The Bitcoin solution to the scaling problem
Over the years, Bitcoin has had offshoots that were specifically designed to solve its scaling problem. Litecoin and Bitcoin Cash are two well-known examples.
Bitcoin as we know it today resisted those hard forks and remained unchanged. Instead, it introduced two solutions called “SegWit” and the “Lightning Network”.
- SegWit: A way of arranging data to make transfers faster and easier. The downside is that it requires specifically compatible address types, so you can only use SegWit with certain wallets and certain exchanges. This basically means that Bitcoin users often have to turn SegWit on and off to use it properly. For this reason, most people seem to just keep it turned off.
- The Lightning Network: A layer-2 system that sets up secondary payment channels to go around the blockchain. The idea is to keep smaller transactions off the main Bitcoin network to alleviate congestion. As of December 2020, it’s operational, but in limited use and with a range of issues.