## When the network is gasping: the blockchain congestion problem

Blockchain network congestion is a phenomenon that occurs when the volume of transactions entering the network exceeds its processing capabilities. This creates serious problems for users: transaction fees increase, their confirmation slows down, and service quality deteriorates. The root of this problem lies in both the technical limitations of the network and external factors related to user activity.

## How the transaction processing system works

To understand why the network may become congested, it is necessary to explore the mechanism by which transactions enter the blockchain.

Blockchain is a sequence of blocks secured by cryptography. Each block contains data about transactions made by users. New blocks are continuously and immutably added to the chain, disseminating across a decentralized network of nodes that maintain a copy of the entire blockchain.

**Mempool is a waiting area for transactions.** When a user sends a transaction, it is not immediately added to the blockchain. First, it enters the mempool (memory pool) – a set of unconfirmed transactions waiting to be included in the next block. Here, transactions are held until they are processed.

**Candidate blocks are proposed blocks for addition.** Miners or validators select unconfirmed transactions from the mempool and form candidate blocks from them. These blocks must undergo verification according to the network's consensus mechanism.

Bitcoin uses the **Proof of Work (PoW)** mechanism – miners compete to solve a complex mathematical puzzle. The first one to solve it adds their candidate block to the blockchain and receives a reward.

Ethereum used PoW, but in 2022 it transitioned to **Proof of Stake (PoS)**, where validators are randomly selected to propose blocks, and other validators confirm them.

**Finality – when a transaction becomes immutable.** After a transaction is added to a block, it is considered confirmed. With each new block added after it, the level of finality increases. For Bitcoin, it usually takes six additional blocks to achieve full finality. Ethereum recommends more confirmations due to the shorter block time.

## What Causes Network Congestion

Overloading is a complex phenomenon that arises from several reasons simultaneously.

**Sudden surge in activity.** When the price of a cryptocurrency changes sharply or a new popular token emerges, users flood the network with transactions. This can overwhelm the network's capacity to process them. In the spring of 2023, this happened with Bitcoin, when the popularity of BRC-20 tokens led to a backlog of unconfirmed transactions – nearly 400,000 transactions were waiting to be included. Fees increased by more than 300% within a few weeks.

**Network Technical Limitations.** Each blockchain has its own block size, which determines the maximum amount of data that can be included in a single block. Bitcoin was originally designed with a 1 megabyte limit. In 2017, the Segregated Witness update (SegWit) was implemented, which theoretically increased the limit to 4 MB. If more transactions come in than a single block can process, they accumulate.

**Slow block addition time.** Bitcoin adds a new block approximately every 10 minutes. If transactions are created much faster, there is a backlog and congestion in the mempool.

## Consequences for users and the network

Network congestion leads to serious problems that affect the quality of service.

**Increase in transaction fees.** Miners choose to process transactions with higher fees as it is more profitable. During congestion, users have to pay significantly more to expedite the confirmation of their transaction. This makes using the network more expensive, especially for small transactions.

**Confirmation delay.** In extreme situations, transactions may wait for confirmation for several hours, days, or even longer. This causes frustration for users and reduces the practicality of using blockchain.

**Risk to Security and Centralization.** Prolonged confirmation delays increase the likelihood of double spending attacks. High fees can lead to the concentration of mining power among large players, reinforcing centralization.

**Market volatility.** When users cannot quickly sell assets due to an overloaded network, it can trigger panic and accelerate the drop in price.

## Historical examples of overloads

**Bitcoin at the end of 2017 – beginning of 2018.** The historical price increase of Bitcoin led to the most significant overload of its time. At one point, the average transaction fee exceeded 50 dollars. This drew the entire industry's attention to the scaling problem.

**Ethereum and CryptoKitties.** In 2017, the decentralized project CryptoKitties went viral, filling the Ethereum network. This significantly slowed down the network's operations. Later, the DeFi boom (decentralized finance) again led to congestion and an increase in gas prices.

**Bitcoin BRC-20 tokens in 2023.** When the popularity of BRC-20 tokens began to rise, the Bitcoin network came under pressure. Nearly 400,000 unconfirmed transactions accumulated in the mempool, and fees increased by 300% over a short period.

## How to solve the problem

There are several approaches to reducing overload, but each has its advantages and disadvantages.

**Increase in block size.** Allows processing more transactions at once, enhancing throughput. However, larger blocks propagate more slowly, increasing the risk of network forks. Additionally, larger blocks require more storage space, which can exacerbate centralization.

**Block time reduction.** Allows the network to process transactions faster, but a shorter interval may increase the number of stale blocks and jeopardize security.

**Second Layer Solution (Layer 2).** These are off-chain solutions that process transactions outside the main blockchain and then write the final state to the chain. For Bitcoin, this is the Lightning Network, for Ethereum – Plasma and other solutions. They significantly enhance scalability but are more complex to implement and require additional security analysis.

**Sharding.** This is a method of dividing the blockchain into several smaller shards, each of which is capable of processing transactions. This can significantly increase throughput but also complicates the system and introduces new risks.

**Other solutions.** Optimistic rollups, zero-knowledge rollups, and fee adjustments are also being considered. Proof of Stake mechanisms are usually faster than Proof of Work, which also contributes to less frequent overloads.

## Conclusions

Scalability is one of the main challenges that blockchain networks must solve for mass adoption. As the number of users continues to grow, the ability to efficiently process large volumes of transactions becomes critically important – especially for systems aiming to facilitate everyday real-time operations.

Despite the seriousness of the problem, the community is developing new solutions to alleviate congestion. Increasing the scalability of the blockchain remains one of the top priorities of the industry, and progress in this direction will determine the future of cryptocurrency networks.