2015-08-18 10:32:29
A spat between developers may split the digital currency
The project approaches a "fork" in the road
Aug 18th 2015
"FEDERAL Reserve deeply split. Renegade group of board members to create
separate American dollar. Such a headline seems highly unlikely, but this in
essence is happening in the land of bitcoin, the digital currency. On August
15th two of bitcoin s five main developers released a competing version, or
fork , of the software that powers the currency a move, some fear, that may
split bitcoin.
The dispute is predictably arcane. The bone of contention is the size of a
block , a batch of bitcoin transactions into which these are assembled before
they are processed. Satoshi Nakamoto, the elusive creator of bitcoin who went
offline in 2011, limited their size to 1Mb. That is enough to handle about
300,000 transactions per day suitable for a currency used mainly by
crypto-geeks, as bitcoin once was, but nowhere near enough to rival
conventional payment systems. The likes of Visa and MasterCard can process tens
of thousands of payments per second if needed.
By how much and when to increase this limit has long been a matter of a heated
debate within the bitcoin community. One camp wants to set the number much
higher and do it soon. Otherwise, they argue, the system could crash as it runs
out of capacity as early as next year. Transactions could take hours to confirm
and fees could rocket, warns Mike Hearn, a leading bitcoin developer. Bitcoin
would survive, he wrote in a blog post in May, but it would have lost
critical momentum.
The other side, led by the other three main bitcoin developers, frets that
increasing the block size hastily would lead to centralisation and turn bitcoin
into more of a conventional payment system. This matters to bitcoin purists,
who laud the currency s decentralised approach of running a currency. The
system currently relies on thousands of independent nodes , computers spread
across the world that check whether blocks of transactions are valid and keep
tabs on who owns which bitcoins. Increasing the size of these blocks would make
the system so unwieldy as to dissuade nodes from participating, so hastening a
worrying recent decline in participants.
The dispute is as ideological as it is technical. The bitcoin community has a
process to settle such controversies, but it is by design slow and produces
decisions only when everybody is happy. Frustrated that the discussion has kept
dragging on, Mr Hearn and Gavin Andresen, one of the dissenting developers,
decided to press the issue by organising a referendum of sorts: they have
called on miners , specialised nodes that assemble the blocks and mint new
bitcoin, to install their new version, called Bitcoin XT .
Once at least 75% of the blocks are processed by Bitcoin XT, but no earlier
than January, it will upgrade to a block size of a maximum of 8Mb (and double
that limit every two years). The nodes that then still run the old Bitcoin
Core software would find themselves excluded from the system.
Predictably, the move has increased the temperature of the debate. On
discussion sites such as Reddit, moderators have censored mentions of Bitcoin
XT because they see it as an effort to undermine the bitcoin community.
Comments purportedly made by Mr Nakamoto warning that a fork would lead him to
declare bitcoin a failed project have been widely dismissed as a hoax.
Despite all the sound and fury, such an outcome is still unlikely. Like
spatting doves and hawks at an old-fashioned central bank, the two sides will
probably agree on some compromise; two fun-sounding Bitcoin Scalability
Workshops have been scheduled for later this year.
Even if miners get to make the decision, this would probably not lead to a
bitcoin split. Once it becomes clear which version is likely to prevail, all
miners will have an incentive to jump on the winning bandwagon. Already, 8% of
them have joined the dissident XT faction, a rapid take-up. Whether such a
majority rule is the best way to run the highly complex bitcoin system,
however, is an entirely different question.