Is bitcoin forked?

Thursday 27 August 2015

There’s a war brewing between the XT camp and the bitcoin traditionalists. Where will it end?

Bitcoin XT - the fork that increases block size to 8 MB from 1 MB - has launched. It is seeing slow but increasing adoption. And there are some people who are not happy about that.

Read also: Do I hear 8MB blocks? Sold!


The torturous saga of the upcoming bitcoin fork has not made life easier for anyone

As a quick recap, the bitcoin protocol currently supports 1 MB blocks. This places a fundamental limit on the capacity of the network. At peak times, transactions are already delayed. It means bitcoin can never scale to a point where it could be a rival to Visa, for example. The solution arrived at by Gavin Andresen and a cartel of Chinese miners was to increase capacity to 8 MB from 2016, doubling block size every two years after that.

This has been a hugely controversial decision, for a number of reasons. Firstly, it necessarily involves greater centralisation of bitcoin, because only those with the highest bandwidth and disk capacity will be able to store the full blockchain. Secondly, it thereby threatens the entrenched interests of existing miners, who will increasingly find themselves squeezed out by the bigger players, who can afford to access economies of scale.

And thirdly, well, there lies a whole other story.

The ‘bitcoin vs XT’ debate has been characterised by lies, propaganda, misinformation and underhand tactics. XT has been decried as ‘Gavincoin’ and an altcoin. The latest in the saga has been to accuse the XT camp of being in cahoots with the NSA, or similar. XT includes code (dubbed ‘spyware’ by critics) that can be used to blacklist IP addresses - particularly Tor exit nodes. On the one hand, this enables resistance from a denial-of-service attack. On the other, it enables blacklisting of individual IP addresses and potential leakage of information, compromising anonymity.

It’s been a nasty argument. It’s hit bitcoin’s price - down to around $200 at one point - and has split the community. Though perhaps not as much as it might seem. The ‘no’ camp is extremely vocal, and has resorted to tricks such as ddos’ing a popular site showing the number of XT nodes running, At the time of writing, support for XT seems to be around 14%, and rising gently. 

However, some big players have understandably come out in favour of XT - their business models depend on transaction volume, and hobbling the bitcoin network with a 1 MB block side doesn’t do them any favours. Payment processor BitPay has stated their support for larger blocks; others like Coinbase have said they will go with whichever fork ‘wins’, as consensus becomes clear.

Whatever individual community members think, it’s businesses that will drive this fork. No business will intentionally hamstring itself by opting for a minority fork. Instead, my guess is that it will take a few big players - like BitPay - to nail their colours to the mast and show which way the wind is blowing. After that the rest will fall into line pretty fast. There may be choppy waters for a while longer, but the outcome is all but a done deal.

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