On August 2, Bitcoin–easily the most valuable single cryptocurrency by orders of magnitude–suddenly forked when a group of users decided not to support the adoption of changes to the blockchain system proponents claimed would make BTC transactions faster. Right now, there are two forks, or divisions in Bitcoin: Bitcoin Cash, and Bitcoin. Bitcoin Cash supports a block size of up to 8MB and does not implement a feature called segregated witness, which stores some transaction data outside the blockchain to free up space for more transactions. Bitcoin, in contrast, has stuck with 1MB blocks and does implement segregated witness. So far, so good.
The next fork will implement a feature known as SegWit2x. As the name implies, this agreement will cover two primary features: 2MB blocks (updated from 1MB) and the same segregated witness feature now shared by Bitcoin. This was announced on the SegWit2x Github repository.
There are a variety of arguments for or against increasing the block size, which we’ll summarize here. Reasons to expand it include promoting early adoption by keeping fees low, approving more transactions per second, and creating more space for off-chain extensions. Cons have included the risk of catastrophic non-consensus, creating a more centralized system (directly antithetical to Bitcoin’s libertarian design and values), and that the more the network is controlled by a handful of players, the greater the trust is required to use BTC.
This latter point might seem like a non-issue, but the entire point of Bitcoin was to create a method of processing transactions that didn’t require trust. For many people, these changes weaken fundamental precepts of the network, which is why they’ve been so hotly argued.
On Github, Jeff Garzik writes:
Segregated Witness support has been locked-in as a soft fork expected to activate around August 23 2017 (block height 481,824). Bitcoin clients that are not currently SegWit-compatible and wish to benefit from the new type of transaction must perform extensive upgrades to various subsystems, including changes to transaction serialization, signature hash computation, block weight calculation, scripting engine, block validation, a new address scheme, and P2P protocol upgrades. Fortunately Segregated Witness compatibility is opt-in, and existing Simplifed Payment Verification (SPV) wallets and full nodes are expected to continue working without changes after SegWit activates.
There is, however, another danger here. For all the hopes its various users have placed on Bitcoin and the sometimes staggering amount of money they’ve invested into it, BTC’s long-term success is not yet certain or guaranteed. One of the things that could kill it is if the network keeps forking in various ways, according to the goals of a smaller and smaller group of people. We’re not saying that’s a pre-ordained outcome by any means, but forking twice in several months isn’t a great vote of confidence, either.
With the above said, there’s also an argument to be made that these changes are the natural result of different groups choosing to prioritize different things. The entire reason Bitcoin Cash is named that way is because its developers wanted to name it for the types of transactions they’re hoping it’ll be used for. Smaller block sizes favor transaction fees and large stakeholders, not the smaller group of miners trying to generate some BTC to sell or use personally.
In the meantime, the value of a single Bitcoin has skyrocketed in recent weeks, and sits at $ 4,427 at the time of this writing.
Now read: What is the Blockchain?
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