Like many others, I attended the Satoshi Roundtable event with key bitcoin community members, developers, investors, and entrepreneurs. It was an incredible experience and I’m supportive of any event that helps bring our industry together (fun trivia: my co-founder, Nic, helped get the event off the ground last year).
The wide group sessions in the main room, with all of us gathered together, were the highlight of the event for me. Seeing the passion of folks and hearing about new projects was invigorating.
Unfortunately, the small side bar sessions troubled me greatly. It became clear at those that large parts of the industry no longer share the same vision nor are they likely to pragmatically compromise to avert what I view as serious risk of running out rocket fuel before we get the ship to orbit.
By this point, there has been a great deal written about the ongoing debate over the future of the bitcoin protocol, mostly by writers I’ve felt have done a better job than I could. In particular, I encourage you to read this post by Mike Belshe, the CEO of Bitgo.com.
With that said, I have a few thoughts to share about current conditions on the network, the danger of central planning, and choice.
Delivering Less Value at a Higher Price
Last week, activity on the bitcoin network spiked allowing us an early view of what the network will look like as blocks get progressively fuller and the mempool becomes increasingly backlogged. The data revealed a troubling trend that will most likely worsen:
In short, transactions took longer despite average fees rising significantly, and the price fell. Simply put, bitcoin users paid more for less value. Higher fees did not result in faster transactions, just a lengthy backlog.
What happens if we compare this to conditions on the network on a typical day last May? The performance losses of the network have since then become even more obvious.
It’s clear bitcoin users are paying more for less. At Blockchain.info, where I am CEO, we have historically seen very few tickets related to transaction times or fees. Now however, we are setting new records for the number of tickets we receive in this category daily — indeed, the tickets are growing by a factor of 10 every week. It is now our top support issue by ticket volume.
Most concerning, this brief busy period we experienced last week is merely a taste of what will come as the network becomes increasingly overwhelmed if we continue down the current path. Instead, we should plan for success. Not survival, not previous growth rates, but for an outcome in which millions and millions more people decide to join our economy and community rapidly.
It’s often argued that the network becomes congested due to ‘attacks’ or ‘spam.’ This has happened in the past with low value tiny transactions. However, during this latest deterioration in network conditions, there simply was no room for low-fee or dust transactions, nor has there been conclusive evidence of a widespread attack on the network.
Indeed, while some pointed to a particular address that seemed to be ‘attacking the network’ (this video circulated reddit) transactions similar to the type in the video, across the entire network, accounted for an infinitesimal 0.275% of transactions for the period (Feb 28-March 2nd) — or in other words, a mere 2,859 in total, which is comparatively a drop in the bucket against the 1,042,993 on the network in the same period.
In fact, most of the spike in transaction volume during the period seems to have been from wallets to exchanges, indicative of early stage capital flight in which bitcoin holders move their bitcoin from storage to an exchange in preparation to sell down their positions, or move them into a new position.
To discount these network issues as being merely related to ‘spam’ is equivalent to a limited group of people adjudicating what the bitcoin network is for. Most importantly however, it is a dangerous game, with far reaching implications, for the industry or developers to begin declaring which transactions are ‘good’ and which are ‘attacks.’ If Bitcoin is to be an open network, central planning of what type of transaction is acceptable shouldn’t be acceptable.
We’ve known for years that bitcoin would need to scale to support more on-chain transactions. In fact, the first references to the discussion date back to 2010, when Satoshi wrote “the eventual solution will be to not care how big it gets.” In a mailing list post, he expands and clarifies his view — noting how most users will need to merely use Simplified Payment Verification (SPV) and won’t store or transmit the entire block chain, but rather leave this function to “specialists with server farms.”
Instead of implementing this vision however, some of the developers working on Bitcoin Core have decided to centrally plan the bitcoin economy — arbitrarily and without consensus, deciding to eliminate various transaction types, attempt to push the industry to new security and business models in an attempt to hotwire bitcoin to be a settlement layer.
It is clear from the first day that the vision of bitcoin was to be a system for peer to peer internet transactions between people. Satoshi is quite explicit on this vision and designed a system that while imperfect, has proved to contain the right checks and balances to make it work. If Satoshi had waited to solve every potential attack vector, there would be no bitcoin community or economy. Sometimes, a system is good enough — perfect is often the enemy of done. If you want proof of this, check out the first code base.
If some of the current Bitcoin Core developers who are blocking Satoshi’s vision for scaling have a better plan, the responsibility is on them to gain the support necessary for that plan from the community. However, it is not the responsibility of the community to attempt to gain their permission, at all costs, to implement the original vision. Indeed, this attempt by some of the current developers of Bitcoin Core to centrally plan the bitcoin economy by implementing new rules, even through inaction, is incredibly dangerous.
The most surprising thing I’ve learned after discussing this issue continually for a year now is that while bitcoin is full of free market folks, some believe this doesn’t extend to bitcoin itself.
I do not share this view. I believe a free market for implementations of bitcoin will encourage the pace of innovation, result in better choices, and prove to be a boon for decentralization. We as a community and as an economy need to get used to making choices between different options and visions. In this case, we can choose between the original P2P cash vision, including scale and widespread consumer use, or a new vision of a settlement system. If you believe in the first vision, I urge you run to BitcoinClassic, as I do, in the near-term.
It’s a simple, production ready solution that’s ready right now and is in production. The project is led by Gavin Andresen, the sole developer Satoshi himself granted access to his codebase too before retiring from the community.
The market is not, however, limited to just a version of bitcoin to run. The ideas that form cryptocurrencies, block chains, and distributed systems are going to reshape finance and digital value transfer for decades to come. There are choices in this new market for consumers beyond bitcoin.
As a community and an economy, we are now competing in a market with not just other cryptocurrencies, but with private chains, consortium projects and an ever expanding number of new offerings. Indeed, it seems some users are already making the choice to move to new systems.
I’m hopeful that more of us in this community and economy choose the original vision. The time to decide is now. We can begin to scale bitcoin to become a truly global and open community of millions of people around the globe. A better financial system with a better money that is transparent, fair, efficient and open to all. That’s the vision I’m as excited about today as I was years ago.