The scaling problem is the limitations of a blockchain's transaction throughout and ability to have fast and low cast transactions.
The scaling problem refers to the limitations of a blockchain’s transaction
throughput, which ultimately affect the speed and costs of
transactions. The scaling problem is tied to how a decentralized network handles
blocks of transactions, which depend on factors such as its block size and block time, which is the time it takes to create a new block. This problem became evident after users of
Bitcoin, the first blockchain network, experienced delays in transaction settlements and increases in fees whenever usage of the network spikes.
In 2015, the Bitcoin blockchain
limited its block size to one megabyte (MB), which was later increased to 2 MB. While the increase in block size slightly alleviated Bitcoin’s scaling problem, many developers cautioned against the types of changes that could potentially make the protocol centralized. This is because every transaction carries data, which means that more transactions also means more data per block, which would ultimately result in requiring miners to have massive disk spaces in order to store a copy of the full Bitcoin blockchain. The Bitcoin community ended up deciding against greatly increasing block size, as it traded decentralization for scalability, which was considered the wrong approach by many.
Therefore, solving the scaling problem has become an uphill task, taking years of time and effort. The scaling problem is exacerbated by the fact that scaling a blockchain network requires proper consensus and coordination between the different parties involved such as the developers, miners and community. However, months of moving back and forth between these groups can still end in disagreements. In such a case, the process may lead to a
hard fork where one team activates the upgrade and branches off the main network.
While unscaled blockchains can stay as they are, they will face detrimental consequences like a continuous decrease of transaction speed and increase in costs, as well users leaving for a more scalable network. This has a ripple effect as a lack of users is likely to discourage developers, businesses, miners/stakers from moving forward.