Bitcoin civil war looming: The who, what, why, when and how

If you’ve been following Bitcoin news, you may have heard of an apparent ‘civil war’ warming up between two rival factions of the Bitcoin community. Interestingly, in recent days Bitcoin’s value dropped from about $250 to under to $220 before rebounding and stabilizing at $230. While determining exactly what is causing prices to fluctuate is difficult, the potential ‘civil war’ is likely playing a roll. So how can we explain this conflict, which potentially caused a drop in prices, and what does it mean for the Bitcoin community?

What has happened is a so-called software hard fork in the underlying protocol that lays out the operations and limitations of Bitcoin. The details are complex, but the cryptocurrency community has basically been split over the allowed size of blocks that are added to the blockchain. An increasing number of developers, mining groups and companies are calling for increasing the size of the blockchain, which is currently rather limited.

Bitcoin’s civil war: The new Bitcoin XT protocol will rise to 8MB at the start of 2016.

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How Bitcoin works and what the fork means

Confused? Bitcoin runs on a blockchain or a public ledger in which miners essentially bundle together transactions, form them into a block, and then have them added to the blockchain. As this happens, new digital coins are created and are given to the miners, along with transaction fees. According to the current Bitcoin core protocol, blocks are limited to 1MB in size, but the new Bitcoin XT protocol will rise to 8MB at the start of 2016 and will continue to double until reaching a final size of 8GB in 2036.

bitcoin bytecoin altcoin blockBy increasing the size of blocks, developers will be able to increase the speed at which transactions are completed. Currently, Bitcoin’s system can process only seven transactions per second or about 25,000 transactions per hour. This might seem like a lot, but a company like Visa actually handles about 2,000 transactions per second.

For a major global currency, seven transactions per second simply won’t cut it. By increasing the block size more transactions can be processed at a time.

Importantly, however, is the fact that the increase in blocksize will only occur if miners support Bitcoin XT by developing new blocks with the protocol. If 75 percent of new Bitcoin blocks are mined justing XT by January of 2016, a hard fork – meaning a split of software – will be implemented.

Big names weighing in

Bitcoin XT has already been released though so far it appears that adoption by miners has been tepid. However, the new Bitcoin protocol is being championed by some big names. Mike Hearn and Gavin Andresen, both senior developers, are leading the charge for increased block sizes.

But, on the other side, numerous big names are fighting against the forced fork. While some people and groups actually agree with increasing the block size – and indeed Satoshi Nakamoto’s original plans for Bitcoin hinted that blocksizes would likely have to be increased at some point -, the way Bitcoin XT is pushing a hard fork and trying to take over Bitcoin has drawn the anger of many.

satoshi_lead_large_verge_medium_landscape1Even Satoshi Nakamoto, or at least someone who has access to his email address, has been weighing in on the debate. But according to Nakamoto, the hard fork, which is being heavily pushed by Hearn and Andresen, this is not what he had envisioned for Bitcoin.

While the creator of Bitcoin believed that the digital currency would have to evolve and adapt, this alleged Nakamoto is claiming that such changes were only supposed to be made through near anonymous decision. If Bitcoin XT is used to force change, then the whole Bitcoin project will be a failure because it will ruin the idea of social consensus and Bitcoin’s harmony component, Nakamoto is saying now.

What does this mean? Watch and wait, but don’t worry

Here’s the most important question: what does the Bitcoin hard fork mean? Right now, it doesn’t look like much of anything.

Too many major mining groups and too many members of the Bitcoin community in general are opposing Bitcoin XT, which means that the new protocol will most likely be dropped. This is pure speculation, of course, but even with Satoshi Nakomoto – or someone with access to his original email address – weighing in against the new protocol, it’s going to be hard for XT to gain traction.

If three quarters of the miners, however, do switch over to the new protocol, the rest of the miners will be given two weeks to switch over to the new protocol or else be at risk of losing their BTC all together, at least according to the new system. Right now developers are still working out what the full impact of the hard fork will be, but it could result in cleaving the actual public ledger in two. In this case it’s hard to imagine that Bitcoins created by the regular core and by the XT version would be directly compatible.

Still, while you should definitely keep your eye on the developments, Bitcoin users don’t need to worry too much for now. Currently, the battle is as much about politics and plotting the future of Bitcoin as it is about changing the actual protocol. Even if Bitcoin XT fails, it will likely force leaders within the larger community to sit down and figure out a solution for increasing blocksizes.

Many companies and individuals want to see a size increase, and this is likely to happen at some point. Even if Bitcoin XT succeeds and is massively adopted by the community, for the average user it likely won’t amount to much because only miners and companies will have to adapt to a slightly different protocol.

It’s unlikely that the average Bitcoin user will even notice any changes. Still, Bitcoin’s “leaders” will have to come to a consensus on a solution and then implement it.

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