What is Blockchain Network Congestion?

What is Blockchain Network Congestion?

Blockchain network congestion occurs when the number of transactions submitted to a blockchain network exceeds its processing capacity. This congestion leads to delayed transaction confirmations and higher transaction fees. It affects the user experience and can hinder the usability and adoption of blockchain networks. Popular cryptocurrencies like Bitcoin and Ethereum have experienced congestion events in the past, resulting in significant delays and increased fees.

How does Blockchain Network Congestion happen?

Blockchain network congestion occurs when the number of transactions exceeds a network’s capacity. Transactions enter a mempool, a waiting area, before confirmation. Factors like increased demand, small block sizes, and slow block times contribute to congestion. This leads to delayed confirmations, higher fees, and reduced scalability. Solutions include increasing block sizes, reducing block times, implementing layer 2 solutions, and exploring sharding. Efforts are ongoing to address congestion and improve blockchain network efficiency.

Mempool

The mempool, short for “memory pool,” is a crucial component of a blockchain network where pending transactions are temporarily stored before being confirmed and added to a block. It serves as a waiting area where transactions wait to be included in the next available block for processing and eventual inclusion in the blockchain.

When a user initiates a transaction on a blockchain, it is first broadcasted to the network and enters the mempool. Miners (in proof-of-work blockchains) or validators (in proof-of-stake blockchains) select transactions from the mempool to include in the next block they try to add to the blockchain. The selection process often involves prioritizing transactions with higher fees to incentivize miners or validators. Transactions remain in the mempool until they are included in a block or removed if they expire or are deemed invalid.

The mempool’s size and congestion level can vary depending on transaction volume, network capacity, and block space availability. During periods of high demand or limited network resources, the mempool can become crowded, leading to longer confirmation times and potentially higher transaction fees. Miners and validators prioritize transactions based on various factors, including transaction fees, to optimize their revenue and maximize network efficiency.

Candidate blocks

Candidate blocks, also known as proposed blocks, are blocks that miners (in proof-of-work blockchains) or validators (in proof-of-stake blockchains) propose to add to the blockchain. These blocks contain a collection of unconfirmed transactions that have been broadcasted to the network but have yet to be included in the blockchain.

When a candidate block is proposed, it undergoes a validation process according to the blockchain’s consensus mechanism. In proof-of-work systems like Bitcoin, miners compete to solve a complex mathematical puzzle, and the first miner to solve it successfully gets to add their candidate block to the blockchain. In proof-of-stake systems like Ethereum 2.0, validators are randomly selected to propose candidate blocks, which are then attested to by other validators.

Candidate blocks hold unconfirmed transactions and serve as a temporary state before becoming confirmed blocks. Once a candidate block receives sufficient validation and is added to the blockchain, the transactions included in that block are considered confirmed. However, it’s important to note that in blockchain networks with a longer confirmation time, competing blocks can still be mined during this period, potentially leading to temporary forks or orphaned blocks.

Finality

Finality in blockchain refers to the state where a transaction or operation becomes irrevocable and cannot be changed or reversed. Once a transaction achieves finality, it is permanently recorded on the blockchain and becomes an immutable part of the transaction history.

The concept of finality varies slightly between different blockchain networks. In the Bitcoin blockchain, for example, transactions are broadcasted to the network and added to the mempool. Miners select transactions from the mempool and include them in blocks added to the blockchain. While these transactions are confirmed, competing blocks can be mined, causing temporary forks. To achieve a higher level of confidence in finality, it is recommended to wait for additional blocks to be added on top of the block containing the transaction. Typically, six additional blocks are sufficient to consider a Bitcoin transaction as “final.”

In Ethereum and some other blockchains with shorter block times, a greater number of confirmations may be recommended to achieve a similar level of confidence in finality. Ethereum has transitioned to a proof-of-stake consensus mechanism, where validators attest to the validity of blocks. Once a block receives enough attestations, it transitions from a candidate block to a confirmed block, providing a higher level of finality.

Finality is a critical aspect of blockchain technology, ensuring the integrity and immutability of transactions and data recorded on the blockchain. It gives users confidence that once a transaction is confirmed and achieves finality, it cannot be reversed or tampered with.

Longest chain principle

The longest chain principle is a fundamental concept in blockchain technology. It refers to the rule that the valid version of the blockchain is the one with the longest chain of blocks, representing the most accumulated computational work.

In a decentralized blockchain network, multiple miners or validators may create new valid blocks simultaneously. This can lead to temporary forks, where different branches of the blockchain exist. However, the network eventually converges on a single valid blockchain following the longest chain principle.

According to this principle, nodes in the network always choose the chain with the most accumulated computational work as the valid chain. Miners or validators dedicate computational power to extending the chain, making it longer. As a result, shorter branches, often called orphan or stale blocks, are discarded, and their transactions are returned to the mempool for inclusion in the valid chain.

The longest chain principle ensures consensus and security in the blockchain network. It helps maintain the integrity of the blockchain by selecting the most computationally validated version as the authoritative chain, providing a clear and agreed-upon history of transactions, and preventing potential attacks or manipulation.

What causes Blockchain Network Congestions?

Blockchain network congestion occurs when the number of transactions submitted to the network surpasses its processing capacity. Several factors contribute to congestion, some of which are listed below. These factors collectively strain blockchain networks, leading to delayed confirmations and reduced efficiency. Addressing congestion requires implementing solutions that enhance network scalability, optimize block size, and improve transaction throughput.

Increased demand

Rising transaction submissions overwhelm the network, causing a backlog of unconfirmed transactions in the mempool. Price volatilities and mass adoption cycles can trigger spikes in transaction activities.

Small block size

Each blockchain has a maximum block size, limiting the number of transactions that can be included. For example, Bitcoin’s original block size was 1 megabyte, but upgrades like Segregated Witness (SegWit) increased it to around 4 MB. If transactions exceed this limit, congestion ensues.

Slow block times

Block time refers to the interval between adding new blocks to the blockchain. For instance, Bitcoin adds a block every 10 minutes. When transaction creation outpaces block addition, a backlog of transactions forms, contributing to congestion.

History of Blockchain Network Congestions: A few examples

Bitcoin Network Congestion (2017)

During the peak of Bitcoin’s popularity in late 2017 and early 2018, the network experienced significant congestion. The surge in transaction activities resulted in a large number of unconfirmed transactions and skyrocketing transaction fees. At one point, average transaction fees reached over $50, highlighting the challenges of scalability and network capacity.

Ethereum Network Congestion (2017)

In 2017, the Ethereum network faced congestion due to the viral success of the “CryptoKitties” project. The popularity of breeding and trading digital cats on the Ethereum blockchain caused a significant increase in transactions, resulting in slower confirmation times and higher fees.

BRC-20 Tokens Congestion on Bitcoin (2023)

In the spring of 2023, the Bitcoin network experienced congestion due to increased transaction activities related to BRC-20 tokens. The transaction surge led to a bottleneck in the mempool, causing pending transactions and fees to skyrocket. At one point, nearly 400,000 unconfirmed transactions were recorded, leading to significant delays and a substantial increase in transaction fees.

Solutions to Blockchain Network Congestions

To alleviate blockchain network congestion, various solutions can be considered, each with its pros and cons:

Increasing block size

Enlarging the block size allows more transactions to be included, boosting network throughput. However, larger blocks take longer to propagate and require increased storage, potentially leading to centralization risks.

Decreasing block time

Reducing the interval between block additions speeds up transaction processing. Yet, shorter block times can increase orphaned blocks and compromise security.

Layer 2 solutions

Off-chain protocols like Bitcoin’s Lightning Network and Ethereum’s Plasma enable faster transactions by processing them outside the main blockchain. These solutions enhance scalability but introduce complexity and security considerations.

Sharding

Dividing the blockchain into smaller shards capable of processing transactions independently can significantly increase network capacity. However, sharding adds complexity and security challenges.

Conclusion

Blockchain network congestion is a critical issue that arises when the number of transactions surpasses the processing capacity of a blockchain network. This congestion can lead to delayed transaction confirmations, higher transaction fees, and a degraded user experience, potentially hindering the adoption and usability of blockchain networks.

Various solutions are being explored and implemented to alleviate this congestion. These include increasing block size, reducing block time, implementing layer 2 solutions, and exploring sharding. Each of these solutions has its advantages and challenges, and the choice of solution depends on the specific requirements and constraints of the blockchain network.

While blockchain network congestion poses significant challenges, it also drives innovation in the blockchain space. As the technology matures and more efficient solutions are developed, we expect blockchain networks to become more scalable and efficient, further enhancing their potential to revolutionize various sectors of our economy.