Want to understand the essentials of Bitcoin’s Scaling dispute? This analogy should simplify things for you a lot.
Lots of people are confused about what the problem is and even more so about the dispute around how to solve it. This article aims to clear that up through analogy. I’m going to keep it brief to avoid making heads spin with cryptography and non-essential details.
The Two Scaling Solutions:
Bitcoin’s database, the blockchain, is like a highway. It can only handle so much traffic at once before things start to back up. Bitcoin’s popularity growth has caused things to back up. So, obviously, traffic capacity should be increased.
Two ways to grow traffic capacity exist. One is called Segregated Witness, or SegWit for short. The other is called Block Size Increase.
SegWit basically doubles the number of lanes available for people who use it and lets people who don’t still use the pre-existing lanes. It was designed by bitcoin’s core developers for over a year and thoroughly safety tested before being released. Today, over 80% of the users have installed it. It is backwards compatible so that the minority who don’t install it will still be able to use the existing highway after it is turned on. Also, SegWit will allow for additional traffic to fly overhead using new solutions that don’t take up space on the highway.
Despite this overwhelming support, SegWit hasn’t been turned on, however, because it’s not users who get to turn it on. A group called Miners, who collect tolls and get paid for maintaining the highway, are the ones who get to turn on SegWit. The busier the highway is, the higher the tolls are. It’s no surprise they haven’t leaped at the opportunity to reduce their tolls.
Block Size Increase is analogous to saying let’s build a new highway twice as wide as the current road, stop using the current road and have everyone upgrade to a different car than their current one because the current one was designed to drive only on bitcoin’s original highway and will not run on the new road. Miners will continue to collect all the tolls on this new highway. Anyone who doesn’t upgrade will be unable to use the new road.
Scaling proposal summary:
You can stop reading here if you just wanted to understand the difference between the two: A “car” here is a bitcoin wallet; the highway is the blockchain and the miners are like toll collectors. You can draw many of your own conclusions from here.
This analogy is not lopsided or unfair. It seems obvious that SegWit is better for bitcoin — it’s ready now; it was built by competent engineers; over 80% of users have prepared for it; there is no harm to come to the remaining 20% who haven’t upgraded; we’ll have layer 2 solutions which will allow for large volumes of transactions to take place securely while hardly touching the blockchain.
It is only miners who have not turned on the upgrade and the reasons for this are obvious too: a threat to their current revenue stream.
The proposals to resolve the impasse between miners and users
UASF is a way for users to activate SegWit by telling the miners that they will not drive on any miner’s highway capacity after August 1st if that miner is not switching on SegWit. It’s basically a protest against the toll collectors who are unnecessarily keeping tolls high by refusing to turn on the technology that will increase the highway capacity. UASF is an economic boycott of the miners who are not turning on SegWit.
On the other hand, the Barry Silbert proposal says “let’s do both SegWit and the block size increase”. The problems with this proposal though is that no software exists for its implemenation of the block size increase and it has unnecessarily also said “let’s activate SegWit in a different way than the way that 80% of the users have already installed the software to do (for no added benefit).
This solution aims to appease the miners by giving them additional toll collection capabilities while asking them to also agree to the improvements the users wanted. However, it still requires that 100% of users upgrade their cars to cars that aren’t yet even engineered or tested, let alone available for use, and it makes all the current cars that can run SegWit need to be modified to turn it on (and nobody has shown anybody how to make those modifications).
It seems extremely silly from a technical viewpoint, and it is. But this is being done to get the agreement of miners, not because it’s technically sound.
So now users have to choose — launch a protest, UASF, or, wait for new software to be written, (hopefully) safety tested, and deployed universally, however long that will be.