The "block size" issue will be the death of Bitcoin

Feb 13, 2016 22:13 GMT  ·  By

Bitcoin has split, again. The story is the same as in previous years, with a small part of developers, miners, users, and wallet companies choosing to hard-fork the project and run an alternative version of the original crypto-currency, hoping to convince others to join.

There are currently four different versions of the Bitcoin virtual currency running online. There are Bitcoin Core (the official branch, which most people use), Bitcoin Classic (the most recently launched version), Bitcoin XT (similar to Bitcoin Classic, but launched last year), and Bitcoin Unlimited (a version with no transaction block size and no fees).

The Bitcoin community continues to be torn apart by infighting

Before going forward, readers need to understand a few things. Bitcoin is an open project, but despite this, only a few people get to be part of the decision-making group. As you can imagine, this has rubbed some of its developers the wrong way.

Every time some group has a different way of approaching things, huge debates arise, which are eventually crushed by the overwhelming part of the community, or the developers split the Bitcoin project and create their own version.

This is how Bitcoin Unlimited was born, and later how Bitcoin XT started. Both failed to attract the vast majority of actors from the Bitcoin ecosystem, but they also paved the way for other forks.

Some people really want a bigger transaction block size

Bitcoin Classic, the most recent version, is yet another hard-fork. A hard-fork is "a change to the Bitcoin protocol that makes previously invalid blocks (transactions) valid, and therefore requires all users to upgrade," as described in the Bitcoin wiki. So in simpler terms, a hard-fork is an incompatible change to the Bitcoin protocol that breaks Bitcoin clients.

The protocol-breaking change in Bitcoin Classic is the same as the one implemented by Bitcoin XT. Both doubled the transaction block size, increasing it from 1MB to 2MB. The Bitcoin block size is the amount of data Bitcoin's centralized databases can process for each transaction.

A few weeks ago, Mike Hearn, one of Bitcoin XT's developers, criticized the Bitcoin project, going as far as to say that it was dying just because they refused to increase the transaction size.

Bitcoin Classic is yet another attempt of the Bitcoin community to increase the transaction block size even if core Bitcoin Core developers don't want it.

Both sides are hinting at conspiracies left and right

Mr. Hearn says that because most of the Bitcoin miners and servers that process Bitcoin transactions are located in China, it is in their interest to keep the transaction size down, mainly due to poor Internet connection speeds.

On the other side of things, Bitcoin Core people are accusing Bitcoin XT and Bitcoin Classic of being shill projects that want to break the Bitcoin community so that the banking industry can move in with their own blockchain.

This blockchain is developed by a company called R3, where, coincidentally, Mike Hearns also works, so you can imagine why the Bitcoin Core community is hanging on to their 1MB, despite the numerous benefits a 2MB block size would bring.

Bitcoin Classic needs 75% market share

This past week, Bitcoin Classic officially launched, and out of the gate, it already got the support of various Bitcoin miners and wallet companies, racking up an 8.5% market share in just a few days.

While various Bitcoin mining pools have declined to adopt the new fork, Coinbase, one of the biggest wallet processor on the market, has said it will run it alongside its Bitcoin Core nodes.

In order for Bitcoin Classic to topple Bitcoin Core, it will have to get a market share of over 75%, at which point it will become the officially recognized Bitcoin client protocol in the next 28 days.