What Is Blockchain Network Congestion?

Basics

Network congestion in a blockchain occurs when the volume of transactions surpasses the network's capacity to process them efficiently. Factors contributing to congestion include a surge in transaction activities, limited block sizes, and delayed block confirmation times. The implications of network congestion can be significant, leading to higher transaction fees, longer confirmation times, and a suboptimal user experience. A clear example occurred in the spring of 2023 when the Bitcoin network experienced congestion due to heightened transaction activities associated with BRC-20 tokens. As a result, pending transactions piled up, and fees reached unprecedented levels.

How Does Blockchain Network Congestion Happen?

Network congestion arises when the volume of transactions surpasses a network's processing capacity. Various factors, including external elements like market volatility and inherent characteristics of the network, such as block size and block time, influence this occurrence. Before delving into the specifics, it is vital to understand how blocks are added to the blockchain.

Blockchain Technology: How Does It Work?

At the core of blockchain technology lies a series of interconnected blocks, where each block holds transaction data contributed by users. These blocks are indelible and unchangeable once added to the chain. These blocks traverse a decentralized network of nodes, with each node preserving a duplicate copy of the entire blockchain. Through cryptographic methods and game theory, the blockchain is the fundamental infrastructure for popular cryptocurrencies such as Bitcoin and Ethereum.

To understand the factors contributing to congestion in blockchain networks, it is necessary to delve into key concepts that influence the network's transaction processing capacity. These concepts include mem pools, candidate blocks, finality, and the principle of the longest chain.

What Is a “Mempool”? 

A mempool serves as a repository for unverified transactions awaiting inclusion in the next block of a blockchain. When a user initiates a transaction on the Bitcoin network, it undergoes a process before being permanently recorded on the blockchain. Initially, the transaction enters the mempool, which functions as a temporary holding area for pending transactions. Transactions remain in the mempool until they are confirmed and added to a block. Confirmation occurs when miners validate the transaction by including it in a newly mined block. Once a transaction is confirmed, it is removed from the mempool and permanently appended to the blockchain, ensuring its immutability.

What Is a “Candidate Blocks”?

Candidate blocks, also called "proposed blocks," are blocks that miners or validators put forward as potential additions to the blockchain. These blocks contain unconfirmed transactions broadcasted to the network but have yet to be incorporated into the blockchain.

To become a confirmed block, a candidate block must undergo the mining or validation process dictated by the specific consensus mechanism of the blockchain. In the case of Bitcoin's Proof of Work (PoW) consensus mechanism, miners compete to solve a complex mathematical puzzle. The first miner to successfully solve the puzzle is granted the opportunity to add their candidate block to the blockchain and receive a reward.

In Ethereum's Proof of Stake (PoS) consensus mechanism, validators are chosen randomly to propose candidate blocks. Other validators then provide attestations to verify the block's validity. Once a candidate block receives sufficient attestations, it transitions from a candidate block to a confirmed block.

What Does Blockchain "Finality" Mean? 

Finality in the blockchain context refers to the state where a transaction or operation becomes irrevocable and cannot be changed or reversed. Once a transaction achieves finality, it is immutable and permanently recorded on the blockchain. The Bitcoin blockchain broadcasts transactions to the network and adds to the mempool. Miners select and validate transactions from this pool and include them in new blocks to be added to the blockchain. The transactions included in a block are considered confirmed, but there is still a theoretical possibility for other miners to mine a competing block.

The level of the finality of transactions increases as more blocks are appended to the blockchain. In the case of Bitcoin, transactions are typically deemed "final" once an additional six blocks have been added to the block containing those transactions. Ethereum, with its shorter block time, recommends a more significant number of confirmations to achieve a similar level of confidence in transaction finality.

"Longest Chain" Principle: What Is It?

As explained earlier, it is possible for multiple miners to produce valid blocks simultaneously, leading to temporary forks in the blockchain. The "longest chain" principle states that the valid version of the blockchain is determined by the amount of computational work invested in it, typically represented by the longest chain of blocks. Consequently, the "valid" blocks on shorter chains, often called orphan or stale blocks, are discarded, and their transactions are returned to the mempool.

In the case of Ethereum, the most extended chain principle was utilized when the network operated on the Proof of Work (PoW) consensus mechanism. Following Ethereum's transition to Proof of Stake (PoS) in 2022, the network adopted an updated fork-choice algorithm that assesses the "weight" of the chain. This weight is calculated based on the cumulative sum of validator votes, considering the validator's staked-ether balances.

Blockchain Network Congestion: What Causes It?

Blockchain network congestion occurs when the volume of transactions being submitted surpasses the network's processing capacity. This congestion can be attributed to several factors:

• Increased demand: As more users submit transactions to the blockchain, the number of unconfirmed transactions in the mempool can exceed the capacity of a single block. This is especially relevant for blockchains with block size and time limitations. Increased demand may arise due to sudden price volatilities triggering a surge in transaction activities or waves of mass adoption.
• Small block size: Each blockchain has a predetermined block size that dictates the maximum number of transactions that can be included in a block. For instance, Bitcoin initially had a block size limit of 1 megabyte. However, upgrades like Segregated Witness (SegWit) have increased the theoretical block size limit to approximately 4 megabytes. If the number of transactions exceeds this limit, it leads to network congestion.
• Slow block times: Block time refers to the interval between adding consecutive blocks to the blockchain. For instance, Bitcoin aims for a block time of approximately 10 minutes. If transactions are generated faster and in higher volumes than the network can handle, a backlog of transactions occurs, contributing to congestion.

In summary, blockchain network congestion can arise from increased demand, small block sizes, and slow block times, hindering the network's ability to process transactions efficiently.

How Does Network Congestion Affect Blockchain?

Blockchain network congestion can have several negative consequences that disrupt the smooth functioning of the network. These consequences include:

Increased Transaction Fees

When a blockchain network is congested, users often pay higher transaction fees to attract miners' attention and prioritize their transactions. This can make using the blockchain more costly, especially for smaller transactions, as users must pay higher fees to ensure their transactions are processed promptly.

Delayed Transaction Confirmation Times

Network congestion can result in longer waiting times for transactions to be confirmed and finalized. Sometimes, transactions may remain unconfirmed for hours, days, or even longer. Such delays can lead to frustration among users who expect timely confirmation of their transactions.

Poor User Experience

High fees and slow confirmation times significantly impact the user experience. When users encounter expensive fees, and long waiting times, it can diminish their satisfaction and trust in the blockchain. This, in turn, may hinder the adoption and usability of the blockchain technology.

Market Volatility

Congestion in the blockchain network can contribute to market volatility. Suppose many users attempt to sell their cryptocurrency holdings during a congested period, but the network cannot process these transactions efficiently. In that case, it can create uncertainty and potentially amplify market volatility.

Furthermore, network congestion can pose security risks and increase the risk of network centralization. Longer confirmation times can heighten the potential for double-spending attacks, where a user attempts to spend the same cryptocurrency multiple times before the transactions are confirmed. Additionally, high fees may concentrate mining power in the hands of a few participants, leading to a less decentralized network. Blockchain network congestion can result in increased transaction fees, delayed confirmations, poor user experience, market volatility, security risks, and network centralization concerns. These challenges highlight the importance of scalability and optimization efforts to ensure blockchain networks' efficient and seamless operation.

Blockchain Network Congestion: Examples

The Bitcoin and Ethereum networks have faced significant network congestion, causing various user challenges and overall network performance.

Bitcoin Network Congestion

Bitcoin experienced a notable episode of network congestion during the surge in its price between late 2017 and early 2018. The increased popularity and demand for Bitcoin led to a massive influx of transactions, causing significant delays and substantial transaction fees. At one point, average transaction fees soared to over $50, making it costly and time-consuming for users to send transactions.

In the spring of 2023, the Bitcoin network faced another congestion event triggered by increased transaction activities related to BRC-20 tokens. This transaction surge led to a skyrocketing number of pending transactions and fees. The mempool, where unconfirmed transactions are waiting, experienced a bottleneck with nearly 400,000 unconfirmed transactions. Within a couple of weeks, transaction fees surged by over 300%.

Ethereum Network Congestion

The Ethereum network has also encountered instances of congestion. In 2017, the viral success of the "CryptoKitties" project significantly slowed down the Ethereum network. The overwhelming demand and transactions associated with the project congested the network, leading to delays in transaction processing and higher gas prices.

Furthermore, the boom in decentralized finance (DeFi) applications on the Ethereum network has also contributed to network congestion. The high demand for executing smart contracts and interacting with DeFi protocols has caused gas prices to increase, making transactions more expensive for users.

While any blockchain network can experience congestion, the instances of network congestion on the Bitcoin and Ethereum networks have gained more attention due to their widespread popularity and significance in the cryptocurrency ecosystem. The impact of congestion on these networks highlights the need for scalability solutions and optimizations to ensure smoother and more efficient transaction processing.

Solutions to Alleviate Network Congestion

Addressing blockchain network congestion is a complex challenge with various approaches, each with its trade-offs and considerations. Here are several strategies that can be employed.

Extending the Block Size

This approach involves expanding the size of each block, allowing more transactions to be processed simultaneously. Larger blocks enhance network throughput but take longer to propagate across the network, potentially leading to temporary forks. Additionally, larger blocks require more storage space, which can contribute to centralization concerns.

Block Time Reduction

Reducing the time it takes to generate new blocks can speed up transaction processing. However, shorter block times may result in a higher number of orphaned blocks, reducing the security of the blockchain.

Layer 2 Solutions

These off-chain solutions enable transactions outside the main blockchain, with the final state recorded on-chain. Examples include Bitcoin's Lightning Network and Ethereum's Plasma. Layer 2 solutions can enhance scalability significantly. However, their implementation complexity and associated security considerations should be carefully addressed.

A Sharding System

Sharding involves dividing the blockchain into smaller shards, each capable of processing transactions and executing smart contracts independently. This approach can significantly increase the network's capacity. Nevertheless, similar to Layer 2 solutions, sharding introduces complexity and potential security risks.

Additional measures to alleviate network congestion include fee adjustments and scaling solutions like optimistic and zero-knowledge rollups. Moreover, adopting the Proof of Stake (PoS) consensus mechanism, generally faster than Proof of Work (PoW), can enhance the network's efficiency. It's crucial to thoroughly evaluate the advantages and disadvantages of these approaches to determine the most suitable solution for specific blockchain networks. A comprehensive understanding of the network's requirements, security considerations, and user needs is essential when addressing congestion issues.

Conclusion 

Network congestion issues are becoming more prevalent, with many users adopting blockchain technology in the coming years. For a network to be widely adopted and valuable, it must be able to process a high volume of transactions efficiently. This is particularly important for blockchain systems intended to facilitate real-time, everyday transactions. Significant challenges are associated with blockchain network congestion, but the community continues to develop solutions to mitigate them. The blockchain industry is investing heavily in scalability research.