Capacity vs Scalability

Let’s talk about terminology.

Capacity: The number of transactions that can be processed on the network.

Scalability: Capability of the network to handle a growing amount of work.

Examples:
1) A 2MB hardfork is a capacity increase but not a scalability improvement.
2) Segregated Witness is a capacity increase and a scalability improvement.
3) Monero has no block size limit and thus a higher capacity than Bitcoin, however its TXO pool is unpruneable, its blockchain would grow faster at same usage, and its transactions take more computational effort to validate, so it doesn’t scale as well as Bitcoin.