The world of Bitcoin and open-source money is facing its first major divide between miners and the core developers behind the protocol. Two different proposals for dealing with an eventual outgrowth of the current blockchain size are dividing the Bitcoin community as the public chooses sides.
The block chain is essentially the ledger for all bitcoin transactions. More specifically, it is the technology backbone of cryptocurrency. Miners use computers to connect to the block chain and solve complex mathematical problems that secure the network. The miners are rewarded with bitcoins for securely processing transactions and recording them into the block chain. All transaction data is then permanently stored on a block. When the Bitcoin protocol was first written by Satoshi Nakamoto in 2008, it had a 1 MB limit to the block size.
Although the Bitcoin economy is still relatively small, it has become clear that if Bitcoin use continues to grow and the block size is not eventually increased, congestion could slow transactions down to the point that it might take days to complete a single transaction.
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The impending need for action has led bitcoin’s core developers to propose two competing plans for dealing with the block size issue – Bitcoin Improvement Proposal (BIP) 100 and BIP 101, also known as Bitcoin XT.
Bitcoin XT was proposed by former Google developer Mike Hearn, and Gavin Andersen, one of Bitcoin’s core developers. XT would raise the block size limit to 8 MB in January 2016. From there the block size would be doubled every two years until reaching 8,192 MB. Only when 750 of 1,000 blocks are consecutively mined with XT will the change be made.
BitPay and Coinbase have come out in support of XT. In a statement on Monday, several of bitcoin’s biggest service providers – including wallets Blockchain, Circle and Xapo – put their weight behind BIP 101.
Earlier this summer, core developer Jeff Garzik proposed BIP 100, which would take a “market” approach to the problem and allow the miners a vote on the block size. BIP 100 does not negate the need for a larger block size limit but calls for consensus on the issue. The proposal has gained support from the members of the Bitcoin community who do not like the idea of a handful of people deciding changes for such a decentralized system.
Currently Bitcoin is run on a system known as “Bitcoin Core”. Both systems are running on the blockchain but if Bitcoin XT is adopted it could cause great disruption. Business Insider writes:
Bitcoin is still running as one digital currency. However, if XT is adopted by 75% of users by January 2016, it will upgrade to a larger block size. This will be incompatible with Core — meaning that if the other 25% don’t then choose to convert, it will effectively split the currency into two.
This split is what is being referred to as the Bitcoin XT fork. If miners are divided between the two systems, core and XT, there could be a cryptocurrency war leading to a split of Bitcoin.
Even if the fork does not spell the end of Bitcoin as we know it, there are legitimate concerns for possible breaches of security. The fork could allow for double-spending, with users able to spend coins they had before the fork twice. This would also make Bitcoin received after the fork only accepted on one blockchain.
Gavin Andersen recently described Bitcoin XT as “a twenty-year plan to scale up transaction handling. It is impossible to predict the future, and there will certainly be protocol changes to improve scaling, privacy, security and functionality between now and 2035. Bitcoin XT and other implementations of the Bitcoin protocol will certainly evolve over time, exactly like how other Internet protocols evolve over time.”
Andersen’s optimism for XT has not stopped BIP 100 from gaining support from the largest mining pools. Coindesk reports that BTCChina has joined BitFury and F2Pool in support of BIP 100.
F2Pool administrator Wang Chun told Bitcoin Magazine that F2 did not support XT.
“We believe the whole ‘Bitcoin’ XT thing is manipulation,” he said. “While the question whether and how to increase the block-size limit is a technical one, the Bitcoin Core and ‘Bitcoin’ XT issue is political. By introducing ‘Bitcoin’ XT, Gavin Andresen and Mike Hearn are splitting the community. Totalitarianism and dictators cannot co-exist with the free and open-source software spirit.”
The future of Bitcoin remains to be seen. For now, the debate surrounding the XT fork has revealed at least one important hole in the Bitcoin armor. A hole that is news to some but well known for others. This is the fact that five bitcoin developers have a large say in what happens to the currency and ultimately what direction it flows.
For many users of Bitcoin the selling point is the alleged anonymity and decentralization. Indeed its creation was motivated by too-big-to-fail centralization of the economy. Yet the anonymity is definitely not without limitations, and decentralization has been declining as Bitcoin grows. As the Nasdaq noted:
For all the emphasis on Bitcoin’s decentralization and its merits, a very small group of people in effect controls it. A schism within that small group is dangerous to the project’s future. Whichever side comes out on top, the divisions might not heal quickly, completely or at all, and the crypto-currency could lie in a yet-smaller number of hands.
These are the complications involved in scaling an open-source project of this magnitude. Will Bitcoin become too-big-to-succeed?
Derrick Broze is a liberty journalist and bitcoin user. He writes for Coinivore and many other publications. Follow him on Contently.
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Would an order of magnitude larger block size (BitXT, for example) “devalue” each current bitcoin just like so-called quantitative easing devalues each dollar? Thanks.
Bitcon is a fake, a fraud, and a scam. A currency that has 400% swings in value does not qualify as a viable currency. And no one wants it. Tried to pay my rent with it – landlord threatened to start eviction proceedings; supermarket called security when I asked to pay with bitcon; asked car dealer if I could pay with bitcon – man you could hear the laughter into the next county. Even the Salvation Army guy didn’t want it. Bitcoin – na, BITCON – ya can’t even buy tulips with it.
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