we have today. The system could also not get to this kind of scale without bitcoin users agreeing collectively to increase the maximum block size, so it's not an outcome that can happen without the consent of bitcoin users.
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==Scalability targets==
 
==Scalability targets==
  
VISA handles on average around 2,000 transactions/sec, so call it a daily peak rate of 4,000/sec. They have burst capacity for over 10,000 transactions per second which they need to handle the busiest points of the holiday period (~8,500tps). [http://investor.visa.com/phoenix.zhtml?c=215693&p=irol-newsArticle_print&ID=1355716]
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VISA handles on average around 2,000 transactions per second (tps), so call it a daily peak rate of 4,000 tps. It has a peak capacity of around 56,000 transactions per second, [https://usa.visa.com/dam/VCOM/download/corporate/media/visa-fact-sheet-Jun2015.pdf] however they never actually use more than about a third of this even during peak shopping periods. [http://www.visa.com/blogarchives/us/2013/10/10/stress-test-prepares-visanet-for-the-most-wonderful-time-of-the-year/index.html]
  
PayPal, in contrast, handles around 4 million transactions per day for an average of 46tps or a probably peak rate of 100tps.
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PayPal, in contrast, handled around 10 million transactions per day for an average of 115 tps in late 2014. [https://web.archive.org/web/20141226073503/https://www.paypal-media.com/about]
  
Let's take 4,000 tps as starting goal. Obviously if we want BitCoin to scale to all economic transactions worldwide, including cash, it'd be a lot higher than that, perhaps more in the region of a few hundred thousand transactions/sec. And the need to be able to withstand DoS attacks (which VISA does not have to deal with) implies we would want to scale far beyond the standard peak rates. Still, picking a target let's us do some basic calculations even if it's a little arbitrary.
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Let's take 4,000 tps as starting goal. Obviously if we want Bitcoin to scale to all economic transactions worldwide, including cash, it'd be a lot higher than that, perhaps more in the region of a few hundred thousand tps. And the need to be able to withstand DoS attacks (which VISA does not have to deal with) implies we would want to scale far beyond the standard peak rates. Still, picking a target let us do some basic calculations even if it's a little arbitrary.
  
==Current bottlenecks==
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Today the Bitcoin network is restricted to a sustained rate of 7 tps due to the bitcoin protocol restricting block sizes to 1MB.
  
Today the BitCoin network is restricted to a sustained rate of 7 tps by some artificial limits. These were put in place to stop people from ballooning the size of the block chain before the network and community was ready for it. Once those limits are lifted, the maximum transaction rate will go up significantly.
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===CPU===
 
 
==CPU==
 
  
 
The protocol has two parts. Nodes send "inv" messages to other nodes telling them they have a new transaction. If the receiving node doesn't have that transaction it requests it with a getdata.
 
The protocol has two parts. Nodes send "inv" messages to other nodes telling them they have a new transaction. If the receiving node doesn't have that transaction it requests it with a getdata.
  
The big cost is the crypto and block chain lookups involved with verifying the transaction. An ECDSA verification of a transaction input takes around 3msec on a modern Intel core. RIPEMD-160 runs at 106 megabytes/sec (call it 100 for simplicity) and SHA256 is about the same. So hashing 1 megabyte should take around 10 milliseconds and hashing 1 kilobyte would take 0.01 milliseconds, ie it's dwarfed by the cost of the ECDSA and thus can be ignored.
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The big cost is the crypto and block chain lookups involved with verifying the transaction. Verifying a transaction means some hashing and some [[ECDSA]] signature verifications. RIPEMD-160 runs at 106 megabytes/sec (call it 100 for simplicity) and SHA256 is about the same. So hashing 1 megabyte should take around 10 milliseconds and hashing 1 kilobyte would take 0.01 milliseconds - fast enough that we can ignore it.
  
So the slowest part of verifying a transaction is verifying its inputs, which is ~3 msec per input on todays hardware. It seems like in the current blockchain most transactions have only one input, and a few have more like 5/6 inputs. Let's call it an average of 2 inputs overall.  However each transaction input is verified twice: once when first received, and a second time when a block containing that transaction is received, so call it 12msec in total per transaction.
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Bitcoin is currently able (with a couple of simple optimizations that are prototyped but not merged yet) to perform around 8000 signature verifications per second on an quad core [http://ark.intel.com/products/53469 Intel Core i7-2670QM 2.2Ghz processor]. The average number of inputs per transaction is around 2, so we must halve the rate. This means 4000 tps is easily achievable CPU-wise with a single fairly mainstream CPU.
  
This means a single core today can probably, with tuning and the block chain held in RAM but no special hardware beyond that, verify and accept about 80 transactions/sec. This means a network node capable of keeping up with VISA would need roughly 50 cores + whatever is used for mining (done by separate machines/GPUs). Whilst building a single machine with 50 cores would be kind of a pain load balancing inbound "tx" messages over multiple machines would be very easy. Certainly a single machine could easily load balance all of VISAs transactions to a small group of verification machines which would then send the verified tx hash to the miners for incorporation into the merkle tree.
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As we can see, this means as long as Bitcoin nodes are allowed to max out at least 4 cores of the machines they run on, we will not run out of CPU capacity for signature checking unless Bitcoin is handling 100 times as much traffic as PayPal. As of late 2015 the network is handling 1.5 transactions/second, so even assuming enormous growth in popularity we will not reach this level for a long time.
  
For receiving and handling all the "tx" messages, you therefore could build a rack of 12 4-core machines that would keep up.
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Of course Bitcoin does other things beyond signature checking, most obviously, managing the database. We use LevelDB which does the bulk of the heavy lifting on a separate thread, and is capable of very high read/write loads. Overall Bitcoin's CPU usage is dominated by ECDSA.
  
That leaves the inbound inv messages. The cost of handling an inv is basically reading a small message from the network and then doing a RAM lookup to see if we already have the transaction. This is really, really fast. A single core could easily handle several thousand inv messages per second before breaking a sweat, even assuming it needs to read from a sharded in-memory block chain index.
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===Network===
  
==Network==
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Let's assume an average rate of 2000tps, so just VISA. Transactions vary in size from about 0.2 kilobytes to over 1 kilobyte, but it's averaging half a kilobyte today.
  
Let's assume an average rate of 2000tps, so just VISA. Transactions vary in size from about 0.2 kilobytes to over 1 kilobyte, but from looking at the block explorer it's probably averaging half a kilobyte today. So let's assume the way people use BitCoin gets more complicated and call it 1kb per transaction.
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That means that you need to keep up with around 8 megabits/second of transaction data (2000tps * 512 bytes) / 1024 bytes in a kilobyte / 1024 kilobytes in a megabyte = 0.97 megabytes per second * 8 = 7.8 megabits/second.
  
A solved block will then be around (1kb * 2000tps * 60 * 10) / 1024 / 1024 = 1.14 gigabytes per block.
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This sort of bandwidth is already common for even residential connections today, and is certainly at the low end of what colocation providers would expect to provide you with.
  
But you only have to transmit a solved block to your connected peers. If we assume these big futuristic supernodes have something like 40 or 50 peered connections, that means in the worst case scenario where you solve a block OR you receive a block but none of your peers have it yet (unlikely), you have to send ~57 gigabytes of data (call it 60).
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When blocks are solved, the current protocol will send the transactions again, even if a peer has already seen it at broadcast time. Fixing this to make blocks just list of hashes would resolve the issue and make the bandwidth needed for block broadcast negligable. So whilst this optimization isn't fully implemented today, we do not consider block transmission bandwidth here.
  
Shifting 60 gigabytes of data in, say, 60 seconds means an average rate of 1 gigabyte per second, or 8 gigabits per second.
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===Storage===
  
The real question you want to know is how much does that sort of bandwidth cost? Well, bandwidth prices are a very tricky thing as some of the largest consumers pay the least due to how peering agreements work. The Googles and Akamais of this world will pay way less for a 10G wave than a small operator would. And, you wouldn't be hitting the 8Gbps very frequently .... only when you solve a block, really, as when relaying a block the peers you connect to will likely have already received it from some other peer anyway so only a subset would need to receive it from you.  
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At very high transaction rates each block can be over half a gigabyte in size.
  
Luckily, a node would very likely not have to transfer this much data this quickly. Assuming all nodes are equally well connected to other nodes with the same number of connections, each node would only have to send one copy of each block received, on average. Even if you are the first node to become aware of a block, once you send the block to 3 or 4 others, it would propagate among the others in exponentially growing numbers, similar to the bit-torrent protocol.  
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It is not required for most fully validating nodes to store the entire chain. In Satoshi's paper he describes "pruning", a way to delete unnecessary data about transactions that are fully spent. This reduces the amount of data that is needed for a fully validating node to be only the size of the current unspent output size, plus some additional data that is needed to handle re-orgs. As of October 2012 (block 203258) there have been 7,979,231 transactions, however the size of the unspent output set is less than 100MiB, which is small enough to easily fit in RAM for even quite old computers.
  
Take a look at [http://icecolo.com/colocation-packages] to get a feel for data transfer costs.
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Only a small number of archival nodes need to store the full chain going back to the genesis block. These nodes can be used to bootstrap new fully validating nodes from scratch but are otherwise unnecessary.
  
==Storage==
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The primary limiting factor in Bitcoin's performance is disk seeks once the unspent transaction output set stops fitting in memory. Once hard disks are phased out in favour of SSDs, it is quite possible that access to the UTXO set never becomes a serious bottleneck.
  
At very high transaction rates each block can be over a gigabyte in size. These blocks must be stored somewhere. Whilst for speed it'd be ideal to store the block chain entirely in RAM, for cheapness storing only the hot parts in RAM and the rest on disk is the way to go. A 3 terabyte hard disk costs less than $200 today and will be cheaper still in future, so you'd need one such disk for every 21 days of operation (at 1gb per block).
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==Optimizations==
  
==Network structure==
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The description above applies to the current software with only minor optimizations assumed (the type that can and have been done by one man in a few weeks).
  
Today BitCoin is a flat peer to peer network in which all nodes are equal. However the intention is to evolve it towards a more typical two-tier structure in which low powered client nodes connect to long-lived, high powered supernodes. The protocol already has some support for this (see the services flags in the version/address messages). However client mode is only partially implemented and no code exists to decide if and when to switch between supernode/client node status.
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However there is potential for even greater optimizations to be made in future, at the cost of some additional complexity.
 
 
As the network scales up, the costs of running a supernode that stores the full block chain and verifies every transaction will get progressively higher, but the two tier structure ensures everyone can still get started quickly. Client nodes only need to download a small number of headers the first time they connect (from their last checkpoint until the chain head). It's quite possible to run such nodes on a modern smartphone. The security model for lightweight clients is slightly different to a full node: whilst they don't need to talk to a trusted node (ie any network node will do), in that configuration it's important that the network be very difficult to attack as the block contents are not verified.
 
 
 
==Optimizations==
 
 
 
The description above applies to the current software. However several optimizations exist that can dramatically cheapen the cost of running a node and these are fairly easy to implement.
 
  
 
===CPU===
 
===CPU===
  
The CPU cost of a transaction is doubled by the fact that the current software verifies each input twice. There's no need for this. Once a transaction is received the fact that it passed verification can be stored, and when it re-appears in a block the second verification can be skipped. This would roughly double per-core capacity, ie you would need only 25 cores to verify VISA-level traffic loads. This can actually fit into a single high-end server.
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Algorithms exist to accelerate batch verification over elliptic curve signatures. It's possible to check their signatures simultaneously for a 2x speedup. This is a somewhat more complex implementation.
  
===Storage===
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===Simplified payment verification===
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<!-- "Simplified payment verification" redirects here. Update the redirect if you change the section title -->
  
The storage costs of the block chain calculated above assume transactions are never deleted. Satoshi's paper explains how transactions with fully spent outputs can be pruned from long term storage due to how they are arranged in a Merkle tree. Nodes try to avoid accumulating lots of small unspent outputs as that means to send a reasonable quantity of coins would require transactions with lots of inputs and thus, be large and perhaps requiring a fee. Because nodes fight fragmentation, as time goes by it's likely that many blocks can be completely pruned of all or nearly all transactions, reducing their storage costs in the best case down to 80 bytes. As of May, 2011, the software does not implement pruning, and the potential savings are [http://forum.bitcoin.org/index.php?topic=9461.msg137059#msg137059 calculated] at 71% of transactions or 73% of raw block bytes.
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It's possible to build a Bitcoin implementation that does not verify everything, but instead relies on either connecting to a trusted node, or puts its faith in high difficulty as a proxy for proof of validity. [[bitcoinj]] is an implementation of this mode.
  
===Bandwidth===
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In Simplified Payment Verification (SPV) mode, named after the section of Satoshi's paper that describes it, clients connect to an arbitrary full node and download only the block headers. They verify the chain headers connect together correctly and that the difficulty is high enough. They then request transactions matching particular patterns from the remote node (ie, payments to your addresses), which provides copies of those transactions along with a Merkle branch linking them to the block in which they appeared. This exploits the Merkle tree structure to allow proof of inclusion without needing the full contents of the block.
  
The network costs of distributing blocks can be minimized by changing the protocol to send blocks as a header plus a list of hashes. Because nodes are very likely to have already seen a transaction when it was first broadcast, this means the size of a block to download would be trivial (80 bytes + 32 bytes per transaction). If a node didn't see a transaction broadcast, it can ask the connected node to provide it.
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As a further optimization, block headers that are buried sufficiently deep can be thrown away after some time (eg. you only really need to store as low as 2016 headers).
  
===Network structure===
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The level of difficulty required to obtain confidence the remote node is not feeding you fictional transactions depends on your threat model. If you are connecting to a node that is known to be reliable, the difficulty doesn't matter. If you want to pick a random node, the cost for an attacker to mine a block sequence containing a bogus transaction should be higher than the value to be obtained by defrauding you. By changing how deeply buried the block must be, you can trade off confirmation time vs cost of an attack.
  
The peer-finding mechanism today relies on IRC. Switching to DNS would give dramatically faster startup times that do not scale with the size of the network.
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Programs implementing this approach can have fixed storage/network overhead in the null case of no usage, and resource usage proportional to received/sent transactions.
  
===Simplified payment verification===
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See also: [[Thin Client Security]].
  
It's possible to build a Bitcoin implementation that does not verify everything, but instead relies on either connecting to a trusted node, or puts its faith in high difficulty as a proxy for proof of validity. [[BitCoinJ]] is an implementation of this mode.
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== Related work ==
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There are a few proposals for optimizing Bitcoin's scalability. Some of these require an alt-chain / hard fork.
  
In SPV mode, named after the section of Satoshis paper that describes it, clients connect to an arbitrary full node and download only the block headers. They verify the chain headers connect together correctly and that the difficulty is high enough. They then request transactions matching particular patterns from the remote node (ie, payments to your addresses), which provides copies of those transactions along with a Merkle branch linking them to the block in which they appeared. This exploits the Merkle tree structure to allow proof of inclusion without needing the full contents of the block. The pattern matching protocol message isn't implemented yet, [http://forum.bitcoin.org/index.php?topic=7972.msg116285#msg116285 a proposal] was discussed in May 2011.
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* [https://bitcointalk.org/index.php?topic=88208.0 Ultimate blockchain compression] - the idea that the blockchain can be compressed to achieve "trust-free lite nodes"
 
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* [http://cryptonite.info/files/mbc-scheme-rev2.pdf The Finite Blockchain] paper that describes splitting the blockchain into three data structures, each better suited for its purpose. The three data structures are a finite blockchain (keep N blocks into the past), an "account tree" which keeps account balance for every address with a non-zero balance, and a "proof chain" which is an (ever growing) slimmed down version of the blockchain.
As a further optimization, block headers that are buried sufficiently deep can be thrown away after some time (eg, you only really need to store say 1000 blocks).
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* [https://lightning.network/ Lightning Network], an alternative protocol for transaction clearance in which nodes set up micropayment channels between each other and settle up on the block chain occasionally. Ordinary users interact primarily or only with payment channels and only use the blockchain for large transfers and cold storage.
 
 
The level of difficulty required to obtain confidence the remote node is not feeding you fictional transactions depends on your threat model. If you are connecting to a node that is known to be reliable, the difficulty doesn't matter. If you want to pick a random node, the cost for an attacker to mine a block sequence containing a bogus transaction should be higher than the value to be obtained by defrauding you. By changing how deeply buried the block must be, you can trade off confirmation time vs cost of an attack.
 
 
 
Programs implementing this approach can have fixed storage/network overhead in the null case of no usage, and resource usage proportional to received/sent transactions.
 
  
 
[[Category:Technical]]
 
[[Category:Technical]]
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[[Category:Scalability]]

Latest revision as of 20:25, 15 February 2019

[Note: This page is seriously outdated and largely unmaintained; due to past incidents of edit-warring it has not been subject to much peer review.]

A Bitcoin full node could be modified to scale to much higher transaction rates than are seen today, assuming that said node is running on a high end servers rather than a desktop. Bitcoin was designed to support lightweight clients that only process small parts of the block chain (see simplified payment verification below for more details on this).

Please note that this page exists to give calculations about the scalability of a Bitcoin full node and transactions on the block chain without regards to network security and decentralization. It is not intended to discuss the scalability of alternative protocols or try and summarise philosophical debates. Create alternative pages if you want to do that.

Note to Readers

When techies hear about how bitcoin works they frequently stop at the word "flooding" and say "Oh-my-god! that can't scale!". The purpose of this article is to take an extreme example, the peak transaction rate of Visa, and show that bitcoin could technically reach that kind of rate without any kind of questionable reasoning, changes in the core design, or non-existent overlays. As such, it's merely an extreme example— not a plan for how bitcoin will grow to address wider needs (as a decentralized system it is the bitcoin using public who will decide how bitcoin grows)— it's just an argument that shows that bitcoin's core design can scale much better than an intelligent person might guess at first.

Dan rightly criticizes the analysis presented here— pointing out that operating at this scale would significantly reduce the decentralized nature of bitcoin: If you have to have many terabytes of disk space to run a "full validating" node then fewer people will do it, and everyone who doesn't will have to trust the ones who do to be honest. Dan appears (from his slides) to have gone too far with that argument: he seems to suggest that this means bitcoins will be controlled by the kind of central banks that are common today. His analysis fails for two reasons (and the second is the fault of this page being a bit misleading):

First, even at the astronomic scale presented here the required capacity is well within the realm of (wealthy) private individuals, and certainly would be at some future time when that kind of capacity was required. A system which puts private individuals, or at least small groups of private parties, on equal footing with central banks could hardly be called a centralized one, though it would be less decentralized than the bitcoin we have today. The system could also not get to this kind of scale without bitcoin users agreeing collectively to increase the maximum block size, so it's not an outcome that can happen without the consent of bitcoin users.

Second, and most importantly, the assumed scaling described here deals with Bitcoin replacing visa. This is a poor comparison because bitcoin alone is not a perfect replacement for visa for reasons completely unrelated to scaling: Bitcoin does not offer instant transactions, credit, or various anti-fraud mechanisms (which some people want, even if not everyone does), for example. Bitcoin is a more complete replacement for checks, wire transfers, money orders, gold coins, CDs, savings accounts, etc. and if widely adopted probably replace the uses of credit cards which would be better served by these other things if they worked better online.

Bitcoin users sometimes gloss over this fact too quickly because people are too quick to call it a flaw but this is unfair. No one system is ideal for all usage and Bitcoin has a broader spectrum of qualities than most monetary instruments. If the bitcoin community isn't willing to point out some things would better be done by other systems then it becomes easy to make strawman arguments: If we admit that bitcoin could be used as a floor wax and desert topping, someone will always point out that it's not the best floorwax or best desert topping.

It's trivial to build payment processing and credit systems _on top_ of bitcoin, both classic ones (like Visa itself!) as well as decentralized ones like Ripple. These systems could handle higher transaction volumes with lower costs, and settle frequently to the bitcoin that backs them. These could use other techniques with different tradeoffs than bitcoin, but still be backed and denominated by bitcoin so still enjoy its lack of central control. We see the beginnings of this today with bitcoin exchange and wallet services allowing instant payments between members.

These services would gain the benefit of the stable inflation resistant bitcoin currency, users would gain the benefits of instant transactions, credit, and anti-fraud, bitcoin overall would enjoy improved scaling from offloaded transaction volume without compromising its decentralized nature. In a world where bitcoin was widely used payment processing systems would probably have lower prices because they would need to compete with raw-bitcoin transactions, they also could be afford lower price because frequent bitcoin settling (and zero trust bitcoin escrow transactions) would reduce their risk. This is doubly true because bitcoin could conceivably scale to replace them entirely, even if that wouldn't be the best idea due to the resulting reduction in decentralization.

Scalability targets

VISA handles on average around 2,000 transactions per second (tps), so call it a daily peak rate of 4,000 tps. It has a peak capacity of around 56,000 transactions per second, [1] however they never actually use more than about a third of this even during peak shopping periods. [2]

PayPal, in contrast, handled around 10 million transactions per day for an average of 115 tps in late 2014. [3]

Let's take 4,000 tps as starting goal. Obviously if we want Bitcoin to scale to all economic transactions worldwide, including cash, it'd be a lot higher than that, perhaps more in the region of a few hundred thousand tps. And the need to be able to withstand DoS attacks (which VISA does not have to deal with) implies we would want to scale far beyond the standard peak rates. Still, picking a target let us do some basic calculations even if it's a little arbitrary.

Today the Bitcoin network is restricted to a sustained rate of 7 tps due to the bitcoin protocol restricting block sizes to 1MB.

CPU

The protocol has two parts. Nodes send "inv" messages to other nodes telling them they have a new transaction. If the receiving node doesn't have that transaction it requests it with a getdata.

The big cost is the crypto and block chain lookups involved with verifying the transaction. Verifying a transaction means some hashing and some ECDSA signature verifications. RIPEMD-160 runs at 106 megabytes/sec (call it 100 for simplicity) and SHA256 is about the same. So hashing 1 megabyte should take around 10 milliseconds and hashing 1 kilobyte would take 0.01 milliseconds - fast enough that we can ignore it.

Bitcoin is currently able (with a couple of simple optimizations that are prototyped but not merged yet) to perform around 8000 signature verifications per second on an quad core Intel Core i7-2670QM 2.2Ghz processor. The average number of inputs per transaction is around 2, so we must halve the rate. This means 4000 tps is easily achievable CPU-wise with a single fairly mainstream CPU.

As we can see, this means as long as Bitcoin nodes are allowed to max out at least 4 cores of the machines they run on, we will not run out of CPU capacity for signature checking unless Bitcoin is handling 100 times as much traffic as PayPal. As of late 2015 the network is handling 1.5 transactions/second, so even assuming enormous growth in popularity we will not reach this level for a long time.

Of course Bitcoin does other things beyond signature checking, most obviously, managing the database. We use LevelDB which does the bulk of the heavy lifting on a separate thread, and is capable of very high read/write loads. Overall Bitcoin's CPU usage is dominated by ECDSA.

Network

Let's assume an average rate of 2000tps, so just VISA. Transactions vary in size from about 0.2 kilobytes to over 1 kilobyte, but it's averaging half a kilobyte today.

That means that you need to keep up with around 8 megabits/second of transaction data (2000tps * 512 bytes) / 1024 bytes in a kilobyte / 1024 kilobytes in a megabyte = 0.97 megabytes per second * 8 = 7.8 megabits/second.

This sort of bandwidth is already common for even residential connections today, and is certainly at the low end of what colocation providers would expect to provide you with.

When blocks are solved, the current protocol will send the transactions again, even if a peer has already seen it at broadcast time. Fixing this to make blocks just list of hashes would resolve the issue and make the bandwidth needed for block broadcast negligable. So whilst this optimization isn't fully implemented today, we do not consider block transmission bandwidth here.

Storage

At very high transaction rates each block can be over half a gigabyte in size.

It is not required for most fully validating nodes to store the entire chain. In Satoshi's paper he describes "pruning", a way to delete unnecessary data about transactions that are fully spent. This reduces the amount of data that is needed for a fully validating node to be only the size of the current unspent output size, plus some additional data that is needed to handle re-orgs. As of October 2012 (block 203258) there have been 7,979,231 transactions, however the size of the unspent output set is less than 100MiB, which is small enough to easily fit in RAM for even quite old computers.

Only a small number of archival nodes need to store the full chain going back to the genesis block. These nodes can be used to bootstrap new fully validating nodes from scratch but are otherwise unnecessary.

The primary limiting factor in Bitcoin's performance is disk seeks once the unspent transaction output set stops fitting in memory. Once hard disks are phased out in favour of SSDs, it is quite possible that access to the UTXO set never becomes a serious bottleneck.

Optimizations

The description above applies to the current software with only minor optimizations assumed (the type that can and have been done by one man in a few weeks).

However there is potential for even greater optimizations to be made in future, at the cost of some additional complexity.

CPU

Algorithms exist to accelerate batch verification over elliptic curve signatures. It's possible to check their signatures simultaneously for a 2x speedup. This is a somewhat more complex implementation.

Simplified payment verification

It's possible to build a Bitcoin implementation that does not verify everything, but instead relies on either connecting to a trusted node, or puts its faith in high difficulty as a proxy for proof of validity. bitcoinj is an implementation of this mode.

In Simplified Payment Verification (SPV) mode, named after the section of Satoshi's paper that describes it, clients connect to an arbitrary full node and download only the block headers. They verify the chain headers connect together correctly and that the difficulty is high enough. They then request transactions matching particular patterns from the remote node (ie, payments to your addresses), which provides copies of those transactions along with a Merkle branch linking them to the block in which they appeared. This exploits the Merkle tree structure to allow proof of inclusion without needing the full contents of the block.

As a further optimization, block headers that are buried sufficiently deep can be thrown away after some time (eg. you only really need to store as low as 2016 headers).

The level of difficulty required to obtain confidence the remote node is not feeding you fictional transactions depends on your threat model. If you are connecting to a node that is known to be reliable, the difficulty doesn't matter. If you want to pick a random node, the cost for an attacker to mine a block sequence containing a bogus transaction should be higher than the value to be obtained by defrauding you. By changing how deeply buried the block must be, you can trade off confirmation time vs cost of an attack.

Programs implementing this approach can have fixed storage/network overhead in the null case of no usage, and resource usage proportional to received/sent transactions.

See also: Thin Client Security.

Related work

There are a few proposals for optimizing Bitcoin's scalability. Some of these require an alt-chain / hard fork.

  • Ultimate blockchain compression - the idea that the blockchain can be compressed to achieve "trust-free lite nodes"
  • The Finite Blockchain paper that describes splitting the blockchain into three data structures, each better suited for its purpose. The three data structures are a finite blockchain (keep N blocks into the past), an "account tree" which keeps account balance for every address with a non-zero balance, and a "proof chain" which is an (ever growing) slimmed down version of the blockchain.
  • Lightning Network, an alternative protocol for transaction clearance in which nodes set up micropayment channels between each other and settle up on the block chain occasionally. Ordinary users interact primarily or only with payment channels and only use the blockchain for large transfers and cold storage.