Last week, Mike Hearn – an influential Bitcoin developer and former Google engineer – renounced the crypto currency’s long-term viability.
“In my opinion, the Bitcoin technology is a failed experiment” said Hearn. Opponents of the project were quick to follow up with rumors that the virtual currency is dead. In reality, Bitcoin is not on the brink of extinction, but rather in the midst of an evolution.
Hearn isn’t implying that a $5-billion dollar global network will just disappear. His controversial statement was referring to the endless infighting within the BTC development team. The engineer is convinced that tensions can weaken users’ trust in the system and, as a result, drive bitcoin rates down permanently.
Though Hearn ‘s fears are largely baseless, the internal disagreement is very real. Financial and ideological principles have led all the major bitcoin influences to divide into two groups. On the one side, are most of the crypto currency’s core software developers, who’s main goal is keeping it decentralized. On the other – today’s largest exchanges, miners and influential start-ups, who say the technology has to change for the currency to survive.
It’s a debate that has been raging on for years and only became a real problem in 2014, when bitcoin value dropped from $950 to under $400 within 10 months. That may seem like a huge loss, until you consider that in 2013, the price of a bitcoin reached $100 for the first time ever. So, realistically speaking, even if the technology remains unchanged, the only consequence would be a lack of growth.
You don’t need to be a programmer to understand how BTC works. Just like any other currency, Bitcoins can be stored, created, and traded safely. Miners use computing power to solve highly complex equations, called blocks. Once they do, the solution appears on an open ledger, a.k.a. the blockchain, and miners receive some BTC as a reward. Each set of equations (each block) is actually a bitcoin transfer.
Basically, the sender pays a tiny fee for their transaction to be confirmed by miners. Meanwhile, the recipient makes sure they received their virtual money by checking for confirmation on the blockchain. Because bitcoin is decentralized, no one’s “in charge”. Anyone can generate, send or receive funds. Plus, every transaction receipt is recorded and stored publicly.
“Bitcoin Core” vs “Bitcoin Classic”
The actual problem at hand only arose due to bitcoin’s unexpected rise to popularity. What started as a small open-source project, has quickly become a widespread trend. The original creators of the project didn’t expect millions of people to be using the blockchain simultaneously. As such, the core software can’t handle the flow of transactions with the same speed as it used to. Waiting 10-15 minutes for a transaction to be confirmed isn’t an option for many users, which is the reason for bitcoin’s recently-stunned growth rate. Both sides of the debate have a solution in the works.
Exchanges, large-scale miners and BTC-based businesses want to change the size of blocks from 1 MB to 2, 4 or even 8 MB. This would decrease transaction processing time to mere seconds. The problem is, millions of small miners don’t have the hardware to mine 2MB blocks. That means the blockchain’s reliability will decrease, at least temporarily. Advocates propose launching an analogue to the blockchain, with the core software changed to adjust for increasing block size. They already attempted launching a beta version, named “Bitcoin Classic.”
The software developers argue that decentralization is essential. It’s what allows anyone in the world to mine BTC, which increases the blockchain’s security and guarantees that the digital currency will stay viable, even if some of the largest servers are compromised. The developers are so adamant about keeping the main software intact because the whole concept of the bitcoin based on an ideological principle.
They want the “world’s first decentralized currency” to stay decentralized, proposing to add server size manually. Their project (Bitcoin Core), requires a huge amount of computing power to be activated at peak times of the day, when the blockchain slows transactions down the most.