Background

The following is my attempt to present the state of Bitcoin without taking sides on the contentious issues within the community.

Back in June 2015, something fishy began happening on the network: payments stopped going through. First in the name of “testing the network” and later unannounced, someone was submitting spam transactions. The spammer sent thousands of transactions back-and-forth to Bitcoin wallets he owned.

To counteract this spam, individuals and companies were forced to pay priority fees to get their transactions pushed through the network. This solution didn’t always work, though, because the network had reached its limitations and could not process additional payments.

The attack eventually ended, but the Bitcoin community has been dealing with this issue ever since.

There are a few important takeaways from this event:

Bitcoin faces some serious issues if a single person/group can take down the network.

The Bitcoin network has reached its upper limitation, even if it was under unnatural stress.

A fee market will evolve in a crippled Bitcoin network, making it as expensive as existing financial tools.

A Fractured Response

Soon after, it was clear that those who wanted to solve Bitcoin’s existing issues were split into two camps:

those who wanted to increase the network’s capacity, and

those who wanted to find an alternative solution.

So that you can properly understand the perspective of each of these groups, and form your own opinion, I will outline the major tenants of each.

Network Capacity Increase Proponents

Those who argued for a network capacity increase reasoned that the action would immediately relieve the threat of future attacks and prevent growing pains as Bitcoin naturally reached network limits. Their opinion was that an effective solution shouldn’t just solve current issues but would scale to meet future needs. As such they entertained many different network scaling schedules ranging in length from a few years to the duration of Bitcoin’s life time.

Alternative Solution Proponents

Opponents to the network capacity increase cited the fact that any such action would effectively decentralize Bitcoin, violating a core principle of the currency.

One of the many touted innovations of Bitcoin is that it doesn’t rely on a centralized authority (such as a bank) to settle payments. Instead, individuals run nodes (think servers to the internet) and also fulfill the traditional role of the banker, verifying authenticity and information for each transaction.

This group reasoned that individuals would not be able to afford the increasing hardware & electricity costs and may not have access to internet fast enough to keep up with the network.

An Argument Against Each Side

One of the most irresponsible conclusions to draw about network scaling proponents is that they shared a common opinion on how the network should scale. For reference, I’ll list a few of the more popular proposals:

BIP 101 — The network limit should increase to 8x its current limit in 6 months and double every two years for 20 years thereafter.

BIP 102 — The network limit should double one time at an agreed upon (short term) date.

BIP 103 — The network limit should begin increasing by 17.7% per year in 1.5 years to mirror the growth rate of internet broadband limitations.

Not without equal blame, those countering the network limitation increase failed to provide viable immediate alternatives to their opponents’ proposals. Many of the alternative proposals put forth (ie. Lightning Network and more recently SegWit) called for sweeping changes far outside the scope of the problem Bitcoin was currently facing and would take months to implement assuming the best of circumstances.

Consensus and Inaction

Following the initial division within Bitcoin, there were numerous calls for “consensus.” Bitcoin enthusiasts stressed that any decision made on the network scaling issue had to be a unified decision.

Some called for a consensus among developers — that further discussions would clearly yield the best solution. Others pointed out that the final decision was really made by the individuals who ran the decentralized network.

In the meantime, the solutions put forward by each party were entertained and came in and out of favor without any final decision.

BitcoinXT

It was mid-August and no agreement had been reached, when the BitcoinXT solution backing the 8x network limit increase proposal was released. While BitcoinXT was the first coded answer to the network scaling issue, many still saw it as a threat to split Bitcoin in two.

Unlike most of the code changes between any given versions of Bitcoin, the network limitation increase implemented in BitcoinXT could not be run by older versions. It’s very important to note, though that until January 2016 the original Bitcoin code and BitcoinXT could be run in parallel as the network changes in XT didn’t take effect until then.

The simplified situation was that if BitcoinXT could replace the code on 75% of the network by the January deadline, it would become the current standard for Bitcoin. This replacement would occur as individuals running the network decided to switch to BitcoinXT or keep their existing Bitcoin node.

A Toxic Environment

Around this time, another issue came into play. Social media moderator for Bitcoin discussions on BitcoinTalk.org and Reddit.com, Theymos, began removing comments regarding “contentious hardforks” and “altcoins.” Ultimately, Theymos stated that because BitcoinXT was not backwards-compatible with existing Bitcoin code it was not Bitcoin and should not be discussed on the forums he moderated.

As a direct result of what BitcoinXT supporters saw as censorship, the /r/bitcoin_uncensored, /r/bitcoinxt, and /r/btc subreddits (forums) were created. In the weeks and months since changes have occurred, trolling and witch hunts have become common place on subreddits for both sides of the network scaling issue.

The current situation on Bitcoin forums isn’t conductive to discussion and dialog. It is currently impossible to rectify the earlier issues which led Bitcoin to this point because there is no unifying forum in which to do so.