Off-chain scaling solutions for Bitcoin – Where are we now?

Bitcoin carries a set of unique properties as a secure, scarce, decentralized asset with a reliable issuance rate. However, as we were painfully reminded of in 2017, bitcoin involves a trade-off causing a bottleneck in its transaction processing capacity.

This bottleneck leads to scaling limitations involving high transaction fees and network congestion during periods of high on-chain activity. Various solutions have been proposed or activated in order to resolve this issue, some of them more controversial than others.

PROPOSED SOLUTIONS TO THE SCALING PROBLEM

Moving transactions off-chain have been a popular proposal to solve the scalability problem. Several projects are striving to unload the pressure from the Bitcoin blockchain. The Lightning Network and Blockstream’s Liquid Network have gained the most traction among the designated off-chain solutions. However, amidst the growth of decentralized finance, a third unexpected platform has taken a significant share of the off-chain market; The Ethereum Network.

In this mini report we provide a quick overview of the recent development in the exciting off-chain space.

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