A meeting of bitcoin startup executives and miners held this weekend has resulted in the publication of a new proposal for how the open-source project should be upgraded to support additional transaction capacity.
Detailed in a post published by investment firm HedgeCulture Group today, the proposal was billed as an agreement that would make two changes toward this stated goal. The proposal was signed by more than 50 companies, and claims to have support from 83% of the network’s miners – businesses that operate computers that secure the blockchain and add new transactions to it.
First, it lowered the barrier for the activation of Segregated Witness, the long-stalled proposal put forward by Bitcoin Core developers in December 2015, to 80% of the network’s mining power. Second, it stated that the undersigned businesses would agree to activate software that would upgrade bitcoin’s block size to 2MB via a process known as a hard fork.
DCG further called on companies, miners, users and developers to join the proposal via a dedicated web form that was provided in the post.
The company wrote:
“We are also committed to the research and development of technical mechanisms to improve signaling in the bitcoin community, as well as to put in place communication tools, in order to more closely coordinate with ecosystem participants in the design, integration, and deployment of safe solutions that increase bitcoin capacity.”
Abra, Bitclub Network, Bitcoin.com, BitFury, Bitmain, BitPay, Blockchain, Bloq, Circle, RSK Labs and Xapo are said to be providing technical and engineering support to prepare for the upgrades, though their commitment was not further detailed.
Notable, however, is the absence of developers making up the open-source development community Bitcoin Core. Blockstream, a company that funds two such developers, opted not to attend the meeting when it was announced in March, with Blockstream CEO Adam Back formally declining to participate on behalf of the startup.
According to those involved, the proposal will use an idea put forth by RSK Labs developer Sergio Demian Lerner in early April, though it’s notable that several developers rejected the proposal in following emails. (The idea has been floated many times before as well.)
Speaking to , Lerner affirmed that the startup would play a role in the process, though he said he “probably won’t write” the code that is eventually used.
“Our agreement is to audit that code,” he said.
No code was released in the announcement, and others were less clear about what technology would underlie the move.
According to those involved, the process by which the measure would be approved involves miners augmenting coinbase transactions in new bitcoin blocks to signal their support, as soft forks are usually deployed. By signaling on “bit”, miners would be voicing their approval for a process by which SegWit would be activated at the time of a network fork.
“SegWit can activate immediately and the same bit will say in the future, at X date, a 2 MB hardfork happens, signaling two events with one bit,” said Jeff Garzik, founder of bitcoin startup and proposal signatory Bloq.
What’s different this time?
One of the more complex questions that resulted from the publication centers around just what it means exactly – and if it will really impact bitcoin’s technical direction.
Garzik put forth the strongest argument that it marks a significant departure from past proposals, namely because it finds new businesses funding technical efforts that will benefit the non-proprietary code.
“I think a mistake that every business has made is that they free-rode on Core,” Garzik said.
Others remarked similarly that the commitment might be real this time. Marshall Long, one of the leaders behind Bitcoin Classic, an early 2016 effort to increase bitcoin’s block size, argued that the “field of communication” is improved over previous efforts.
In particular, he referenced a 2016 agreement between a subset of miners and developers, colloquially termed “The Hong Kong Agreement”, which originally committed to a timetable that would see both the activation of the SegWit code upgrade and the development of a 2MB hard fork. Ultimately, both timelines were missed.
“We’ve seen this before, so it has a less likely chance of turning out the same way. The recent history, the Hong Kong agreement is so fresh, something will happen good or bad,” Long told .
Still, Blockstream CSO Samson Mow, whose firm did not sign the proposal, noted that, like with other fork proposals, there is disagreement that it represents a significant enough majority to impact the network’s direction.
“The technical community and a big swath of users have already said that a hard fork is not needed now,” Mow said, adding:
“This proposal is just going back and rehashing things that have already been discussed at length.”
Chaincode developer Matt Corallo had a similar view.
“I’m somewhat disappointed that all of the feedback given by folks who’ve worked on the bitcoin protocol was completely ignored,” he said in the DCG chat group. “[I] suggest much more technically realistic ways to accomplish the same goal.”
Who gets what?
Others commented on the somewhat messy sociology behind the positioning, given that bitcoin users have been so firmly entrenched along partisan lines – with those supporting so-called “off-chain scaling” solutions on one, and those backing “on-chain scaling” solutions that would increase the hard-coded block size on the other.
For example, Bloq economist Paul Storzc, whose startup is supporting the proposal, noted that he wasn’t sure exactly what the compromise was.
“People wanted SegWit on the small block side, but the small block side thought the big block side would also like it because it’s getting larger blocks, so it was unclear there would be any sentiment against it,” he explained.
Still, he noted that the activation of SegWit as part of the deal would be unlikely to win over Bitcoin Core developers. “It isn’t a huge concession to the small blockers to activate SegWit. It was only being withheld to annoy them anyway in the first place,” he remarked.
Bitcoin miner Chandler Guo noted his belief that, if anything, the compromise is perhaps more out of necessity given frustration over the stagnation of the technology’s development, and that in the end, there are perhaps no winners.
In a roundabout analogy, he compared the deal to a “beautiful girl” who would finally need to marry an “ugly man” due to indecision.
“The beautiful girl was waiting and waiting, and they have to marry someone, it doesn’t matter who. The beautiful girl has to finally marry someone,” he said.
Will the network fork?
Perhaps the most contentious part of the agreement is the commitment to a bitcoin hard fork within a certain timeframe.
Yifu Guo, the founder of bitcoin mining firm Avalon (now Canaan), professed to skepticism that the timeline would be held. “I’ll believe it when I see it,” he said. “It’s too fast, they don’t have enough adoption.”
Even with the agreement, Guo said, there are technical limitations to how fast such a solution could be tested. Asked if he thought it would be a success, he said: “I don’t believe that.”
Others were also concerned about the six-month timeline as those backing the proposal would have to develop code, ensure that it has widespread agreement, and deploy it all before the deadline.
“I don’t think it’s very realistic. Six months is not long enough. Let’s put it like that,” said bitcoin enthusiast Stefan Jespers, who goes by the moniker ‘WhalePanda’. He mentioned that it took developers six months to develop SegWit, and that it takes a long time for nodes to upgrade, offering recent bitcoin client versions as examples.
“You know the expression ‘honey badger doesn’t care’ in bitcoin?” said Jespers. “People are going to oppose it, because it seems like they’re being forced into it. Even if 80% of the miners support it, then what do the other 20% want to do?”
He added that he feels many developers and users don’t support a block size parameter increase, and that their voices were excluded from the agreement.
Action at any cost?
The fact that a range of scaling proposals have been put forth over the last year, with none ultimately reaching full agreement from the bitcoin community, meant there was also a notable skepticism of the proposal.
Still, some argue that it’s at least a path forward.
ShapeShift CEO and co-founder Erik Voorhees, one of the companies that signed the agreement, told :
“I’m almost of the opinion that I don’t care what path is chosen for bitcoin. I just want something to happen. Bitcoin’s been in this deadlock for two years. I’m a supporter of SegWit. I’m a supporter of a hard fork to a larger block size.”
There were also strong enthusiasts of the measure due to the perception that fees on the network are escalating with the bitcoin blockchain’s increasing use. Here, a variety of perspectives diverged, most of them stemming from disagreements on how economic costs of the network should function and who should pay those costs.
Garzik, for example, stressed the pain that he believes users are feeling, stating the proposal “actually addresses a problem facing the user community”.
He told :
“[Bitcoin] Core is refusing to do anything in the short term that will actually increase capacity. If you want to talk about price, talk about transaction fee price.”
Are network and startup needs the same?
Elsewhere, comments underscored a key divide in the argument, whether the bitcoin network should even adapt to the needs of startups.
Paul Puey, CEO and co-founder of wallet provider Airbitz, said he is in “full support” of the proposal due to the pain his firm has experienced of late, despite the fact that his startup had not signed the pledge at press time. As a wallet operator, its customers and the company itself have been feeling the strain of the higher transaction fees, and it’s due to an upgrade that they have no control over.
“All of those people who think this is okay, that bitcoin doesn’t support many transactions in volume. I think they’re horribly wrong,” Puey said. “I’m all for pushing forward something at this point.”
Others disagreed, with Blockstream’s Ben Gorlick stating that SegWit offers a clear benefit for transaction capacity.
“What is being used right now is an attempt at a compromise. They’re saying it as an excuse to fork. They’re saying, let’s take this thing that seems certain to everyone and they’re creating a false majority,” he stated.
Will the network fork?
Gorlick’s statements also hinted at another side effect of the proposal – the fact that action without broad agreement could risk splitting the bitcoin network in two.
The ‘contentious hard fork’ aspect, which could result in two chains if not everyone agrees, is partly what’s held back previous proposals so far. Some, such as Mow, think that this outcome could hold up this proposal as well.
Others say that it’s a risk worth taking.
“That is a risk. But the risk of bitcoin stagnating because everyone’s getting fed up with it is also a risk. The latter is becoming a much bigger problem in my opinion,” Voorhees said.
Lightning Network creator Joseph Poon said he isn’t supporting either side, but that from his past participation in negotiations, he believes the proposal puts the network on a path to a split that could result in two bitcoin blockchains.
Poon told :
“It looks like the way both sides are communicating, a fork is going to be inevitable. The real fight is going to be who gets to be called ‘bitcoin’.”
And, what will happen if it does? In a Consensus 2017 panel yesterday, BitPay CEO Stephen Pair said that as he thinks that the market should decide which blockchain is the one that would be called ‘bitcoin’. He suggested that BitPay will ultimately choose to support both bitcoins for a time, even if he thinks one will ultimately win out.
In remarks, HedgeCulture Group CEO Barry Silbert acknowledged that different users of the bitcoin network could go separate ways as a result of the deal, though he stated his belief that this outcome was increasingly likely before the meeting and proposal.
Can two chains survive?
Others said that the economics of the network won’t support such an outcome.
“There will be two bitcoins with two market prices, they will sum up to what they have before,” Storzc said. “One will be worth more than the other, and the one that is smaller won’t be enough for miners to run profitably.”
While the ethereum blockchain underwent a split, commentators remarked that the unique design of bitcoin – it takes longer for the difficulty to reset, for example – means that this might not happen the same way.
Even if miners with spare hardware were to support a fork, Peter Rizun, developer for the alternative bitcoin implementation Bitcoin Unlimited, expressed his doubts that two chains could continue.
“The technical problem of keeping the chain alive. Old miners will mine that, but they’ll never find the block,” he said. “I don’t think people realize how long the minority chain will struggle.”
Others continued the familiar refrain that this outcome is unlikely. Economics aside, there may be technical hold-ups to efforts to change bitcoin.
“I think the people [behind the agreement] pushing for the fork are not really the majority so they won’t do it,” said Ferdinando Ametrano, a professor at Politecnico di Milano.
Ametrano told :
“In the end, this might be for the better. Bitcoin might be good as it is right now. Core can’t get SegWit, and startups can’t get 2MB, that just reinforces the idea that bitcoin is really immutable.”