Critical Situation with Transaction Confirmation in Bitcoin network

06.03.2016

Last days of February the ecosystem of the major world cryptocurrency Bitcoin faced long-awaited problems: it became difficult to process transactions with standard and low commission fees.
 
This is because in extracted on February 29 blocks there was no free space for sending additional transactions.
 
These faults remind the ecosystem’s team about a long time increasing problem – the necessity to develop and implement real methods of scaling the network otherwise a control over it may be lost.
Problems with sending Bitcoin transactions
 
According to the announced protocol, for transactions with standard commission fees interruptions in delivery must be minimal. Bitcoin mining is adjusted by such an algorithm that paid transactions with standard or high commission fees are included in neighbor blocks immediately. On the contrary, transactions with low or without commission fees are waiting for a while for confirmation till there will be a place to include them in the nearby blocks.
 
End of February presented a situation when confirmation was delayed even for transactions with standard and high commission fees. This leads Bitcoin ecosystem to a dead state. On March 1 there were conditions that a transaction with commission fee in 0.001 BTC, around $0,43, didn’t receive an immediate confirmation about several next blocks in Bitcoin network.
 
During a top-load period confirmations were received only for transactions with mega-commissions, 0.0044 BTC = $1.9 for 1kb. This situation in Bitcoin network appeared for the first time without outside interference.
 
Debates around the block-size lead to the increase of commission fees for transactions responsible for transference of finances across the network, therefore damaging the ecosystem.
 
The situation when unpredictably there is a delay with confirmation and commission fee for a standard transaction is increased up to $2 is unacceptable as Bitcoin loses its position so that clients will switch to other cryptocurrencies or payment systems. Because an ordinary bank transaction is much more predictable in this case.
 
The situation is getting worse day by day. The team of Bitcoin ecosystem has no solutions capable of improving the situation. Cloud pools that serve the network are full of unconfirmed transactions, number of which goes beyond permissible rates. Some people explain the situation by growth in popularity of the cryptocurrency; however, such popularity worsens system’s image, and delays in confirmations bring damage to clients.
 
The encountered situation cannot be announced as a result of one more stress-test for Bitcoin network as it happened three times during last year because there are no any signs indicating on man-made check-up.
 
Some can think that the situation was a result of launching Биткоин ХТ project. Project supporters spent impressive amounts totaling to hundreds of Bitcoins to prove that the network has to be improved as quick as possible. However, nobody assumed responsibility for the stress-test.
 
On March 1, Alex Petrov from Bitfury posted a twit about a DDoS attack on Bitcoin network but without any facts confirming the statement. It didn’t look like wide-scale attacks that took place last year. DDoS-attacks are able to block the resource and delay processing of transactions with high commission fees but they require a great deal of money.
 
We may suspect in creating this situation one of pools, participants of which could expect getting back funds spent on attack due to increased commission. But this situation is unacceptable for major pools – they are just not interested.
Analysis of network failure on February 29
 
What is the reason behind the critical condition of the network risen on February 29 that led to a tenfold increase of commissions for transaction confirmation although for a short-time. On this day there were 133 blocks mined, including:
  • 8 blocks containing 10 kb of transactions, related to SPV-blocks. This kind of blocks is characterized with simplified mining scheme and includes miners’ own transactions and coinbase-transaction that confirms mining of 25 Bitcoins. Coinbase-transaction is present in every block and represents a miner’s income.
  • 7 blocks filled with 750 kb; these are blocks with software restrictions. They are used by some pools for faster processing and sending to the network.
  • 118 blocks with the size exceeding 930 kb; most of them were over 998 kb.
More detailed information you may find on forums in user’s comments. We can perform our own analysis.
Available information bears evidence to the fact that Bitcoin network is at the limit of its possibilities to fill blocks. Whereby the increased commission does not guarantee that the cryptocurrency will be delivered to a client in the shortest possible time.
February 29 failure can be explained using a mathematical algorithm. Between blocks there is a distance of 10 minutes, and 144 blocks can be mined in 24 hours. But with growth of computing power used for mining, extraction of a block is accelerated, so instead of standard 144 blocks more blocks are mined. For example, productivity boosting by 10% increases mining by 14 blocks (144+14=158). From the beginning of the year the complexity increased, so growth of extracted blocks resulted in increased capacity of the network by the same 10%.
On February 29 due to unknown reason miners’ productivity suddenly decreased, so instead of 144 blocks the network produced only 133. Actual decline in block mining and increased number of transactions resulted in critical condition of the network.
Software restrictions set by miners
 
Unsatisfactory respond of the network is provoked by miners themselves. Because they limit transaction volumes. Blocks are meant for 1 Mb of transactions but miners fill them only with 750-950 kb. Thus, they gain an edge in the competition. The crisis forced many pools to refuse from these restrictions or increase their size.
On the day of writing this article limits in pools are as following:
  • DiscusFish/F2Pool (26%) – no limit, empty blocks are available;
  • AntPool (23%)- 750-935 Кб, last day there were around 20% of empty blocks.
  • BTCC (15%) - 990 Кб, empty blocks are available;
  • Bitfury (11%) - 999 Кб ;
  • BitClub Network (4-5%)- 999 Кб or absent.
  • KNCMiner (4-5%) - 935 Кб, empty blocks are available;
  • BW Pool (4-5%)- 950 Кб, empty blocks are available;
  • Slush (4-5%) - 999 Кб;
  • Kano CKPool - 990 Кб;
  • Solo CKPool - 999 Кб;
  • GHash.IO - 750 Кб;
  • Telco 214 - 750 Кб;
  • Eligius - 930 Кб, empty blocks are available;
  • BitMinter - 990 Кб.
Further deepening of the crisis
 
On March 1, most of pools increased or even cancelled restrictions. It means that their capacity has reached calculated limit and there is minimum free space for processing transactions. Therefore, minimal increase in transaction volume and some situational factors in block mining can influence critically on the efficiency of Bitcoin network.
 
In this case expenses on maintenance of operations increase, so does the risk influencing the time of Bitcoin delivery to all network clients.
 
Critical situation is actually exists and is caused not by imaginary reasons which are easily removed; it will not be resolved by itself. Network clients face signs of crisis and can see the problem development in delayed transactions and empty Bitcoin-wallets.
 
Hence, network developers should face the primary task: accelerate groundwork and search for solutions of the problem, otherwise Bitcoin will have hard times because the ecosystem may lose its reputation and, as a result, face an outflow of users to other systems. Solving technical problems should begin right now.
Problem of SegWit and 2 Mb block – Is there a solution?
 
Introduction of SegWit and implementation of 2 Mb blocks would solve the crisis with transactions at the given moment. However, nobody is able to predict for how long two- or threefold increase in capacity will last out. Growth in Bitcoin popularity can lead to the next crisis in transaction delivery by extended blocks in the nearest future.
In its latest release, Bitcoin Core has offered to perform a duplicative transaction with increased commission for users who need to receive funds urgently. It can partially solve the problem but will result in loss of the regulation on mini-transactions which are considered as the major advantage of the cryptocurrency. Anyway, it is just the beginning of finding solutions for the problem encountered. Users of Bitcoin network are interested in finding a long-term solution, so developers have to resolve the problem at first instance.
Back