I love talking about Bitcoin. In fact, on the first Friday of this month, I shared how Bitcoin’s technology should be considered a technology well worth watching. The applications of how it works and why it is so secure are practically limitless. Now, over three weeks later, I’m here to talk about how Bitcoin is now considered a colossal failure.
Wait. Hold on a moment. What?!
No, no, no, I didn’t say Bitcoin was a failure. Mike Hearn, one of Bitcoin’s developers over the past five years, said that. Hearn declared on Medium that the Bitcoin experiment has failed. Quite the proclamation. He explained the failure of Bitcoin is this: Bitcoin failed because the community failed. According to Hearn, the Bitcoin network is on the brink of technical collapse because the blocks are too small and transaction times are too slow.
What, exactly, does that mean?
Allow me to walk you through Bitcoin 101 and the mechanics behind this digital currency. The way Bitcoin makes certain that you don’t sell your digital currency twice is by adding your transaction to what is called a blockchain. Once a blockchain accumulates enough transactions, Bitcoin miners will compare the transaction block to every previous block that has ever been registered in the blockchain. If it hasn’t been spent previously the miners approve the transaction. A very simplified version of Bitcoin, but you get the idea.
Now in the beginning because there weren’t many Bitcoin transactions, they made the “blocks” (transactions) in a blockchain small because they didn’t want to have to wait weeks for another block. Well now there are many more transactions, the blocks so small the process takes too long to handle, and miners can’t handle too many transactions at once. The original idea was to have the blocks be bigger once enough Bitcoin transactions were happening. We have faster computers now which fit into the vision of Bitcoin’s believed creator, Satoshi Nakamato. While Nakamoto is credited for the first Bitcoin specification and proof of concept back in 2009, it is still widely debated about him and what he intended to accomplish with Bitcoin. He’s still anonymous, shrouding himself with secrecy, and there has been speculation on who he was, why he stepped back from Bitcoin. All we know is Nakamoto handed over the reins of the BitCore core code over to Gavin Andresen, an early contributor to the community. Andresen, an experienced leader, held the big picture on the potential of Bitcoin, and his reliable technical judgement was one reason that Mike Hearne quit Google and work fulltime on Bitcoin. Hearne believed with Gavin in charge Bitcoin would develop into a good, world-changing project.
I know, this is starting to sound like a techy version of Games of Thrones, isn’t it? Well, hold on to something because here’s where the plot thickens.
Where problems occur and signals cross happens from when Andresen took the lead once Nakamoto stepped away. Nakamoto never asked Andresen whether he wanted the responsibility as Bitcoin was an unpaid job at the time. Andresen had admitted he didn’t actually want the responsibility; so as soon as he got the job, Andresen brought in four other developers and gave them access to the code. The vetting process for the direction of Bitcoin was non-existent so only Andresen knew if these four new developers were aligned with Nakamoto’s true vision. From the opinions of one of them, Gregory Maxwell, Andresen really hadn’t bothered to ask. Not only did Maxwell not believe in Nakamoto’s original vision, he had said in the beginning he thought Nakamoto was wrong. So now, through controlling the Bitcoin blogs and steering the community, is Gregory Maxwell. According to Herne, the current Bitcoin industry are facing problems:
- The blockchain, as it is still a particular size, is full and too small to handle demands
- The capacity cap of one megabyte per block is still in place as it was from the beginning
- Due to the size of a block and the resulting blockchain, network capacity is extremely slow, making it difficult to keep up Bitcoin demand.
- Due to the size of a block and the resulting blockchain, Bitcoin cannot scale to a large size because of this limitation.
To compound this problem, Gregory Maxwell does not want to increase the size of the blocks.
And to return to the Game of Thrones analogy, if Maxwell is sitting on the Iron Throne at King’s Landing, the this means he can see in the distance the Mother of Dragons, also known as China.
About 50% of Bitcoin miners are in China. Armed with small computers, questionable bandwidth, and server rooms that can only be described as a dark labyrinth of technology, China are also adamant in what they don’t want: a bigger blockchain. The Chinese miners are worried they couldn’t download bigger blocks fast enough, and don’t have the processing capacity to handle bigger blocks. They have been making good money mining on this one megabyte blockchain, and they want it to stay that way. So those at the top of the Bitcoin command chain are wanting the miners to dictate the architecture of the digital currency instead of the developers writing the code. So now politics has gotten into this squabble.
In August of 2015 the people who wanted to save Bitcoin—Hearn being one of them—created a fork from this artificial cap. With open source software, this group of miners and devleopers created this fork and released BitcoinXT. This did not settle well with Maxwell. Anybody known using BitcoinXT was blackballed by him and banned from mentioning it on the Bitcoin blogs he moderated. It was absolute anarchy among the Bitcoin community.
All this has led to Mike Hearn to selling all of his Bitcoins and stating “I’m done.” Hearn is not alone. Many of Bitcoin’s core developers are leaving it, no longer seeing or believing in the future Nakamoto envisioned.
I thought Bitcoin was a brilliant notion, but never invested as they started going down in value. That was one of my problems. A part of me was intrigued by the “no centralized control” ideology behind it, but Gregory Maxwell has been doing exactly that. Instead of respecting the consensus of those developers writing code, Maxwell is exercising with great impunity centralized control over Bitcoin. Does this mean Hearn is correct in that Bitcoin is a failure? There is always time for a change. If Nakamoto or Andresen were to take charge, they could bring the community together.
Until that time, it would seem that dark times have come to Winterfell.