I put the below thoughts into an email to some friends earlier this month but wanted to get something more polished onto Medium. Here you go:
On November 8, 2017 the planned Bitcoin hardfork known as “SegWit2x” was called off. The cancellation means that Bitcoin’s blockchain will stick with new Segregated Witness implementation and, for now, 1MB-sized blocks. I won’t get into the history or details of this hardfork, but for a deeper dive there’s an excellent article written by Laura Shin of Forbes here.What it boils down to is a disagreement over how Bitcoin should scale on a technical level to increase its throughput and accommodate more transactions. One group thinks that the block sizes should simply be increased while another group thinks that the blocks should instead be reformatted or have additional technology built on top of them. The cancellation of SegWit2x means that the latter group won.Overall I think this was the better outcome for the following reasons:
- I don’t agree that increasing the Bitcoin block size is the only/best way to scale.
- I think improving Bitcoin’s scaling should be done in more thoughtful and innovative ways like with (1) Segregated Witness: which rather than increasing the size of the blocks, reorganized them to make them more efficient or (2) the Lightening Network: which uses extensions off of the Bitcoin blockchain, which are called “side chains”, to process smaller transactions that are only later settled on the main Bitcoin blockchain after a large amount of transactions have piled up.
- Increasing the block size just seems quick and dirty to me and totally arbitrary. For instance, BCash/Bitcoin Cash, another hardfork that happened this summer increased the block size to 8MB while SegWit2x would have resulted in a block size of 2MB. By some accounts, for Bitcoin to ever achieve Visa- or Mastercard-like volume, its block size would need to be in the gigabytes. So where does the block size increase end?
- The SegWit portion of the SegWit2x upgrade already improved transaction throughput and effectively increased transaction capacity from 1MB to 4MB. So that should be sufficient for now.
- However, the one block size increase argument that I do sympathize with is that right now bitcoin has a window of opportunity to become so ingrained into global commerce that governmental cryptocurrencies (which are inevitable) will not be able to compete. So we need to do everything possible right now to scale. But as I mentioned above, I think at the moment that scaling can be done in better ways.
- I also think the Bitcoin core developers who were against Segwit2x know the most about Bitcoin on a technical level and truly have Bitcoin’s best interest in mind. It’s not purely idealogical-cryptoanarchist-libertarian-no compromise-BS. And apparently many of the original SegWit2x supporters agreed. And even Nick Szabo agreed, who of all living people is the most likely to be Satoshi Nakamoto (just read his blog).
Conclusion
My view right now is that if the other scaling methods (like the Lightning Network or other side chains upgrades) can be done in a reasonable amount of time, then that’s the best way to scale. I think its good that we’re giving those a chance. If sufficient progress hasn’t been made in a few months then I have no doubt that the block size increase option will again resurface. Maybe then it’ll be more of a necessity.
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