Bitcoin SegWit2x Cancelled

From ancient grudge break to new mutiny, Where civil blood makes civil hands unclean – William Shakespeare.

The Bitcoin community has been at odds for a few years over something seemingly quite simple, the block size. What is the block size and why is it so important? The Blockchain or distributed public ledger which is an encrypted record of all transactions in the Bitcoin network is made up of a chain of immutable blocks. A block is a sequence of bytes or bits containing information regarding transactions. The amount of data which can be stored in a single block is the block size.

Each block on Bitcoin's blockchain is able to hold 1 MB(Megabyte) of data limiting the number of transactions which can be included in a block. The block size wasn't always limited. To begin with, there was no block size at all. The 1 MB limit was implemented to improve security as limitless block size or even higher block size left the blockchain vulnerable to DOS(Denial of Service) attacks. But as the Bitcoin network grew, the 1 MB block size was proving a deterrent due to increasing transaction fees and slower processing of transactions.

While there is unqualified consensus over the need to address Bitcoin network's scalability, there's contention aplenty over the most suitable resolution.

Bitcoin Core, the reference client of Bitcoin, proposed SegWit(Segregated Witness) in the New York Agreement. SegWit would split the transaction into two segments, reducing the signature or witness segment's data footprint on the block four-fold. This was a backward compatible soft fork, meaning that the existing protocol would not change, therefore not requiring significant software upgrade.

The other proposal, SegWit2X, supported by some companies, required a hard fork to the blockchain increasing the block size to 2 MB and leading to a new iteration of the blockchain. Not to mention those who were opposed to SegWit altogether, arguing that it was a futile effort without significant increase in the block size, and ended up implementing a hard fork on August 1 giving birth to another forked blockchain, Bitcoin Cash(BCH).

Which of these proposals is the answer? It's probably not SegWit2X because the lead developer, Mike Belshe, released a statement on Wednesday that the proposed hard fork has been suspended due to lack of sufficient consensus

‘Although we strongly believe in the need for a larger block size, there is something we believe is even more important: keeping the community together. Unfortunately, it is clear that we have not built sufficient consensus for a clean blocksize upgrade at this time. Continuing on the current path could divide the community and be a setback to Bitcoin’s growth. This was never the goal of Segwit2x.' – Mike Belshe, CEO, BitGo, Inc.

Diving the community may not be the goal for any vested party but it is what the unresolved disputes and uncertainty over the future viability of Bitcoin has done. Furthermore, given that Bitcoin as a currency is still a very novel idea much of the world is loath to subscribe to, uncertainty and frequent bickering damages reputation of the community as a whole, only serving to further deter broader faith.

If a larger block size alone were without significant demerits, it would be a straightforward answer gleaning unanimous consensus within the community. Although proponents of Bitcoin Cash would have you believe that 8 MB block size is the panacea for all of Bitcoin's scaling ailments, you would be naive to believe so.

  • Larger blocks would make operation of full nodes highly expensive in terms of both cost and computing resources
  • As a consequence, lesser full nodes could lead to centralized entities with hashing power which goes against the grain of Bitcoin’s central ideology, diminishing its value
  • Slower propagation speed, increasing likelihood of double-spend and blockchain reorganization
  • Most importantly though, no amount of block size would be sufficient to support on-chain transactions were Bitcoin to be widely adopted, meaning off-chain transactions rather than increased block size may be the best solution

It is unhealthy that unresolved disputes are allowed to linger and furtively fester within a community. Despite much debate, dispute, haranguing, forks and cancellations, there is no viable long-term antidote to Bitcoin's growing pains as of yet. The definitive answer may only be found in a radical revamp of the consensus protocol.

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