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glossary

Definitions and terminology related to cryptoeconomics, blockchain and distributed ledger technology.
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Scalability

Scalability, in the context of distributed ledger technology, refers to a system’s ability to facilitate increases in throughput. A decentralized newtork’s scalability is most directly dependent on its block time and transactions per second, with higher block times and lower tps frequently causing bottlenecks in networks. Scalability is often cited as a key hindrance to mass adoption of blockchain technologies such as Ethereum and Bitcoin, which can only process roughly up to 15 and 7 transactions per second, respectively. Such payment networks have limited use cases as media of exchange, as they are unable to compete with traditional payment processors such as Visa, which is able to process 1,700 transactions per second. Further, to achieve scalability and feasibility as a medium of exchange, Bitcoin must drastically reduce its block time, which is currently approximately ten minutes. In Bitcoin and other networks, so-called ‘Layer 2’ solutions, such as Lightning Network, attempt address scalability by moving certain transactions to a separate sidechain.