Scalability Principle

The nature of Bitcoin stability implies an inherent economic pressure precluding linear scalability. The block size limit consensus rule establishes the arbitrary trade-off between utility threshold and system security. Yet at any block size the system remains non-scalable due to the necessity of confirmation finality. In other words, a finite set of transactions must be selected, which implies that others may be excluded, necessitating a competitive fee market for inclusion.

Effective transaction carrying capacity, and therefore aggregate demand, can be increased through the use of off-chain confirmation settled on chain. This represents an individual and time-limited security compromise (for lower-value transactions), avoiding a system-wide and persistent security compromise (for all transactions). This compromise lowers but does not eliminate the utility threshold.

As such stability and non-scalability exist at any block size and level of off-chain transaction.