There’s so much interesting work going on in the blockchain space right now that I initially didn’t want to share my 2 cents about the latest Bitcoin drama. The blocksize debate has been going on for several years now and for those who have been paying attention for a while, it seems tired. It’s easy to think that Bitcoin may have lost its opportunity and the Ethereum ship is now sailing. Look no further than the ether (ETH) price performance so far this year compared to bitcoin (ETH is up 510.5% and BTC is down 5.5% in 2017 as of 3/25/17).
I’m a bitcoin holder though and while easy to sit idle, it’s important that the voices of more holders are heard. I’m a bitcoin holder for the following reasons:
Bitcoin has the best collection of crypto minds in the world. My core belief is that developers are the most important aspect of any blockchain project and folks like Pieter Wuielle, Greg Maxwell, Matt Corallo and Adam Back are the best in the business.
Bitcoin has a first mover advantage, brand recognition as digital money and the strongest network effect. Bitcoin has had a 5+ year head start in terms of building brand recognition and network effects. Its immutable blockchain has built a strong global brand and attracted users and entrepreneurs around the world.
Bitcoin has the most robust security and governance structure of any p2p electronic cash system in the world. It’s very difficult to change Bitcoin by design. Satoshi disappeared years ago and there’s no benevolant dictator in Bitcoin. It’s not susceptible to political influence from any one group or individual. The culture is security focused and in terms of both hashing power and governance structure, the Bitcoin blockchain is the most anti-fragile blockchain that exists.
If you disagree with any of these points, you may want to stop reading. You probably are not interested in Bitcoin.
via http://www.cryptograffiti.com/
Where are we now?
A new group of developers has built a version of the software called Bitcoin Unlimited as an alternative to the existing Bitcoin Core and a number of large miners like Bitmain are supporting it. The new version has bigger blocks, which solves the transaction bottleneck problem Bitcoin is facing today. This new faction of Bitcoin Unlimited supporters has spurred a lot of recent discussion about a contentious hard fork, a price selloff of ~28% in a week and general uncertainty about the future of Bitcoin. The uncertainty is fair; steps must be taken to put Bitcoin back on track and it could could get much worse before it gets better.
Addressing false narratives
There are two false narratives floating around regarding the state of Bitcoin that are important to dissect though. Everyone has their biases (which is where false narratives typically come from), but false narratives aren’t helpful in pushing Bitcoin forward (which is what all true Bitcoin holders want).
False narrative #1: The root of the issue is a disagreement about what Bitcoin is (digital gold or a scalable payment network). Both groups want Bitcoin to be more than digital gold, the question is how to get there and who has the power in getting there. Bitcoin Unlimited is committed to a version of software that maximizes on-chain mining fees by increasing the block size. Bitcoin Core wants to get beyond digital gold by keeping blocks relatively small and creating a level 2 system (that enables fast, cheap small payments). This level 2 system may not be as lucrative for miners. Both sides want Bitcoin to be more than digital gold but they disagree about the best way to get there and who has the power in getting there.
False narrative #2: A contentious hard fork in Bitcoin is guaranteed. This could happen, but to state it matter of factly is irresponsible. A hard fork would cost miners a lot of money in the short term. Perhaps they are willing to forgo the short-term profits for the long term, but that is far from a given. And selling you bitcoin holdings prior to this presumed contentious hard fork does not do anything productive if you believe in the long-term promise of Bitcoin.
A compromise is best for users
I urge bitcoin miners, developers and holders to recognize these false narratives and strongly support a compromise between developers and miners. A contentious hard fork that gives more power to one side or another would not kill Bitcoin by a long shot, but it could set it back significantly.
Satoshi was thoughtful about the game theory behind Bitcoin and designed the system in a way that aligns all parties to act in the best interest of the group. Perhaps Satoshi didn’t factor in egos and emotions completely when he built the system and that could be the downfall of Bitcoin. But I think cooler heads will prevail, one way or another.
I’m not in the weeds every day and this is of course much easier said than done, but as a bitcoin holder it seems the best path forward would be a compromise that allows:
1.) Large miners to be satisfied with transaction fees for the foreseeable future and comfortable that their needs are heard from
Core
2.) Core developers to be confident that miners will approve changes like Segwit that enable innovation on top of Bitcoin
3.) Bitcoin to maintain a unified front to the world
Ultimately, Bitcoin is about allowing more people in the world to connect to the global economy. If it was about getting rich or seeking fame, Satoshi would have sold his coins and revealed an identity years ago. Either way, I think Bitcoin will do its job and connect millions of people to the global economy. A compromise is one way to get there and a hard fork is another. Maybe a hard fork is necessary, but I’m hopeful developers and miners will put their egos aside to recognize the best path for everyone.
Disclosure: My digital asset portfolio can be found here.
About me: I run The Control and am an investor at Runa Capital, an early stage venture fund. Previously, I worked on business development and marketing at Coinbase. Follow me on Twitter, signup for our newsletter, and support us by upvoting.