Increased block size and Bitcoin blockchain dynamics

Bitcoin is a peer to peer electronic payment system where payment transactions are stored in a data structure named the blockchain which is maintained by a community of participants. The Bitcoin Core protocol limits blocks to 1 MB in size. Each block contains at most some 4,000 transactions. Blocks are added to the blockchain on average every 10 minutes, therefore the transaction rate is limited to some 7 transactions per second (TPS). This is much less than the transaction rate offered by competing financial transaction processing systems. The Bitcoin TPS can be increased by increasing the block size and/or by decreasing the block discovery interval. Both of these interventions will increase the end-to-end block transmission delay, which in turn will increase the probability that different participants momentarily record different versions of the blockchain, so that the consensus protocol will discard an increasing number of blocks. The net effect is that the real increase in the TPS is not proportional to the increase (decrease) in the block size (block discovery rate). Our simulation experiments show that large block sizes, if accompanied by large end-to-end block transmission delays, give rise to the frequent appearance of inconsistent blockchain copies, to the detriment of the TPS. We present a simulation analysis of Bitcoin-Next Generation where blocks (keyblocks) stripped of transactions propagate rapidly through the peer-to-peer network. Once a keyblock is mined, only the miner of the keyblock is entitled to broadcast small microblocks of transactions until the next keyblock is mined and another miner is selected to broadcast microblocks. Initial simulation experiments show that Bitcoin-NG can sustain substantially larger transaction rates than Bitcoin Core.