BitcoinBlog

Is Bitcoin Dividing? – Bitcoin Block Size, Non-Consensus Governing & Inevitable Hard Fork

Bitcoin appears to be hard forking as a result of division among its core developers. The split is over the block size limit controversy, and may divide the community, the software and possibly the blockchain.

While there are many other Bitcoin blockchain alternative currencies, such a hard fork is a first.

The debate in the Bitcoin community that has led to this split is over Bitcoin’s scalability – the long lasting “block size” debate.

In the Bitcon blockchain, blocks are where data is permanently recorded. These blocks were limited to 1 MB in size by Bitcoin founder Satoshi Nakamoto. With the current block size, the general wisdom is the Bitcoin network can currently only sustain seven transactions per second.

For real world applicability, that transaction rate is not acceptable. For example, Visa’s credit card networks can handle an average of 2,000 transactions per second. Bitcoin needs to be scalable to be a real world alternative to legacy financial systems.

There are two sides to this hard fork, the Bitcoin Core project and a variant called Bitcoin XT.

The Bitcoin XT group, led by Bitcoin Foundation Chief Scientist Gavin Andresen and core developer Mike Hearn, seek to scale the network and increase the block size to 8 MB. On August 15th, they made available a full release of Bitcoin XT, which is a patch set on top of Bitcoin Core.

The Bitcoin XT proponents hope to gain enough support to make it the new consensus.

Increasing the block size is apparently supported by two of the five Bitcoin Core committers – Andersen and Jeff Garzik, most popular Bitcoin wallets, some of the biggest Bitcoin exchanges, the two biggest payment processors – BitPay and Coinbase, the major mining pools in terms of volume and more than 75 percent of people in online forums, according to Hearn.

A public list of members of the Bitcoin community who support or oppose increasing block size is displayed on Bitcoin’s Reddit site.

The debate has been long and tense, and objections to increasing the block size have been many. Opponents to the increase are predominantly concerned about the network’s security and the threat to its decentralized nature, or want to have a more gradual increase over time. Hearn identifies three major groups of objections:

  • If Bitcoin breaks we’ll be incentivised to make something better.
  • The limit should be raised, but not yet (actual time left unspecified).
  • If Bitcoin scales up, it might become less decentralised and then it wouldn’t be Bitcoin anymore.

Andresen has attempted to address all of these objections and many others through his May 2015 blogpost “Time to roll out bigger blocks”.

Andresen and Hearn stipulate that the block size was never meant to be permanent. They point to multiple comments made by Satoshi indicating that the original block size limit was meant to be temporary. Hearn asked Satoshi about the limit in 2010 and received this response:

A higher limit can be phased in once we have actual use closer to the limit and make sure it’s working OK. Eventually when we have client-only implementations, the block chain size won’t matter much.

Until then, while all users still have to download the entire block chain to start, it’s nice if we can keep it down to a reasonable size.

It is apparent that there is bad blood among the Bitcoin Core developers. Andresen and Hearn believe that those that oppose a substantive block size increase do not want to adhere to Satoshi’s vision and want to take Bitcoin in a different direction. Hearn blogs:  

That’s the vision I signed up for. That’s the vision Gavin Andresen signed up for. That’s the vision so many developers and startup founders and evangelists and users around the world signed up for.

That vision is now in jeopardy. In recent months it’s become clear that a small group of people have a radically different plan for Bitcoin. These people have never really been comfortable with Satoshi’s intentions because they fear success — what if technology never improved, what if people couldn’t run Bitcoin on their home computers any more? Would that not somehow make Bitcoin less peer-to-peer, and more like banking? What if people start to rely on Bitcoin even though it’s imperfect?

So now Satoshi is gone they want to make drastic changes — networks of payment routing hubs, sharp rises in fees, ending support for mobile P2P wallets, giving up on unconfirmed transactions, and many other things that never appeared in any of our project’s founding documents.

While Garzik believes in a block size increase, he has not endorsed the Bitcoin XT project and seems to believe Hearn and Andresen falsely claimed he endorsed their project.

One of the other core committers, Pieter Wuille, has proposed a more conservative alternative to Bitcoin XT. Wuille calls for a formula-based block size growth of only 17.7% annually, which he believes will accommodate for all hardware and technological improvements. This appears to be supported by the other two core developers, Gregory Maxwell and Wladimir J. van der Laan, as well as famed crytpographer Nick Szabo.

Wuille states:

It implements a series of block size steps, one every ~97 days, between January 2017 and July 2063, each increasing the maximum block size by 4.4%. This allows an overall growth of 17.7% per year. Wuille, Maxwell and van der Laan are wary of the Bitcoin XT hard fork, as they see it as drastic and risky change.

Wuille concludes:

In summary, hard forks are extremely powerful, and we need to use them very responsibly as a community. They have the ability to fundamentally change the technology or economics of the system, and can be used to disadvantage those who expected certain rules to be immutable. They should be restricted to uncontroversial changes, or risk eroding the expectation of low trust needed in the system in the longer term. As the block size debate has been controversial so far – for good or bad reasons – this BIP aims for gradual change and its effects start far enough in the future.

For many in the bitcoin community, Wuille’s proposal is way too conservative, as it would generate only 2 MB block size growth after 20 years.

Then there are those that have fundamental problems with the Bitcoin XT approach.

Discussions of Bitcoin XT are even being banned from Bitcoin’s subreddit, apparently under the logic that it is basically an altcoin project.

The question remains whether Bitcoin XT has built or will build a consensus to succeed in its efforts. That will be determined by how many miners upgrade to the Bitcoin XT version of software. If 75% of Bitcoin miners adopt it, the minority of miners will be forced to adopt the fork or have to stay on a parallel blockchain.

How then did Bitcoin reach this point of division? After all, this is Satoshi’s heir, Gavin Andresen, leading a palace revolt.

Hearn writes:

It’s become clearer and clearer that the “consensus” that’s so often talked about in the Bitcoin Core community really means the views of a tiny handful of people, regardless of what anyone else in the wider community might think, how much work they have done, or how many users their products have.

Put another way, “developer consensus” is marketing, wool pulled over the eyes of Bitcoin users to blind them from the truth: just two or three people acting in concert can break Bitcoin in whatever way they see fit.

Well, it is fairly evident from the years of debate and indecision regarding the block size that there is something seriously wrong at the Bitcoin Core project. Although it is decentralized platform, Bitcoin’s core committers are clearly not driven by consensus building. If they were, they would have canvassed the views of members of the Bitcoin ecosystem a long time ago. Instead, this handful of individuals has become arrogant, self-important and disinterested in serving the legions of Bitcoin users around the globe. Ultimately, a hard fork of the project was inevitable.

Journalist, policy analyst, and evangelist of new, disruptive technologies including big data analytics, Internet of Things, and cryptocurrencies. Internet industry veteran with regional c-suite experience, and journalist credentials earned at internet.com, Internet World magazine, and Mecklermedia Corporation.
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