Things are looking a bit rough within bitcoin’s community once again. Current events might not exactly be as divisive as when opposition to Core development was peaking through 2016, but this time big miners are speaking out.
The problem
The community has been in need of a solution for quite some time now. The increase in demand for bitcoin transactions has made it so bitcoin fees are rising, something that’s making transactions much more expensive as the price rises.
That’s something arising out of bitcoin’s limited space per block. Only 1MB of transactions can be included in bitcoin blocks, and that’s been proven to be a setback for the growing demand. As more and more bitcoin transactions were created and broadcasted, a constant queue of them would be formed for each one to be included in the next block in order to get confirmed.
Proposed solutions
Some have offered their proposals and thoughts on what they think would be best for bitcoin. While so far, the only proposed solution streamlined to be implemented into bitcoin’s network is the one proposed by Core bitcoin developers.
SegWit (BIP141)
The abbreviation of the words Segregated Witness -SegWit- is a proposed solution that could potentially allow for more transactions to be included in bitcoin blocks. It would help speed up transactions and scale bitcoin’s protocol by scraping scripts from transactions this way freeing up space in bitcoin blocks for more transactions to be included.
The concept proposed by Dr. Pieter Wuille essentially segregates signatures (also called witness) from transactions, hence the name. This reduces transaction size by almost 60% simply by changing the transaction format.
Community oriented proposals
Though the past year, several parties tried (and failed) to gain the majority of support from miners and the community in an effort to fork bitcoin and solve the scaling issue through the implementation of a proposal. Last year, developer proposals started flowing out and some managed to get quite a bit of traction.
However, other than more complicated solutions that -like SegWit- would build on bitcoin’s infrastructure to solve the issue, several parties claimed that increasing the block size limit through a hard fork was closer to the original vision that bitcoin was created on. The proposals below are some of the most well known non Core ones, mentioned in chronological order.
BIP100
A proposal made by bitcoin developer Jeff Garzik, stating that miners would be allowed to make decisions on the block size after the removal of the 1MB limit. Didn’t get far in receiving community support as its promotion lacked the mix of aggressive marketing and offensive politics.
BIP101
A more radical approach on the issue of scaling bitcoin. Initially supported by Gavin Andresen and Mike Hearn. It proposed a direct switch to an 8MB block size limit that would even double every two years. Efforts for it ended with Mike Hearn quitting bitcoin as a whole, stating that he finds bitcoin to be a “failed experiment”.
Bitcoin Unlimited
Also known as BU, it is a full node bitcoin client that gained popularity for not having a hard-coded block size limit, something that in the event of consensus forming around its usage among miners would allow for bigger blocks. Actively supported by Several mining pools, it’s been the proposal receiving the most support so far, especially since the decline of BIP101’s bitcoin XT.
Core’s solution
SegWit is set to activate through the fork in the August 1st and could be implemented even in the event that a small minority of the network doesn’t show support for it (i.e. soft fork).
August 1st’s fork (BIP148)
August 1st’s fork isn’t much of a proposal as much as it is a direct call to action for miners and users alike to begin signaling in what’s called a User Activated Soft Fork (UASF) in order to activate SegWit. This is a tactic that’s been successfully used in the past to activate earlier proposals such as BIP16. The most important part of the fork though is miner support that’s happening through MASF (Miner Activated Soft Fork) in this case.
What’s important to highlight, is the significance of the economic majority showing support to UASF. Profit-driven miners are motivated to follow the majority so that their operations remain financially feasible. If the majority of users and exchanges show a preference to BIP149, then miners are set to follow. Otherwise, they’d remain in the extremely disadvantageous position of remaining in the minority, being left to produce an altcoin rejected by the economy.
In that regard though, about 80% of the network is already running SegWit ready node software, this way making miner acceptance the next step in activating the technology. BIP148 is made so miners will be motivated to signal for SegWit in a way that it can be activated in such in such a manner that would allow even users that aren’t running BIP148 to benefit from SegWit’s activation. And on an even more positive note, a large number of bitcoin companies and institutions such as exchanges are planning (or have pledged) to support SegWit.
Opposition to UASF
Even mainstream media have gotten wind of the discontent between some bitcoin mining parties and bitcoin developers as it’s been quite an eventful week for both supporters and opposition. Several parties insist that a block size increase is the only way forward for bitcoin and hence there’s quite a bit of animosity between certain industry and community figureheads lately.
In spite of August 1st’s fork being supported by Core developers; Bitmain, -the largest bitcoin miner manufacturer company and likely largest holder of hash power in the bitcoin network- has announced that in the event of UASF being successful, they’d continue their efforts to hard fork bitcoin for a larger block size limit. This unprecedented move has been dubbed as an effort to create their own altcoin by prominent members of the bitcoin community.