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The Bitcoin network processes around 10-30 transactions per second with segwit.

With an increasing amount of TX requests as more and more users join the network, how will the network eventually accommodate a surplus of transaction requests?

In other words, once we get to an average of 31 transaction requests per second, won't the mempool grow indefinitely with some users perpetually waiting for their TX to be processed?

Note: I am not asking what happens when the mempool is filled. For the sake of my question, I'd like to even assume an infinitely large mempool. I'm merely referring to the inevitable scenario that

rate of transaction processing < rate of incoming transaction requests

To clarify further: Won't the network inevitably crash due to

  • indefinitely growing / overflowing mempool or
  • indefinitely growing fees
Murch
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csstudent1418
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    Does this answer your question? What if the mempool exceeds 300 MB? –  Jun 24 '21 at 11:28
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    No, but I edit my questino and to clarify not. – csstudent1418 Jun 24 '21 at 12:13
  • Since nodes have finite resources, their mempools cannot grow indefinitely. As an aside, competition among transaction makers during mempool congestion naturally increases feerate which reduces demand. – RedGrittyBrick Jun 24 '21 at 12:28
  • @RedGrittyBrick Let me rephrase: I get that mempool practically can't grow indefinitely. But then what happens at the above described point in time? Mempools get more and more filled causing an increasing amount of transaction requests to be dropped. Increasing feerates reduce demand: For ordinary goods, of course that is true. But for transactions? How can transaction demand be reduced like that, people HAVE to do their TXs no matter the fee right? So then the fees will grow indefinitely with increasing demand? My point is, one way or another the network is bound to crash? – csstudent1418 Jun 24 '21 at 12:37
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    @csstudent1418: People don't have to do their Bitcoin on-chain TX's no matter what. I wouldn't buy a 0.1 BTC car if the TX fee were 1 BTC, neither would you. People switch to LN, other methods or to other currencies. – RedGrittyBrick Jun 24 '21 at 12:41
  • @RedGrittyBrick But isn't this an extremely limiting factor to Bitcoin, in terms of not too many people being able to use it simultaneously? I just find it fascinating that you could essentially be "pushed" off the network like that, just when you needed to make an important transaction let's say. – csstudent1418 Jun 24 '21 at 12:54
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    @csstudent1418: Yes it is a limiting factor. One of many limiting factors. That's partly why there has been the development of LN, Liquid, etc. Also, if a transaction is important, it's presumably important enough that you would pay a reasonable extra amount to push it through. Otherwise, in the context of a digital cash system, is your transaction really important to you if you are not willing to pay a reasonable extra amount to expedite it? – RedGrittyBrick Jun 24 '21 at 13:45

1 Answers1

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Increasing demand for on-chain transactions and static block size means transaction fees will be higher. They can't grow indefinitely since there is a finite amount of money anyone in the world is willing to pay for a transaction, but they might very well become quite large in the future.

This might not be a problem because as transaction fees rise, people are incentivised to adopt Layer 2 solutions like the Lightning Network. If this does become a problem, some people will simply stop using bitcoin and that will also reduce transaction fees.

Murch
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Vojtěch Strnad
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  • "If this does become a problem, some people will simply stop using bitcoin and that will also reduce transaction fees." - I get the logic of that. I guess what I am struggling with is the notion that people eventually being forced off bitcoin contradicts the universality and accessibility of bitcoin, but wasn't it the whole point to achieve that? – csstudent1418 Jun 24 '21 at 12:59
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    Bitcoin is accessible to everyone without any censorship. It scales in layers, blocksize will always be limited if Bitcoin has to remain Decentralized and everyone should be able to run nodes. On-chain transactions have a fee market and users are bidding for block space. Transactions and fees may vary based on demand for this block space. Using LN does not mean being forced off bitcoin. –  Jun 24 '21 at 13:27