Forks and scaling challenges-How Algorand overcomes both

The Bitcoin halving has come and gone as did the excitement around it, yet wild predictions about its future price have continued. Many so-called experts continue to issue bullish (if not outlandish) sentiments that are deliberately aimed at sustaining a fear of missing out (FOMO).

Yet on the utility side of things, there is an ongoing concern about the performance of Bitcoin, particularly concerning transaction fees and confirmation times. As was the case in 2017, when Bitcoin value almost reached the $20,000 mark, the same problem seems to have emerged again. Transactions fees are going through the roof once again at a time when more potential users are making inquiries about the digital currency.


It should be remembered that Bitcoin transaction fees have in the past followed the movement of its price. A bull run on the crypto market has inevitably led to a growth in transaction fees. For example, a CoinTelegraph report states that between April 11th and May 14th, Bitcoin (BTC) transaction fees increased by more than 1,250% from $0.38 to $5.16.

Inability to scale leads to higher transaction costs

When the network is clogged, as it has been for the past month, transactions costs will surge while confirmation times take longer. There is no instant finality to a transfer which means the sender of Bitcoin cannot get delivery if this was a typical sale.

For many Bitcoin users, the reality has been that a transaction is left hanging for close to an hour before the receiver can access the funds. This uncertainty makes Bitcoin a less alluring medium of exchange when compared with traditional payments systems.

For additional perspective, lets contrast Bitcoin with Visa, a global payments processor.  Visa processes 65,000 transactions per second compared to Bitcoin’s 7 per second, so it has a far greater scale. Furthermore, there is no waiting period. Visa transfers are almost instantaneous compared to a typical Bitcoin transfer, which normally requires three confirmations before the transaction is deemed complete. Currently, this period can be as long as one hour.

Merchants continue to shun un-scalable digital currencies 

To get around this problem, a Bitcoin sender has an option to cancel a transfer before the first confirmation is made and start over again. However, once the first out of the three confirmations has been made, it becomes impossible to cancel. Parties will be forced to wait until the transfer is fully consummated.

This is one serious indictment against Bitcoin and this has greatly scuppered adoption efforts.

For merchants, it simply makes no sense switching to an alternative that is more volatile and has a ‘hanging’ period where both the sender and receiver have no access to funds. Merchants want transaction finality, a test which Bitcoin and a host of tokens have failed so far. 

The challenge has been to create a payment platform that achieves scale without losing some of the core benefits of a decentralized blockchain. For example, Visa processes billions of transactions but it is centralized, meaning it has one single point of failure.

Bitcoin will never scale

Bitcoin’s inability to scale is down to its very architecture. This is a point universally acknowledged by both opponents and supporters alike. Unfortunately, attempts to solve this scaling challenge have led to serious disagreements and resulted in splits (or hard forks), and ultimately the creation of Bitcoin Cash cryptocurrency.

Bitcoin Cash may have succeeded at resolving the scaling challenge because it made an upgrade to the block size but others within the ecosystem see this move as a deviation from the founding vision. Consequently, some influential members in the Bitcoin community have steadfastly refused to endorse or associate with Bitcoin Cash or any chain that is seen as rebelling against Satoshi’s vision.

These purists are dead set on seeing Bitcoin remain in its original format and they will shrug off any upgrades even if these are needed to keep the digital currency relevant.

Meanwhile, Bitcoin Cash itself experienced a hard fork, an event that culminated in the creation of Bitcoin Satoshi Vision. The three chains are claiming to have originated from the same source but it is the original Bitcoin — which also had its fork – that still holds the title of being the world’s largest cryptocurrency.

There is no doubt, such splits or hard forks are morale-sapping even to fervent supporters of all cryptocurrencies. In the eyes of detractors, forks are proof that digital currencies like Bitcoin can be manipulated or upgraded.


Algorand’s response to call to action

Meanwhile, opponents of cryptocurrencies have generally made it a point to highlight these weaknesses (divisions) when arguing against Bitcoin and other privately issued coins or tokens. Inversely, some blockchain enthusiasts and entrepreneurs see the same weaknesses as a challenge to create and roll out solutions that overcome shortcomings seen with Bitcoin, without losing key attributes of a decentralized chain.

So far, the Algorand blockchain is one of the few (if not the only one) that seems to have fared better at this than the rest. First, the Algorand blockchain overcomes one significant problem that has been observed with any chain that becomes popular, a hard fork.

As Silvio Micali, a Turing award winner and founder at Algorand explained in a blog post:

“The Algorand blockchain does not fork. Each new block is separately agreed upon and is guaranteed to remain on the Algorand chain forever.

The Algorand consensus is not a drawn-out process. The fact that more and more blocks are attached to a given block B does not make it more and more probable that consensus on B has been reached. Algorand separately reaches agreement on a new block. When this is done, it reaches agreement on the next block. And so on.”

Thus, its users can immediately rely on the transactions as soon as they appear in a new block without having to wait for the block to become sufficiently deep in the chain. 

So instead of haggling with clients over an unconfirmed funds transfer (as may be the case with Bitcoin), a merchant accepting tokens that are underpinned by the Aglorand blockchain is assured of the finality of the transfer just as he would with Visa.

Secondly, Algorand Blockchain processes far more transactions per second when compared to some of its most prominent rivals. For instance, a study by OMFIF shows that R3 Corda—an isolated and multi-tenant chain— and Ethereum Quorum—a permissioned chain—processes 550 and 600 transactions per second respectively.

Algorand platform, which is the world’ first permissionless proof of stake blockchain, actually processes more than 1000 transactions per second. So an enterprise that seeks to enjoy the benefits of decentralization while scaling to billions of users at the same time can do well to adopt the Algorand’s blockchain.

Perhaps one area where the Algorand blockchain pre-empts any future skirmishes within its ecosystem as what happened Bitcoin has to be its embrace of upgrades and new additions. Upgradeability and continued innovation come as a standard on the Algorand Blockchain. 

Innovation key to survival

Upgrades are necessary as they keep a technology abreast of trends and that is one reassuring message from Algorand. There will be tweaks or changes to the architecture on an ongoing basis and this will ensure the chain will maintain its position in this market.

Enterprises choosing Algorand will be assured of all the benefits explained here. For once, this technology will fulfill its often touted potential without disrupting operations.