If you have any significant involvement in Bitcoin then you have probably heard that the original cryptocurrency is experiencing scalability issues.

Bitcoin is already reaching its current limit for the number of transactions that can be processed over a given amount of time. This is leading to users having to pay higher fees or wait longer for their payments to be processed.

This is has lead to a great deal of activity and debate among developers about how the current Bitcoin protocol can be improved upon in order to increase capacity without sacrificing decentralization. The most prominent example of this is, of course, the great block size debate which has repeatedly threatened to tear the community apart.

The Bandwidth Bottleneck

There are many different factors which potentially limit the capacity and performance of the bitcoin network as well as making it harder for people to run nodes and so harming the degree of decentralization which the currency is able to achieve.

Recent research has suggested that one of, if not the most significant limiting factor is bandwidth requirements.

Xtreme Thinblocks provides a way to reduce the bandwidth used by a full node by only relaying full transactions to other nodes when necessary. This technology can already be used by running a ‘Bitcoin Unlimited‘ node, which also provides a GUI that lets you vote on what block size you would like to see being used by BTC, and will also be implemented in ‘Bitcoin XT’ and ‘Bitcoin Classic’ in the future, but there are no known plans to add it into Bitcoin core. Rather than providing a butchered explanation of how this works myself, I’ll just point you to this video which explains it very well: