Following a breakdown of bitcoin’s network whereby more than 200,000 transactions remain stuck and unable to move after 48 hours, Barry Silbert, founder of the Digital Currency Group and investor in a number of bitcoin businesses publicly stated:
I agree to immediately support the activation of Segregated Witness and commit to effectuate a block size increase to 2MB within 12 months.
I agree to immediately support the activation of Segregated Witness and commit to effectuate a block size increase to 2MB within 12 months
— Barry Silbert (@barrysilbert) May 17, 2017
The statement is somewhat ambiguous, so to make it fully clear, Silbert clarified “the intent of the companies and miners that signed on is SegWit plus 2MB hard fork.”
By companies and miners, he is referring to 50 bitcoin businesses who he says have signed up for this compromise as well as around 80% of the mining hashrate share. A named list of these businesses will probably follow, but it is likely to be almost all, if not fully all, prominent bitcoin businesses.
Alex Petrov of Bitfury gave Silbert’s statement a +1, suggesting he agrees with the suggested compromise. Slush Pool’s founder stated he supports it, but the Bitcoin Core developers are giving Silbert a silent treatment, according to Silbert, which met a response by Eric Lombrozo, a Bitcoin Core Developer, who stated:
“Far from silence! Many have pointed out that this won’t work.” Silbert asked Bitcoin Core developers to engage “and let’s all figure this out together,” but Lombrozo’s response was a brisk shut down: “What more is there to figure out?”
This proposed grand compromise was called “consensus” just over a year ago when in February 2016 a representative section of Bitcoin Core developers, including Blockstream employees Matt Corrallo and Luke Dashjr, as well as the very strong small blocks supporter Peter Todd, and others like Cory Fields, agreed with almost all miners and some bitcoin businesses for segwit + a 2MB hardfork.
The agreement stated:
We will run a SegWit release in production by the time such a hard-fork is released in a version of Bitcoin Core.
That 2MB maxblocksize increase was never pull requested by the developers who signed the agreement, therefore the vast majority of miners do not currently run segwit. Silbert’s suggestion appears to be a re-run, but can he pull it off?
The Politics of Protocol Upgrades
Silbert has two advantages. He is an investor in Blockstream and many other bitcoin companies, so they can’t give him the smearing treatment others have enjoyed, such as Coinbase’s co-founder, Bitmain’s co-founder, BitPay’s CEO, bitcoin developers Gavin Andresen and Jeff Garzik, as well as many others.
The second advantage is that he has been a strong supporter of Blockstream and Bitcoin Core, with a potential third being that he has invested in quite a few companies which may give him some influence if it came to a split.
The most valuable asset in a split is Bitcoin’s brand name. It is now worldwide recognized and a mainstream household brand. What exchanges call bitcoin may be seen as bitcoin by most people.
That means in a split, developers are irrelevant if businesses and miners agree – which presumably would be only in rationally beneficial circumstances. Of course, there may be a million eventualities and exceptions may prove the rule, but, in a situation like bitcoin’s scalability where there is genuine disagreement regarding the many proposed methods of scaling, an agreement by the majority of miners and businesses would probably be very representative of the entire bitcoin community.
Bitcoin Core Devs – A Centralized Fault Line?
But what if Bitcoin Core developers refuse to provide the community with what it wants as they have done so far and as some of them have indicated? The options here are only two and neither is great. The businesses and miners can submit to such refusal, in the process accept that a small number of Bitcoin Core developers in effect are now a centralized authority, or they can patch their own clients with the rules they have agreed.
The latter might lead to a chain split, but the minority coin would have to call itself something else and be relegated to altcoin exchanges, so it might not matter except for some temporary trading frenzy.
The alternative is the former, which conceptually places bitcoin in a terrible position, while practically it ensures it becomes irrelevant because no one is going to pay $2-$3 per transaction and wait days, with both fees and delays continuing to increase.
Silbert, the Redeemed Barron?
The most difficult question here is whether Silbert can pull it off. A task which none has managed to achieve in now more than two years. If he does manage to persuade Bitcoin Core to merge a flag day activation of a 2MB maxblocksize increase in 12 months, released on the same client as segwit and at the same time, then maybe he will redeem himself over his ETC shenanigans.
However, realistically, all this is far too little and far too late. Small blockers have won really because even with this grand compromise blocks would probably still be full or near full throughout.
Any argument to increase the maxblocksize thereafter would probably go nowhere. The focus would probably instead be to optimize second layers, with sharding and other cool tech probably left to ethereum.
The roadmap to be followed would be that of a very small number of developers, with any cool practical ideas that benefit ordinary users probably quickly shot down. Not to mention the censorship.
All of this will probably continue the formation of a pragmatic community under a different brand, but bitcoin, at least, might start working again and might begin performing once more the one function it has: moving value from A to B.
Because currently, it can’t do even that. So any other consideration, except for getting bitcoin moving again, may be secondary as far as the vast majority of bitcoin’s community is concerned.
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