'What if' block size is insoluble?

Thursday 11 February 2016

The block size debate has raged for months. We may finally be nearing consensus. Maybe. But what if it goes pear-shaped?

Every now and again it’s worth playing devil’s advocate and entertaining the ‘what if’ scenario. Core developer Mike Hearn’s vocal departure from bitcoinland has highlighted and renewed the concerns shared by many bitcoiners. And so, in the tradition of the Socratic Method, I’d like to conduct a thought experiment and consider what the outcome might be if bitcoin’s seemingly intractable wrangling over the size of a block and the number of transactions that can fit inside one is not satisfactorily addressed over the next, say, six months.

It’s late summer, 2016. Bitcoin is on its knees. The honey badger got complacent and now he’s bloated, stuffed full of transactions and overflowing, circling the drain like a late 1970s Elvis staring at the bathroom floor and wondering whether he can manage another cheeseburger.

Elvis

Bitcoin is currently headed for the 'Elvis scenario'. We'd get past it, but it wouldn't be fun or pretty.

There have been a dozen or more releases designed to fix or at least stave off the problem. XT, Classic, segwit, every sensible variation out there and a good few others - but none of them have gained the confidence of the community and network consensus they need to fly. Transactions are now routinely delayed by hours and the only sure-fire way to guarantee confirmations is to pay exorbitantly high fees. Periodically a new ‘stress test’ will choke the whole network up for days. Bitcoin-accepting merchants are fed up, their business model in tatters.

At this point, one of two things might reasonably occur.

  1. Alternative currencies start to gain more traction. If bitcoin truly offers something worthwhile - and when it works, it certainly does in terms of fast transfers, low transaction fees and no chargebacks - then other cryptocurrencies can do the same. Of course they don’t have the same network effect, but network effect isn’t something that happens overnight. Coins offering the highest liquidity, like Litecoin, will start to take a larger share of transaction volumes. We could repeat the whole cycle again with another coin, but it will end as soon as the community and dev team grasp that increasing block size is a really good idea if you don’t want to go the way of the last guys.
  2. Enough is enough. The bitcoin network forks, or possibly splinters, led by a consortium of exchanges, businesses and influencers who decide they can’t wait any longer and will settle for 60 percent of hashrate support, or 50, or 40. The largest fragment is the ‘new’ bitcoin. It has larger blocks and, hopefully, the capacity to raise block size further, as required. This scenario is not so very different to 1). It’s just that the altcoin gaining market share it an evolution or fragment of bitcoin itself.

These seem like the most reasonable outcomes. Certainly 3) seems highly unlikely: that everyone previously interested in bitcoin would wash their hands of crypto altogether and go back to transacting online with credit cards and PayPal again.

Crypto is here to stay, though that’s not to say that the Elvis scenario wouldn’t be a major blow. If consensus cannot be reached, it will be a big step backwards. I don’t believe it will kill the crypto movement. It would throw open the field to all kinds of challengers and that kind of competition is usually highly productive, if painful in the short term. Ultimately a better-suited solution would arise.

But for the sake of all of us involved in the crypto world, I hope the best solution will be bitcoin itself.


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