Why PoW Networks Can't Scale
Scaling, one of the more popular words in the greater blockchain buzzword bingo that has a lot of people demanding it without many understanding the intricacies involved in successfully implementing a lasting solution. Scaling is not as simple as increasing block size and quickening block generation. Transactions have weight, require computation, need to be communicated through all nodes and the blockchains they are included in require storage in their ever growing state. Scalability is therefore heavily dependent on how the specific blockchain handles transactions and node communication.
In general, one of the core concepts of cryptocurrency, trustless verification, causes the most trouble for scaling. In all blockchain protocols, each node stores all states with account balances, contract code, and entire transaction history, in order to trustlessly verify a transaction’s validity for each transaction in the network. This provides a large amount of security but limits scalability to not being able to process more transactions than any single node in the network can. This is the biggest variable in setting the ceiling for transaction volume at ~3–7 transactions per second for Bitcoin or 7–15 TPS for Ethereum. Visa processes ~2,000 transactions per second and an IoT network with an estimated 50 billion devices could produce several times that. That’s a large gap.