The Clock Is Ticking on Bitcoin’s Future


By and large, Bitcoiners are no strangers to adversity. In fact, they rather seem to welcome it. The community is a battery of contrarianism that lives off the loathing of every institution it seeks to usurp—banks, governments, payment processors. Like the psychic slime in Ghostbusters II, the community gets stronger with every hateful blow.

But what happens when dissent bubbles up from within Bitcoin? This is what we are now witnessing. In September, a pair of Bitcoin programmers, Mike Hearn and Gavin Andresen, splintered off from the central group of developers and released a competing version of the Bitcoin software, called BitcoinXT. It includes a controversial rule change that the pair argue will alleviate Bitcoin’s snowballing scaling problem: At up to 1 megabyte apiece, the size of the components, or blocks, that make up the complete record of Bitcoin transactions (the blockchain) is widely agreed to be too small for the currency’s future. But others warn that BitcoinXT’s solution will place the currency on a path toward centralized control.

The greatest threat to Bitcoin’s stability, however, is not the possibility that BitcoinXT will be adopted but rather that it will be only partially adopted. The new version is programmed to go into effect on 16 January 2016 if 75 percent of the main processors of Bitcoin transactions, called miners, signal their consent. (The percentage is calculated on the basis of computing power.) However, there are many other agents in the Bitcoin peer-to-peer network—users, verification nodes, payment processors, and exchanges—all of which must be in agreement for the network to remain healthy (see table). Together they work to update and secure an ever-growing chain of transaction records that functions as the accounting ledger we call Bitcoin. All parties must agree on the rules of the game and run compatible software; otherwise the transaction chain can bifurcate into two separate chains with part of the network working on one and another part working on the other. In Bitcoin, this is called a hard fork, and it results in two competing currencies.

To imagine the potential chaos of this scenario, consider what it would be like if your bank account suddenly underwent a digital mitosis, splitting into two nearly identical versions of itself but with slightly different names. And now imagine what would happen if the rest of the world couldn’t agree on which version of your account was the official one.

“It’s a really weird situation. It’s not where you want to go. The thing about money is it’s useful because everyone accepts the same token,” explains Wladimir­ van der Laan, a programmer from the Netherlands. Since April, he’s been operating as the maintainer for the Bitcoin core source code, which basically means he makes the last call on what changes get folded into the ever-­evolving Bitcoin software.

I met Van der Laan in Montreal in September after the close of a tense, hastily organized conference, the purpose of which, essentially, was to save Bitcoin. I asked him to speculate about all the different ways that a fork could play out. And there are many (see table). Van der Laan did his best to sketch out how each player could muck up the works—causing wallet balances to go up and down sporadically and miners to waste their energy on coins that have no value—but in the end he just laughed. “We don’t know,” he said. “That’s the problem. There’s uncertainty. That’s why everyone is afraid of this fork.”

And that’s why they all ended up in Montreal. Over the course of the weekend, developers put aside their flaring Reddit tempers and their gnawing Twitter grudges and began to carve out a strategy. They’ll have to create a new protocol version that will obviate the BitcoinXT fork attempt by solving Bitcoin’s scaling problem in a way that everyone can agree to.

In the past, forks have been avoided because developers like Andresen, Hearn, and Van der Laan have managed to reach a consensus before throwing the code to the public. But as the Bitcoin project has grown, so too has the clutter of voices and agendas. And agreement is no longer so easy to come by.

“We started with a world where Satoshi [Nakamoto] was God and what Satoshi said was the word of God,” says Andresen, referring to the pen name of the anonymous Bitcoin architect. Now that Satoshi has gone silent and Bitcoin is in the hands of the people who use it, there are two possible ways forward. The developers could unite, salvage what remains of Satoshi’s celestial aura, and continue to shepherd the Bitcoin core software as the one true protocol. Or Bitcoin could evolve by the laws of natural selection.

Undeniably, there is a vivid strain of anarchists in the Bitcoin community who would welcome a “survival of the fittest” approach. But if the Montreal conference is any indication, most of the developers favor a process whereby the people who know the most about Bitcoin take on the brunt of the decision making.

They have until January to prove they are fit for the job.

This article originally appeared in print as “Bitcoin Needs to Get Its Act Together.” – leading Bitcoin News source since 2012