To maintain and increase its popularity, Bitcoin's scalability must be addressed through the integration of layer 2 and layer 3 solutions.
Bitcoin Scalability Challenges
Bitcoin's primary scalability issues are linked to its ability to handle only about 7 transactions per second. This is contrasted with Ethereum and Solana, capable of 15 and 2,600 TPS, respectively. This limitation is due to its Proof of Work mechanism ensuring high network security but limiting transaction speeds.
Solutions to Scalability
Layer 2 solutions like the Lightning Network and Stacks propose enhancing Bitcoin's capabilities. Lightning Network increases transaction speed and reduces cost, while Stacks introduces smart contracts without altering the base protocol, supporting functionalities like DeFi and dApps.
Prospects Beyond Layer 2 Solutions
Beyond Layer 2, solutions like the Impervious leverage the Lightning Network for transactions, enhancing Bitcoin's potential. Layer 3 solutions can improve interoperability and application-specific functionalities by connecting different blockchains and Layer 2 solutions. Cosmos is another example, integrating independent blockchains into an 'Internet of Blockchains'.
Layer 2 and Layer 3 solutions pave the way for increasing Bitcoin's adoption as a medium of exchange by lowering transaction fees and expediting processes, transforming it from a mere store of value into a practical payment tool.
