Will bitcoin really split in two? Can it be stopped? The questions, which have been on the minds of many as the block size debate ...
Will bitcoin really split in two? Can it be stopped?
The questions, which have been on the minds of many as the block size debate reaches a fever pitch, was explored by a pair of longtime developers, Jeff Garzik and Charlie Lee.
Both men take a long view of the contentious debate and shared their insights with Laura Shin, a contributor to Forbes magazine, in her recent “Unchained” podcast.
Bitcoin Core developers want to keep the current 1 MB block size limit and have proposed Segregated Witness (SegWit) to allow more transactions per block.
The Bitcoin Unlimited (BU) proposal, on the other hand, would replace the 1 MB limit with a flexible cap. BU has gained support and has approached the ability to execute a hard fork and create a second bitcoin version.
The Bitcoin Core faction is worried that Bitcoin Unlimited would give control of bitcoin to a minority of people, thereby eliminating bitcoin’s decentralized property.
“This is only one interpretation and not necessarily the truth,” Shin said, introducing Garzik, co-founder of Bloq (a blockchain solutions provider) and a Bitcoin Core developer, and Lee, director of engineering at Coinbase and the founder of Litecoin.
Garzik said one of the biggest questions the block size debate raises is how to upgrade bitcoin consensus rules, the rules every network participant must adhere to. “How do we upgrade bitcoin, number one, in a way that doesn’t break bitcoin?” he asked. “This is why a lot of the Bitcoin Core supporters have been focusing a lot on the safety of the upgrade.”
There is also the view that SegWit would send bitcoin down a particular economic path that many in the ecosystem do not want, Garzik said.
“Is it that Bitcoin Core path, or is it a protest path?” he asked, summarizing the essence of the current debate. “Are we going to increase that bucket size (the block size), and what happens when you increase that bucket size?” he asked. “This has impact on how much fees are bid up, how much transactions appear on the network.”
With today’s higher bitcoin transaction fees, some businesses are priced out of bitcoin completely. Some exchanges have advised customers that transactions under $1 are economically unfeasible to transact.
There is a fear that miners will become the “Federal Reserve” of bitcoin, Garzik said. These concerns apply to both SegWit and Blockchain Unlimited.
Noting that Litecoin is trialing SegWit on the Litecoin network, Garzik said SegWit needs more testing.
“The Litecoin network is going to provide that,” he said.
BU is new and does not meet many criteria for a safe hard fork, he said.
SegWit offers a capacity solution that increases capacity a little bit and is voluntary. One downside is it doesn’t address the high fees to a noticeable extent.
SegWit and Lightning Network, which is predicated on SegWit, are not ready as a payment replacement. “Therefore, bitcoin is sitting at a decision point where payments on chain are being priced out by high transaction fees and the proposed replacement is still years away,” Garzik said.
Lee said he supports SegWit, but he said it is not incompatible with BU or bigger block sizes.
He said SegWit should be done now since it is safer, and a block size increase can come later.
Bitcoin can no longer be good for storing value and for payments, as it once could, Lee said. “We don’t want to lose the decentralization aspect of bitcoin,” he said.
What makes bitcoin unique, Lee said, is its uncensorable transactions. To compete with other payment methods, it is compromising that feature.
It is unknown at present how much bitcoin can scale on-chain, he said, which is why he wants to see scaling off-chain. Instead of putting the transaction on the blockchain, the payment is shared between payer and receiver.
The community is ready to upgrade, Lee said, but it also wants to be safe.
If BU obtains the majority of network hashing power and splits the blockchain, they could destroy the minority chain, Shin said.
Core’s “nuclear option” is to alter the bitcoin software so it won’t mine on current mining equipment and thereby cut miners out of the system.
“No one wants to see any of those (scenarios) happen,” Garzik said of the two nuclear options.
The idea that SegWit will deliver capacity in two to four weeks is misleading, Garzik said. He said it is a two-step upgrade. This is the basis of much opposition to SegWit.
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“We are still not solving the problem that users in the field are actually seeing today, yet they want to wait until SegWit does or does not fulfill these capacity conditions,” Garzik said. “This has been optimistic projection after optimistic projection.” Fees are going up but capacity is not coming online.
“There’s a lot of cheerleading for an in-lab solution that is not going to deliver for another year or two in terms of bringing cheap payments online,” he said.
He doesn’t think a contentious hard fork will occur. “Everybody in the room really wants the same thing at the end of the day,” Lee said. Garzik agreed. If there is a contentious hard fork, Garzik and Lee were unable to say which chain would be seen as the true one.
They compared the situation to Ethereum and Ethereum Classic, an existing hard fork split.
Shin asked: Will the one seeing as more decentralized be the winner? If so, how is it determined? Lee said market size would reflect this. “If there’s a contentious fork, it will take a while for people to determine the real one,” Lee said.
High transaction fees push people to more centralized platforms, Garzik said. “That’s a centralization factor that we’re seeing today,” he said.
“How do you make a decision in a decentralized environment?” he asked. Asked what people should do with their bitcoin, both men said people should hold onto it and wait for the issue to be settled.
“One of the great strengths about bitcoin is you control your own money,” Garzik said. “It will sort itself out over time.”
Featured image from Shutterstock.