Bitcoin, the virtual currency technology consist of a community enticing investments worth hundreds of millions of dollars, is striving through an ever present war. From the outside, it may seem like minor arguing over a simple matter of numbers. But this insignificant disagreeing actually has significant economic consequences and could even put the very existence of the virtual currency at risk.
The dispute surrounding this single number of the bitcoin system is setting apart the Chinese communities from the Western developers, creating distinction between business community and early adopters, and raising difference of opinion among programmers. All the major parties have to come to an understanding; otherwise the whole bitcoin network could fall apart, ruining the chances of decentralization and security.
Small business owners and startup services adopted bitcoin as a simple decentralized virtual currency free from any government regulation, or from the reach of the banks and agencies; a digital gold. But in an attempt to invent the ideal structure for a virtual currency, bitcoin’s early developers also designed a technology with vast range of applications.
I am sure some of us are already familiar with “blockchain” technology, and how it works. It keeps record of any info in a safe and secure procedure and makes the information available for the public. Since the process is free from any central authority, the information remains unchanged. The possibility of this technology is endless in the modern era of virtual technology and different ventures have already started exploring the application of blockchain this technology
The bitcoin network is nothing but data “blocks” generated from digital information, thus forming a chain. That is where the dispute starts; regarding the limit of the maximum size of the block. The current limit for the maximum block size is 1 MB (megabyte). Such low block size limit means only seven transactions are allowed per second, which is very low for most of the businesses who integrated bitcoin technology at present.
One of the members of the bitcoin core developer team, Jeff Garzik wrote a paper recently, saying this pace is a blockade to bitcoin growth. He wrote, “Any responsible business projecting capacity usage into the future sees the system reaching an absolute maximum capacity, with this speed limit in place. Increasing or removing this limit will encourage businesses to view bitcoin as scalable and capable of supporting millions of new users.”
The limitation of the block size may also have a negative impact on the bitcoin’s fundamental currency application. The user experience may degrade if the transaction request amount exceeds the limit. “Miners” pools who assist inscribe the data in the total network will start charging ever-higher processing fees. And as a result, bitcoin will lose some of the appeal as a payment methods compared to other services.
But the block size limit also has its advantages. It constrains available space, thus providing safety for the network. So, if anyone tries to wickedly overflow the system with spam, he has to spend a hefty amount in the process.
One possible solution may be not to increase the block size limit by too much. That will reduce the amount of work the miners need to do on each block. It will benefit both parties with a low transaction fee and a swift transaction time. Some early adopters of bitcoin, who don’t care about transaction fee or current investment opportunities and hold their bitcoin as long term investment, are also in support of a low block size limit.
But even if the majority of the community votes for an increased block size limit, there’s no protocol for deciding the ideal block size limit—maintaining current safety and future possibilities—or how to implicate a change.
Gavin Andresen (one of the most significant developers of the bitcoin technology) introduced his own proposal. According to the proposal, Andresen proposed a block size limit of 20 MB. That raised a new debate among the experts.
A powerful community of Chinese miners opposed this increase of the block size limit because their country’s internet connection would not allow the increased block size. So they made a counter proposal with a block size limit of 8 MB. The proposal has been supported by Andresen since. In response, a sliding cap was proposed by Garzik that would bring a modification of the bitcoin code. That way, block size limit can be changed (increase or decrease) periodically according to the votes of global miners’.
The bitcoin community has a varied opinion on the debate with some supporting the 8 MB block size increase and some waiting for advanced technologies that might allow them to avoid the dispute. As bitcoin is a completely decentralized system, there’s no clear-cut approach to evaluate these different ideas and concerns—making it impossible to reach to a conclusive decision.
Significance of the situation
Since bitcoin started the journey in January 2009, this block size dispute is the first major modification to bitcoin policy. Every time a new change takes place, the core software has been modified and the players have quickly updated. Anybody trying to avoid the current procedure gets kicked from the system until they meet the terms.
But in this case, there are two sets of protocol implicated by the developers that may lead to splitting of the network. The break down can occur if one party decides to exorcise a global update without measuring the outcomes.
Consequence of the situation
The current market cap of the bitcoin is about $4 billion with millions of dollars investments waiting in the line every day. The blockchain is a completely secure and decentralized system. And the large user base along with the relatively lengthy history make the blockchain technology superior than any of its competitors. If the community falls apart over the block size limit debate, the entire network will be compromised.
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