Almost one million bitcoins, worth more than half a billion dollars, are currently stuck in no man’s land as the network struggles to meet rising demand from China.
At one point, 70,000 transactions were stuck, unleashing a mountain of complaints from worried bitcoin users who took to bitcoin’s main communication channels of r/btc and r/bitcoin to ask why their transaction does not confirm. Among the complainants was a parent who wondered why their son’s payment to Microsoft is not going through. Another asked why his transaction has not confirmed in 24 hours while others wanted to know how to “delete” unconfirmed transactions.
The surge in demand acted as, in effect, a DDoS of the network, denying service to users due to a 1MB transaction space limit which has been the subject of debate for many years with no solution achieved due to refusal from some bitcoin developers, mainly employed by Blockstream, to in any way provide a solution in time for surging demand.
Although Adam Back, Blockstream’s CEO, offered a 2-4-8MB increase, he quickly withdrew the offer in favor of segwit announced last year as a non-complex solution that will take only a few months. Despite arguments at the time that segwit had been in use on Liquid, Blockstream’s private chain, for a year, now, almost a year later, the segwit client has still not been launched.
Once it is launched, it may not activate as ViaBTC has strongly argued that bitcoin’s current path amounts to “network suicide”. Bitcoin, therefore, is locked in a stalemate, but why?
According to the whitepaper, bitcoin network rules are set by miner nodes through Nakamoto’s consensus. That is, 51% of miners determine the longest chain and the true state of bitcoin transactions. The other 49% of miners have no choice, but to follow. Bitcoin, therefore, is based on an assumption that 51% of miners are honest and would act in the interest of the network, but has that assumption failed?
What was speculated back in 2010 appears to become a reality as miners may benefit from retaining the 1MB limit, at least in the short term, because of fees increasing slightly, providing them with an extra $50,000 or more a day. As most mining businesses tend to last only briefly, short-term self-interested thinking may be prevalent, explaining the miner’s refusal to act, despite saying otherwise.
Moreover, certain miners appear to have signed binding agreements, corrupting the Nakamoto consensus. Regarding the successful ethereum hardfork during this summer, F2Pool stated:
“As we have already agreed and signed the document in Hong Kong roundtable, ‘We are as a matter of principle against unduly rushed or controversial hard-forks irrespective of the team proposing and we will not run such code on production systems nor mine any block from that hard-fork.’ I believe this is universal and it could be applied to Ethereum, too. Many in the community including most of them from Blockstream and I fail to see why we must take such a controversial and risky hard fork. We are not willing to deploy this hard fork unless we have to.”
The bitcoin network, therefore, no longer operates on a Nakamoto consensus, but on a social level agreement, with miners choosing to place their short-term greedy interests above those of the network.
It could not come at a worse time. Just as Kim Dotcom tweeted about bitcoin to his many followers and just as the digital currency gains wide name recognition in the west, the network fails to function, declining service to tens of thousands of users.
Image from Shutterstock.
Last modified: June 10, 2020 1:19 PM UTC