Back in the beginning, I argued bitcoin would not scale.
The counter argument was that we could muddle our way through somehow with ad hoc solutions, which could be sort of true, in principle.
The scaling problems started to bite in 2013. They are now biting really hard.
The scaling problems are now well and truly here. Downloading the blockchain is slow and expensive. Doing transactions is slow, unpredictable, expensive, and unpredictably expensive.
Any solutions hurt, are partial, incomplete, unsatisfactory, and will disadvantage some people financially. Civil war in the bitcoin community has ensued over which people it is to be.
That outcomes are determined by weight of computing power (the miners) rather than weight of bitcoins owned has led to problems. The miners don’t face the same incentives as the people trying to do bitcoin based businesses.
Bitcoin has grown to about as large as it can get. It is doing about as many transactions as it can do, arguably rather more transactions that it is really suited for doing. Any fixes are at best small tune ups to get a little bit more performance out of the system, are at worst just burden shifting and burden hiding – hence the civil war. I have been trying to design a coin that could scale, by having a dispersed blockchain, where no one entity has to keep all transactions. You keep your own transactions, and summary information about entities you transact with, and summary aggregate information about all transactions, and the chain of hashes that links the ownership of your money and your transactions into the global hash, which chain would only grow as log of the total number of transaction, rather than grow with the total number of transactions. This means that parts of the blockchain will get lost temporarily or permanently, and the problem is to create a method for dealing with such losses that does not give anyone incentive to cause such losses, apart from the general deflation that such losses cause. Have been trying to design this for some time. Not making much progress these days.
Another solution, compatible with existing bitcoin is to have account based money built on top of bitcoin, bitcoin backed banks, analogous to gold backed banks. People are talking about this solution, but not actually implementing it, even though it seems a good deal easier than the solution that I proposed.