Coinbase Runs Bitcoin XT in Production as Pilot Test

Leading bitcoin wallet service provider and payment processor Coinbase has officially announced that the firm has begun running Bitcoin XT (BIP 101) in production as an experiment.

Bitcoin XT is an implementation of a Bitcoin full node which utilizes the same data directories as Bitcoin Core. The proposal (BIP 101), supported by leading global bitcoin platforms including Coinify, Bitpay, Bitnet, Circle, Blockchain, Xapo, Bitgo, Itbit and KNC aims to increase the BItcoin block size over time at a predictable rate.

According to the BIP 101 proposal drafted by bitcoin core developer Gavin Andresen, the maximum block size will reach 8 megabytes at a time stamp of 2016-01-11 and will double every two years until 2036.

Bitcoin core developers including Gavin Andressen and Mike Hearn, and bitcoin startups are trying to expand the block size due to the delay in confirmation times. As Mike Hearn explains,

“The reason is that at 100% full, the true rate transactions are occurring at would likely be more than 100%. So a permanent backlog would start to build up. Bitcoin Core has no code in it to handle a permanent and growing transaction backlog. Transactions just queue up in memory until the node runs out.”

However, the proposal to expand the block size at this pace has been heavily criticized by bitcoin experts such as Mircea Popescu and Pete Dushenski with concerns over its technological capability.

Dushenski states that the Bitcoin blockchain will become more vulnerable if it increases in size as it will higher hashpower to maintain the network.

“The size of the city is the Blockchain and the height of its walls is the network’s hashrate. As such, the larger the Blockchain, the more hashpower is required to maintain the same level of security. Larger things are inherently more fragile and are therefore exponentially more resource intensive to protect from the forces of nature,” explained Dushenski.

Bitcoin enthusiasts such as Bitcoin moderator and Bitcointalk founder Theymos even advised Coinbase to stop promoting Bitcoin XT to its customers as it will pressure the moderators to censor content about Coinbase on its subreddit.

“If Coinbase promotes XT to customers on and/or switches all of its full nodes to BIP 101 software, then Coinbase is no longer using the Bitcoin currency, and it doesn’t belong on /r/Bitcoin. This also applies to (where Coinbase would be restricted to the altcoin section). and have similar policies. In fact, Coinbase was already almost removed from due to your past statements in this matter,” stated Themos.

Yet, Coinbase and other bitcoin leaders are still looking to implement Bitcoin XT and the BIP 101 proposal drafted by Gavin Andressen as they believe that Bitcoin XT’s simple implementation and working code could enhance the operations of bitcoin startups.

“In my view, Bitcoin XT is the best option I’ve seen so far. Not just because it has working code, but also because it has a simple implementation that is easy to understand, the block-size increases seem about right to me, and I have confidence in the people behind the project,” said Brian Armstrong in an interview.

Over the next few weeks, Coinbase plans to publish blog posts to further explicate their implementation of Bitcoin XT in their projects.