As a matter of fact, Bitcoin blocks can only hold a certain number of transactions as they are limited in their data capacity (the limit tends to not exceed ~1.3Mb). But not only are Bitcoin transactions not instantly settled but their overall capacity on the Bitcoin blockchain is also limited too. One of them is: Bitcoin transactions happening on its base layer are noninstant settlement transactions. Having security as well as reliability as a priority, the Bitcoin blockchain does not want to compromise on transaction-finality speed and must accept certain inherent trade-offs. This goes to show that Bitcoin’s base-layer blockchain does indeed have to be compared to the real-time gross-settlement systems of central banks. dollar’s base-layer settlement system called Fedwire is able to do. Interestingly enough, this compares rather well to the daily number of transactions that the U.S. This equates to approximately 600,000 transactions per day. This is where Bitcoin transactions are getting settled with finality.Īs a global settlement layer, the Bitcoin blockchain is capable of processing around three to seven transactions per second. Within Bitcoin, this base-layer is provided by the Bitcoin blockchain, sometimes also referred to as the Bitcoin mainchain. Most notably, a DeFi ecosystem built on and around Bitcoin is emerging in the form of protocols like RSK, Liquid, Stacks, Sovryn, or Mintlayer.įor this full-stack monetary and financial system based on Bitcoin to work, a global settlement layer is needed.
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Bitcoin represents a new full-stack monetary and financial system that is rapidly growing in size and functionality. While this is correct, it is worth emphasizing that the crypto asset is actually way more than just a currency. In its most basic sense, Bitcoin is still referred to as a (crypto-)currency.