Bitmain, HaoBTC, BW, GBMiners and F2Pool are planning to mine through Bitcoin Unlimited, according to Haipo Yang, ViaBTC’s founder and former Tencent employee, China’s Facebook/Twitter, where he worked in mainly Linux-based C/C++ development.
In combination, together with bitcoin.com, they account for around 60% of the network’s hashrate, making it almost a supermajority in favor of Bitcoin Unlimited, the grassroots long term solution to on-chain scalability decision making.
A representative from Bitmain stated in response to my request for confirmation or denial of ViaBTC’s statement that they currently have no comment. A representative from Bitbank, in response to the same question, responded by linking to “A Statement from Members of the Bitcoin Community,” which announces a $1.2 million grant fund for Bitcoin protocol development. Other miners have not yet responded.
Regarding Segwit, which has now been put forward to miners for approval or rejection, Yang stated:
[A]s far as I know, only a small number of mines support SegWit, and most of pools are privately or publicly opposed to SegWit.
Much of the Questions and Answers session focused on scalability, but Yang addressed another matter that has deeply divided the community: censorship. The moderators of r/bitcoin are accused of undertaking North Korean style measures in censoring, manipulating, or banning of debates and discussions. Yang stated:
“The damage that Censorship does to a community is very large, as everyone knows the Chinese internet, media, books, and art are all subject to censorship. This has caused enormous harm to the development of Chinese culture. Every single Chinese person who understands the effects of censorship absolutely hates it.”
The Bitcoin community and, especially, miners, now face the most important decision in Bitcoin’s existence. They are to choose between two fundamentally different visions for bitcoin’s future. Segwit, a centralized capacity increase from 1MB to around 1.7MB, or Bitcoin Unlimited, a decentralized mechanism for on-chain scalability decision making. Yang stated:
“The battle between Bitcoin Unlimited and Segregated Witness is not a scaling battle, it’s actually a battle about Bitcoin’s future path. The Bitcoin Unlimited path advocates following Satoshi Nakamoto’s original development path, and guarantees Bitcoin retains its open and transparent ledger property, allowing more people to use Bitcoin, and allowing Bitcoin to become a globally used and accepted currency. The Segregated Witness path will turn Bitcoin into something that can only be used by a few, that is easily displaced by another cryptocurrency, with no way to realize its vision of becoming a fully anonymous system. It seems more likely that the BU path will help Bitcoin develop into a trillion dollar market, and Segregated Witness will cause Bitcoin to turn into something like Tor: limited to a few grey area use cases, and incapable of achieving mainstream acceptance.”
What is Bitcoin Unlimited?
Bitcoin Unlimited is a grassroots client developed during the height of the blocksize debate and launched just before Bitcoin Classic last year. It continues the general idea for transaction capacity management that was built into bitcoin initially. Prior to hitting the 1MB limit, the network used to have a soft limit of 250kb transaction space per block. As interest in bitcoin grew and capacity was reached, a general awareness rose that the capacity limit was being hit, therefore miners, without any centralized coordination, simply increased it to 500kb, repeating it again when they increased it to 750kb and then 1MB.
The 1MB limit is a centralized hardcoded limit which requires an upgrade of the software for its modification. Bitcoin Unlimited has removed it, and replaced it with a system similar to what was there initially, turning the 1MB limit into a soft limit as miners accept, but not generate, 1.5MB blocks, 2MB or any other chosen number, rejecting any other blocks. They further communicate this choice through signed blocks. Thus, once, probably as good as all miners, so signal they are willing to accept 2MB blocks, a 1.1 block can be generated.
The overall mechanism, therefore, provides a method for decentralized, market based, decision making regarding on chain capacity. It also provides safeguards as miners can signal they are unwilling to accept blocks of more than x, keeping transaction capacity, therefore, above demand, and increasing it or, perhaps, even decreasing it, dependent on whatever local, free market based, decisions and considerations that may be relevant.
The same, except for generating blocks, applies to node operators as well. Unlike Bitcoin Classic or XT, Bitcoin Unlimited is currently compatible with bitcoin core and does not modify consensus without the prior agreement of the vast majority of miners. Moreover, although it is called unlimited, it is not a big or small block solution. Miners can, if they choose, retain the current 1MB limit or x limit, and there are situations one can envision that happen, say if technology truly does not keep up with bitcoin’s network requirements.
What is Segwit?
Segwit provides a number of modifications, but its relevance in the scalability debate is as far as it concerns its increase of transaction capacity from around 2/3 per second to 4/5. It does so, however, by maintaining the centralized 1MB limit, through a complicated method that has taken almost a year to develop. We may, therefore, return to the same debate again, in a couple of years, if segwit activates.
Segwit supporters, however, hope that won’t be necessary because their vision is to reserve on-chain transactions only for second layer hubs. The Lightning Network, which is still under development, is expected to process almost all transactions through intermediary non-proof of work processors, with the on-chain network acting as a SWIFT like settlement base.
The idea, therefore, is to make on-chain transactions very expensive, costing perhaps $20, $100, or even, in a mass adoption case, in the thousands with the effect being a division of bitcoin into the on-chains money issuing and verification system on one hand, and LN’s payment or transaction network on the other, as opposed to the current system where bitcoin is both money and a payment network.
Ultimately, both visions scale bitcoin, on-chain and off-chain. The question is more in regards to methods and the consequences of such methods. Depending on who you ask, the method they oppose is slower, more expensive, more centralized, less censorship-resistant, perhaps less private, untested, potentially riddled with bugs etc.
Every single aspect has been dissected over the past two years, with most of bitcoin’s community probably having made up their minds. It’s not an easy decision, but the overwhelming majority of businesses, who of course were established or employ many highly technical individuals, and, according to ViaBTC, the majority of miners, would like to keep on-chain transactions unconstrained, with the Lightning Network being optional.
However, that has been known for almost a year, but, finally, miners will now have to make an active decision, as opposed to their previous passive discussions. Their decision will likely determine, at least in the medium term, the future trajectory of bitcoin as, from inception, segwit makes future on-chain scalability more difficult due to its signatures only attack vector, while Bitcoin Unlimited makes the Lightning Network optional which means it will only be used for niche cases, such as micro transactions.
We are therefore likely to find out, in the next few weeks, where exactly bitcoin is going.
Featured image from Shutterstock.Follow us on Telegram or subscribe to our newsletter here.
• Join CCN's crypto community for $9.99 per month, click here.
• Want exclusive analysis and crypto insights from Hacked.com? Click here.
• Open Positions at CCN: Full Time and Part Time Journalists Wanted.