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On 5 September 2018, the all-time record for Bitcoin block size was set when a 2.26 MB Bitcoin block was mined at block height 540,107. This record block size was made possible by Segregated Witness (SegWit) and transaction batching.
Before the deployment of SegWit in August 2017, Bitcoin block size had a hard cap of 1 MB. SegWit was implemented in response to scalability concerns due to increasing usage of Bitcoin, since there were concerns that 1 MB blocks would not be able to fit all recent transactions, which could lead to rapidly rising transaction fees.
With SegWit, the Bitcoin block size limit was re-dominated to be in terms of units instead of bytes. Signature data, called the witness, is separated from the Merkle Tree of a transaction and added to the end, and each byte of signature data only counts as a fourth of a unit. Therefore, if a block consisted purely of signature data, the block size would be 4 mb, so this is now the upper limit on Bitcoin block size. However, the Merkle Tree transaction data accounts for most of the block size, and Bitcoin blocks are rarely larger than 2 MB. The first Bitcoin block over 2 MB occurred on 20 January 2018 at block height 505,225, and weighed in at 2.17 MB.
One thing peculiar about this record-setting 2.26 MB Bitcoin block was it only had 230 transactions, as compared to an average block which has a size of 0.804 MB and 1,609 transactions. Likewise, the 2.17 MB block on 20 January only had 225 transactions.
These large blocks with low transaction counts are likely the result of transaction batching. Essentially, batching is when several transactions are merged into a single Bitcoin transaction. This saves space relative to sending each transaction separately, but the batched transaction can become quite large. The record for a batched transaction is 13,107 outputs, and it is estimated that as of May 2018, only 12% of Bitcoin transactions are batched, but they account for 30-70% of Bitcoin volume.
Indeed, when looking through the transaction ledger for this record 2.26 MB block there are numerous batched transactions. Although the official transaction count for the block is 230, it is actually far more, and could be near a record if you count each input or output in a batched transaction as a transaction. Especially combined with the knowledge that batched transactions take up less space per input or output, yet this block was of a record size. Therefore, this record block is a good example of how batching and SegWit can combine to bring Bitcoin scalability to new levels.
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