Block Size Explained

The concept of creating blocks is central to the blockchain technology, as it is clear from the name. However, we rarely consider how exactly different parameters of blocks affect various projects. 

Today, we will consider the significance of block size for blockchain networks and its critical connection to scalability.

Blocks creation 

First of all, we are going to figure out the question of what is a block in blockchain. Within its intricate architecture, the process of grouping transactions into blocks is of utmost importance. It includes verification, ensuring the legitimacy of transactions according to network consensus rules.

After verification, transactions earn their place in a block, accompanied by a block header. This header incorporates essential information—timestamp, a link to the previous block, and a nonce whose hashed value meets particular criteria.

When it comes to the Proof-of-Work consensus mechanism, blockchains enlist miners in a competition to solve intricate mathematical puzzles. The victor, the first to crack the puzzle, appends the next block to the chain. This method, though resource-intensive and time-consuming, is necessary to ensure that the blockchain operations are legitimate and immutable.

Decoding block size and its significance

Essentially, the block size determines how much information can fit into each block, which is a crucial parameter for any project. This information includes verified transactions.

Enlarging block size might offer a solution for increasing throughput in the short term but introduces other problems. Augmented blockchain blocks need more computational prowess for validation and propagation, a trajectory that might cause centralization, with only well-endowed entities engaging in network participation.

The Bitcoin block size debate 

The debate about the block size of Bitcoin is still a widely discussed topic within the community. In the early days of BTC, the original limit on block size was set at 1 megabyte. This specific parameter became a central point of heated discussions and debates that continued over the course of several years.

The debate about block size is not just about technical details; it turns into a philosophical discussion about the fundamental principles of decentralization and accessibility. Essentially, it is grappling with how a decentralized financial system should exist and operate based on these core principles.

The perfect block size 

The pursuit of the best block size means navigating through an intricate landscape of trade-offs and technical intricacies. Here, we will consider the pros and cons of making the blocks larger.

First, the benefits:

• Enhanced transaction throughput. Larger blocks deal with a higher volume of transactions, leading to better throughput and swifter confirmation times.
• Improved user experience. Expedited transactions contribute to an overall superior user experience, fostering the adoption and daily utilization of blockchain products.

Nevertheless, the substantial block size also brings forth its share of drawbacks:

• Centralization risks. Enlarged blockchain blocks demand more energy for validation and propagation, potentially tilting the scales in favor of well-endowed entities and fostering centralization.
• Storage and bandwidth challenges. The increased size puts more pressure on the storage space and internet capacity, making it challenging for individual users who are actively involved in the network.

Two avenues unfold for adjusting block size: hard and soft forks. The first option leads to a permanent split in the blockchain, resulting in two separate chains with different rules. Proposals for increasing block size through hard forks have faced resistance because they can potentially lead to network splits, as seen in examples like Bitcoin and Litecoin.

As for soft forks, they encompass changes to the blockchain that are backward-compatible, meaning nodes that have not upgraded can still work with the upgraded ones. Segregated Witness is an example of a soft fork that indirectly increased the effective block size.

The future of block sizes

The ongoing exploration of solutions to block size and scalability challenges within the blockchain community has led to the development of various technologies and alternative consensus mechanisms. 

Zero-knowledge proofs, a cryptographic technique, have gained attention as a tool in addressing these challenges. By allowing for verifiable transactions without revealing sensitive information, zero-knowledge proofs are considered for their potential to improve both privacy and scalability on the blockchain.

Optimistic rollups are used in a similar way. With optimistic rollups, the operations go through on the sidechain with the summary of those operations systematically submitted to the main chain. This approach is called optimistic because it considers all transactions valid unless proven otherwise. This makes throughput much higher compared to using Layer 1.

Layer 2 (L2) projects extend beyond the widely recognized Lightning Network, encompassing a growing landscape of innovations that try to optimize the stability and other parameters of the blockchain’s work. These innovations not only alleviate congestion but also bring a shift in the way crypto transactions are dealt with, aiming to make them efficient and secure at the same time.

At the same time, projects in the blockchain space are trying out different consensus mechanisms, particularly to address issues related to handling a large number of transactions. Some popular methods like Proof-of-Stake and Proof-of-Authority are well-liked because they use less energy to reach an agreement. Additionally, there are new and combined approaches being explored to find even better ways to make blockchains more efficient and scalable.

Some other consensus mechanisms include:

• Proof-of-Capacity. Instead of using computational power or stake, PoC lets mining devices utilize their available hard drive space to decide on mining rights and verify transactions. Though energy-efficient and compatible with regular hard drives, it faces challenges like limited developer adoption, susceptibility to malware, and a potential competition for higher capacity hard drives.
• Proof-of-Activity. Combining PoW and PoS, Proof-of-Activity ensures transaction authenticity. Miners start with a PoW-like phase, using computing power to find a new block. Upon discovery, it transitions to PoS, randomly choosing validators based on their coin holdings to sign and validate the block. Illustrated by Decred (DCR), this method offers a unique approach to blockchain security and decentralization.
• Proof-of-Burn. Miners in Proof-of-Burn gain mining rights by "burning" their cryptocurrency coins, sending them to an un-spendable address. This approach, addressing high energy consumption, maintains network activity and agility. Burnt coins act as virtual mining rigs, with miners receiving mining power proportional to the burnt coins. 
• Proof-of-History. Developed by Solana Labs, Proof-of-History (PoH) uses the Verifiable Delay Function to create secure timestamps for blockchain blocks. Emphasizing the order of events, PoH stands out by eliminating the need for significant computational power or stake, offering fast finality, and reducing storage and bandwidth requirements. Present applications include Solana and Arweave, with future potential in digital identity, supply chain management, and decentralized finance.

These consensus innovations aim to ensure a sustainable and scalable basis for blockchain networks, encouraging more active community participation and inclusivity.

All in all, given the speed of the blockchain sphere evolving, crypto enthusiasts will continue finding new ways to solve problems connected to block size and scalability by extent. New ideas are explored all the time, so it is highly likely that we will see more innovations in this sphere soon, proving that blockchain is an agile technology.

SimpleSwap reminds you that this article is provided for informational purposes only and does not provide investment advice. All purchases and cryptocurrency investments are your own responsibility.