Understanding the Fundamentals of Bitcoin and the Block Size Debate

The block size debate is the argument between two sides of the bitcoin community that are each voicing their opinions on whether to increase or maintain the block size of the Bitcoin blockchain network.

Over the past few years, each sides have presented possible solutions to settle the debate. A few of the technologies or systems suggested throughout the debate was the Lightning Network, Segregated Witness, and a hard fork to increase the block size in the short term.

However, both sides weren’t able to come to consensus because of the limitations of each solution. The side rooting for the increase of block size criticized solutions such as Segregated Witness because of its inability to solve immediate issues with full blocks. In contrary, Bitcoin core developers have designed Segregated Witness-based soft fork to gradually increase the Bitcoin block size as it scales.

On July 7, Vivek Rajasekhar, a resident physician in New York, published a detailed paper on the fundamentals of bitcoin and the urgency to increase the block size debate.

The first section of Rajasekhar’s essay described the nature of the Bitcoin blockchain and its difference to centralized payment networks like Paypal. Rajasekhar explains that operating the Bitcoin blockchain is expensive, much more expensive than traditional finance, because it requires existence of numerous servers instead a single server.

The merit of running the blockchain network at an expensive cost is decentralization. While centralized payment works like Paypal can be banned, blocked, and restricted by government agencies and central banks, bitcoin transactions cannot be limited or controlled by a centralized entity.

The core issue which Rajasekhar addresses with the block size debate is, that bitcoin has been marketed as a cheap network for transactions, rather than a decentralized network which offers transaction freedom.

“Bitcoin, as it currently stands, is poorly designed for retail, which is why payment processors like Bitpay are struggling despite millions in venture capital,” wrote Rajasekhar. “Supporters of raising the Bitcoin blocksize bought into this narrative so deeply, they believe that Bitcoin must remain cheap to use. But Bitcoin’s users, the underserved, don’t care about free transactions, they care about the transaction freedom.”

He further criticized prominent bitcoin angel investor Roger Ver’s comparison of bitcoin to starbucks, stating that a brutal force-like immediate solutions are not viable answers to the block size debate. Instead, Rajasekhar believes that genuine scaling solution like the Lightning Network is better for the Bitcoin network and users. As an alternative analogy, he wrote:

“Rather than Ver’s Starbucks, a more appropriate analogy for why the blocksize shouldn’t be continually raised is to imagine someone being told to get from Los Angeles to New York in one day. The raise-the-blocksize crowd believes in a brute force method to this problem: speed up and drive at 200 mph. But a genuine scaling solution requires better technology. Instead of driving faster, you’d hop on a plane. And instead of bloating the blockchain, you’d build the Lightning Network.”

Image Source


TheBitcoinNews.com – leading Bitcoin News source since 2012

Virtual currency is not legal tender, is not backed by the government, and accounts and value balances are not subject to consumer protections. The information does not constitute investment advice or an offer to invest.