And if the simple transaction is me purchasing a pizza instead of transferring a million from one speculator to another? How much does it cost and how much it takes time?
In dirt-simple terms, the lightning network allows you to squash several transactions taking place over a long period of time into one of a much smaller size. It also allows instant payments. [1]
Another way to scale is using sidechains, which shift the transaction burden onto a complementing chain that has a two-way peg to bitcoin. [2]
Neither of these are production-ready yet, but should help improve scalability by a couple of orders of magnitude in the long run.
That being said the current price bubble is out of control and I would strongly warn you away from buying any--and for the sake of full disclosure and identifying my bias I do hold some cryptocurrency.
Here's a lazy copy/paste from the site:
> The Lightning Network is dependent upon the underlying technology of the blockchain. By using real Bitcoin/blockchain transactions and using its native smart-contract scripting language, it is possible to create a secure network of participants which are able to transact at high volume and high speed.
> Bidirectional Payment Channels. Two participants create a ledger entry on the blockchain which requires both participants to sign off on any spending of funds. Both parties create transactions which refund the ledger entry to their individual allocation, but do not broadcast them to the blockchain. They can update their individual allocations for the ledger entry by creating many transactions spending from the current ledger entry output. Only the most recent version is valid, which is enforced by blockchain-parsable smart-contract scripting. This entry can be closed out at any time by either party without any trust or custodianship by broadcasting the most recent version to the blockchain.
> Lightning Network. By creating a network of these two-party ledger entries, it is possible to find a path across the network similar to routing packets on the internet. The nodes along the path are not trusted, as the payment is enforced using a script which enforces the atomicity (either the entire payment succeeds or fails) via decrementing time-locks.
> Blockchain as Arbiter. As a result, it is possible to conduct transactions off-blockchain without limitations. Transactions can be made off-chain with confidence of on-blockchain enforceability. This is similar to how one makes many legal contracts with others, but one does not go to court every time a contract is made. By making the transactions and scripts parsable, the smart-contract can be enforced on-blockchain. Only in the event of non-cooperation is the court involved – but with the blockchain, the result is deterministic.
I haven't explored sidechains enough to give you a competent tl;dr but the security model is discussed in the whitepaper I linked.
I do not quite see how that increases the real world capacity by orders of magnitude. I mean if we assume that people actually spend their money to quite a few different places and everyone would require a significant overhead of a single transaction to be committed for unspecified time. Further, it requires a minimum of two transactions on the blockchain fore each lightning ledger, so if I buy pizza today, and need to close that ledger to buy a sandwich tomorrow, that brings three transactions to blockchain. Of course, you can optimize this, but still, orders of magnitude sounds optimistic.
I recommend you read the summary on lightning.network.
The issue it does not solve, though, is the volatility.
The transaction rate issue is 99% political in fighting and that has basically been solved or will be by mid November.