Bitcoin Has Now Died 89 Times
There is a website called “Bitcoin Obituaries” that lists all the claims that Bitcoin has died. The newest, claim #89, came this week and it was one of the loudest so far. Bitcoin early adopter & developer Mike Hearn published an article claiming Bitcoin is a failed experiment.
I’ve been involved in Bitcoin since 2011 and I’ve been following Hearn for a long time and I have also followed the blocksize debate closely. I think Hearn is going way over the top with his claims and I’m going to try to explain how. Also I’m going to explore the “why” -territory a little bit as well.
I’ll go through the problems he lists in the early part of the article:
“Couldn’t move your existing money”
There is no problem moving money in the Bitcoin network. It works at the moment just as it has worked all the time for the last 7 years. I moved money through the Bitcoin network yesterday and our company moves money through it every day, including today. And quite successfully.
Hearn is predicting there will be bigger problems in moving money in the future but it is not a problem of that level right now. And here I’d like to add that the Bitcoin community is more active than ever before at fixing the capacity problems before they become a problem as bad as Hearn is predicting.
“Had wildly unpredictable fees that were high and rising fast”
This is actually true but I’d like to note that the average fees are still in the cent range. So a couple of cents per transaction. They are “wildly unpredictable” in the sense that you may have to pay 4 cents instead of 2 cents on some occasions (which is a 100% increase, so it is wild!). They have also been rising fast recently (percentage wise) due to the capacity problem of the Bitcoin network.
Again it’s important to note that this is a positive problem. Bitcoin is being used *too much* that the network is congested. This will be fixed as there are large incentives to fix it but the problem has been hard as there are considerations to make (the decentralization of the network). But as the network becomes more congested, pressure to make quick fixes (which are possible) is becoming larger.
And most importantly, as the fees are still in the cent range, this is not a fatal problem.
“Allowed buyers to take back payments they’d made after walking out of shops, by simply pressing a button (if you aren’t aware of this “feature” that’s because Bitcoin was only just changed to allow it)”
This refers to a new feature called RBF (Replace-By-Fee) which allows resending transactions with a higher fee. It’s useful if a transaction gets stuck and is not confirming because the fee wasn’t originally high enough to push through the congestion.
Hearn is again referring to a future where this allows rampant double spending. Currently it does not since it is opt-in from the sender and merchants / receivers could simply disallow quick payments if its enabled. And this gives the user incentive to not use the opt-in RBF for quick payments that rely on 0-conf.
For use cases not related to 0-conf quick payments, RBF is actually quite useful, so this is NOT black & white like Hearn is trying to paint it. I’m personally very much against usage where RBF is a default option but having it there as a tool for certain use cases does make sense.
“Is suffering large backlogs and flaky payments”
This is true in that there is sometimes high traffic periods in the network which certainly cause high backlogs and flaky payments. This is a major problem but there is increased pressure to solve it. Hearn is simply quite impatient about this, more impatient than anyone in the Bitcoin community.
“… which is controlled by China”
This again is true in the sense that Chinese miners together control around 50% of the mining power of the Bitcoin network. But as with all of Hearn’s claims, it’s extremely black & white.
First of all these Chinese miners are multiple separate entities, not one entity. They could, together, join up and do bad stuff if they wanted to. But there are very high incentives in Bitcoin to not do bad stuff as a miner. It makes *no sense*. Any added distrust in the network will always lead to decreases in bitcoin value and that is catastrophic to miners.
Throughout the whole blocksize / capacity debate the miners have been the most conservative party. They are looking for the community at large to take initiative on the capacity increases and then they can come in and actually implement the upgrade to the Bitcoin network.
Additionally, it is actually the p2p full nodes of the Bitcoin network that enforce protocol rules. Not miners alone. So at the end the miners are always working for the network, not the other way around.
“… and in which the companies and people building it were in open civil war?”
This is actually the most clearly true criticism of all. There has been a serious Bitcoin community fork and it has resorted to multiple camps and lots of politics, which didn’t previously exist. It’s currently pretty bad.
But, there is light at the end of the tunnel. Bitcoin is an unfinished experiment in all the possible ways — technical, social, economical. Current challenge is technical, it’s economical but maybe more than anything it’s social. It’s the biggest social challenge of Bitcoin ever to date.
Every day of Bitcoin is a struggle. It’s always a struggle. But it has always pushed through all challenges and I’m fairly confident personally that it will push through this governance issue as well.
Recently the community came up with a competitive Bitcoin version called Bitcoin Classic. Adoption of Bitcoin Classic would immediately increase Bitcoin network’s capacity if the upgrade gets enough backing.
Additionally the reference implementation of Bitcoin called Bitcoin Core is also currently working on capacity improvements that are mainly based on a technique called Segregated Witness. It is already implemented at a SegWit testnet and is progressing quickly.
Due to Hearn’s post and the resulting price crash there is actually more momentum than ever to push an upgrade to the protocol. One way or another, capacity increases *are coming* to the Bitcoin network and I’d bet they are coming sooner rather than later.
Finally I’d like to explore the background of Hearn’s post which is concerning to me. I’ve liked Hearn in the past actually but his recent moves have been increasingly negative.
Mike Hearn recently got a new job at R3 which is a blockchain project backed by over 30 major banks. Then he posts an article on Medium and the NYT that states his old ‘employer’ has a lot of problems. This context is important especially if we look at Hearn’s past problems with the Bitcoin community.
Mike has been at odds with a part of the Bitcoin community for a long time. Especially those that highly value the decentralized / anarchistic nature of Bitcoin.
It seems clear Mike doesn’t really value those things at all, he has always thought of Bitcoin as an efficient global payment network. He gives almost no value to decentralization / freedom from censorship.
On the other hand the Bitcoin community is more or less very concerned about those things and think they are of the highest value. There are many degrees to this of course, but Hearn seems to be on the very end of the spectrum of not caring.
And technically speaking the whole struggle is about how much we should value decentralization vs efficiency in processing transactions.
I’m personally somewhat in the middle ground, I think decentralization is vital but we should try to increase Bitcoin’s capacity as much as possible without seriously compromising the decentralized nature of the system.
I personally think that Bitcoin Classic is a good initiative. Their technical proposal doesn’t hurt the decentralization of Bitcoin in any significant way but gives the network some breathing room in terms of capacity.
But I also think Bitcoin Core is doing good work and I partially agree with Core’s scaling roadmap. And SegWit is an important upgrade since it not only increases capacity but eliminates transaction malleability (which is a great improvement).
In my next post I’m going to talk about the co-existence of Bitcoin Core & Bitcoin Classic. As I very much believe these two competing implementations can co-exist even if only one of them actively pushes for a hard fork.
I think competition between clients can be possible in a healthy manner even if only one of them originally challenges the consensus rules. It’s all in the attitude of the developers and who they think they are serving as developers. But more on this in my next article which I will publish soon.
Disclaimer: These opinions are my personal opinions only. The company that I have co-founded in Bitcoin space does not currently have an official stance on any of these issues and is staying neutral for now.