Don’t Be Fooled, This is Bitcoin’s Greatest Moment
I want you to do something for me. Take a minute, and go to your favorite block explorer, and watch the transactions roll in. As I write this, Bitcoin is running with a little over 200,000 unconfirmed transactions. We have been told over and over that this is a requiem for Bitcoin. That high fees and delays in confirmations will be the final nail in its cryptographic coffin. Yet, the transactions keep rolling in, and so many — myself included — continue to pay the increasing fees. Millions of people are competing, and paying an increasing premium, to get their transactions secured by the Bitcoin blockchain. All the while, with Bitcoin seemingly becoming an expensive and slow alternative, the price keeps climbing. How can this be? Isn’t Bitcoin valuable because it’s fast and cheap?
With so many forums drowned in the stubbornness, the anger, the threats, the misunderstandings, and the general feeling of hopelessness around the Great Blocksize Debate, it is easy to lose sight of the bigger picture. The cryptocurrency ecosystem moves so shockingly fast that we tend to get swept up in the ever shifting current. This will often have us focusing on the water directly in front of us, and failing to see the ocean we are drifting into. So I’m going to take a minute to explain why I think we are in the midst of what could be Bitcoin’s greatest moment, and the true test of the system’s promise.
Are We Really Still Fighting About This?
The intensity and level of debate is testimony to how powerfully we all care about Bitcoin and its potential as a liberating technology. We are all fully aware of how revolutionary it is. And when you pull together a vast number of highly intelligent, passionate, naturally skeptical, and stubborn people, you are bound to quickly find something to disagree about.
“While the supply of bitcoins and the bandwidth of the network may be scarce, the challenges that the technology faces are nearly infinite.”
The most important thing to take away from this entire debate, however, has been the proof of the Bitcoin system. While we bicker and disagree, Money Badger stays strong and continues to operate without issue, during what is essentially a multi-year stress test. To note, a backlog is not a hindrance or an issue for Bitcoin. It is a cost for people using bitcoin. The system itself, however, experiences no downtime, no overload, and no inability to transmit or validate information. The system continues almost entirely unaffected. The users simply have to pay more to receive Bitcoin’s security. A scarce resource in high demand results in a rising price.
The second most important thing to understand of the Great Blocksize Debate is that we all do agree on what Bitcoin needs for the future! Isn’t that great news!? We all agree that we need multiple improvements, and sooner rather than later. Improvements that create faster payments, cheaper transactions, better privacy, greater ease of use, and massive scaling to accommodate hundreds of millions of users.
The bad news? Unfortunately, some of us disagree on how to best to accomplish these goals. As a consequence, much of the community on the dominant sides of the debate are absolutely certain that anyone who disagrees with them must simply be the culmination of evil… (i.e. a bank, a corporation, or a government).
The Division of Power
While the supply of bitcoins and the bandwidth of the network may be scarce, the challenges that the technology faces are nearly infinite. One of the largest of those, which should be recognized no matter your witness-hashing preferences (aka SegWit support), is a heavily centralized mining industry. Bitmain dominates the entire bitcoin mining industry both in hardware production volume and hash power efficiency. In addition, they also appear to control (behind the illusion of multiple pools) somewhere between a third and a half of the entire network’s hashing power. SegWit, the blocksize increase and upgrade at the heart of this debate, would immediately decrease the profitability of Bitmain’s farms (read: ASICBOOST) and could remove much of the edge that Bitmain has over the mining market. After much consideration I am inclined to think this is the dominant reason for their opposition. However, conclusive proof has remained elusive.
Bitmain’s mining “authority,” however, may not be as great as some worry, or as others hope it is. If a majority of the users, developers, and services support a specific software upgrade (read: BIP148), there is still a very limited set of options for Bitmain. Despite the massive hash power they boast, Bitmain still only controls what client they run for themselves, not what client the rest of the ecosystem chooses to run. The greatest impact their hash power can enforce is a split in the chain. If Bitmain chooses to reject users’ desire to use SegWit at the BIP148 deadline, they can continue to mine the legacy (non-SegWit) chain, resulting in two coins. But they do so at the risk of having only a fraction of the users and services giving their chain value.
Another important consideration… what if Bitmain was right? What if this situation was one that they repeatedly claim? That a bank or government was hijacking development in order to undermine Bitcoin’s most important principles. Then Bitmain, Roger Ver, and the Emergent Consensus crew would represent a highly invested minority who simply wanted to prevent an “evil corporate takeover” of the development team. Their demonstration of power shows that a minority of the ecosystem, if extremely dedicated, can actually stalemate a change in the protocol and force a thorough reexamination of the new code. Yet, they may still be entirely unable to prevent its activation, if the majority of the industry finds their claims to be baseless. Examining these claims in detail may be an article for another day.
“No centralized money has this problem, which means it is a good problem to have.”
So What Makes This “Good News?”
First, I believe this stalemate proves Bitcoin is resistant to central authorities, whether they hold perceived good or bad intentions. Both major proposals are at an impasse and have been sitting almost static in hash power, aside from common variance, for months. Neither has the necessary hash rate to force a change, and the attempt to do so (even with a majority of the network) would almost invariably cause a hard fork that could be politically devastating to the side responsible.
Second, while this contentiousness may not be the greatest situation for Bitcoin, it is strikingly beautiful as a moment in the history of money. Consider… there has been more active debating, breakthrough innovations, new ideas, and new applications in the technology of money over the last 8 years in Bitcoin and cryptocurrency, than in the previous century of fiat money. Possibly even longer.
Third, had this been a debate regarding a change in a government backed fiat currency, we would already have had “someone in charge” forcing a terrible plan down everyone’s throat, and there would be absolutely no hope of changing it later. This debate demonstrates a distribution of power in the monetary system that has never existed before. No centralized money has this problem, which means it is a good problem to have. Bitcoin is undergoing a growing pain caused by the fact that people desire to control the incredible power of money, but Bitcoin refuses to give it away.
Lastly, this will undoubtedly set a precedent for Bitcoin and the rest of the Trustware industry for improvements and disagreements into the future. I am more and more convinced recently that SegWit will activate with BIP148. Why? Because as has been clearly demonstrated and expressed by nearly the entire industry, barely anyone actually dislikes SegWit. The many improvements, optimizations, and obviously the blocksize increase, are broadly desired by the ecosystem. Even Jihan and Roger Ver have both claimed there is nothing particularly bad in SegWit, they just keep beating the drum that “allowing SegWit” somehow means they will never get their precious hard fork.
The Time Has Come
BIP148 has been growing steadily in support by a particularly steadfast set of users and services within Bitcoin. BIP148 essentially is setting a deadline for the entire industry to support or reject SegWit (watch closely on August 1st). It has been demonstrated through a significant number of polls on multiple social platforms, surveys of industry leaders and service providers, and audits of all the software being run on the network, that there is clear and undeniably broad support for SegWit across nearly 80%-85% of the ecosystem. In addition, the smooth and unproblematic implementation of SegWit on at least 5 other cryptocurrencies is proof that there is no significant risk or “secret evil motive” anywhere in the code itself.
Implementing SegWit will almost certainly result in lower transaction fees and an enormous increase in the Bitcoin price. That price growth could be a consequence of the malleability fix, the resource optimizations, or the scaling and security benefits that SegWit enables. However, I think there will be a far greater price rise from the sheer release of stress across the entire community resulting from the knowledge that we can finally move forward. Because of these rather obvious truths, Game theory would suggest there is absolutely no profitable or sensible reason that miners (even those angrily in favor of a blocksize increase) wouldn’t simply get behind BIP148 to prevent a fork. Especially considering it doesn’t at all change the fact that a hard fork with many significant changes (including a blocksize increase) will be highly desirable at some time in the not-to-distant future.
Without a doubt, I consider this Bitcoin's Greatest Moment. The unfolding of this debate is proof of the system’s distribution of power. It is proof of a collective tendency toward no change at all, in the face of uncertainty and debate. It is proof that Bitcoin and its technology represent a revolution for society that will likely make the impact of the internet over the last 20 years seem mundane. No great shift comes without pain, frustration, or seemingly insurmountable challenges. Our job is to meet those challenges and continue moving forward, one block at a time.