I understand that, but what happens when we have, say, 2000 transaction requests every 10 minutes, but the system can only process 1000 transactions every 10 minutes because of the block limitations? And say that that number of transaction requests is consistent for a week straight. Then you have tens of thousands of transactions backlogged, that may never be processed.
Am I wrong?
A few things...
I believe the maximum block size can be increased, so more transactions can fit into a block. The max size is low(ish) right now to prevent malicious entities filling up people's hard disks with huge numbers of small transactions.
As Bitcoin becomes more popular and there are more transactions, fees will become more prominent, so you'll have a way to prioritize your transaction if its necessary.
There could be alternate block chains for more localized or specialized spending, with large processors/banks/merchants settling out via the block chain periodically. Perhaps the use of services like MyBitcoin will become more widespread. When sending transactions internally, no data is written to the block chain. They could also settle debts between each other outside of the block chain, through some other communications channel.
Basically, there are lots of options for growth of network usage.
Interesting. I did not know we could adjust the block size. Is that something we should be looking in to now, since free transactions are often taking several hours to complete? I've noticed the same thing as the OP in my recent transactions...
Also, since the entire block chain must be downloaded to a local machine before that machine can acquire a bitcoin address and utilize a wallet, it seems that some sort of "practical maximum" of the block chain should be defined, or at least thought about.
I mean, will new users of bitcoins really want to download a 20GB file just to start using bitcoins as a currency?
So say we pick an arbitrary number - 10GB - as a practical maximum for the block chain. Currently, there are 290,000 blocks? So 290MB? Can we really expect this transaction model to last as long as is projected, for as many people as is projected, without some sort of problem? If we've already "used up" 2.9% of the total available transaction history, what happens when the project is 10 times as popular as it is now? How can it possibly support 10 times as many users for longer than a couple of years?
What am I missing here?