The price of Bitcoin surged late last week as it became clear that a proposal to expand the Bitcoin network's capacity had the support it needed to go into effect. Supporters of the proposal hope that it will put an end to a two-year-old feud that has been tearing the Bitcoin community apart.

The core dispute is over how to accommodate the payment network's growing popularity. A hard-coded limit in Bitcoin software—1 megabyte per blockchain block—prevents the network from processing more than about seven transactions per second. The network started to bump up against this limit last year, resulting in slow transactions and soaring transaction fees.

Some prominent figures in the Bitcoin community saw an easy fix: just increase that 1MB limit. But Bitcoin traditionalists argued that the limit was actually a feature, not a bug. Keeping blocks small ensures that anyone can afford the computing power required to participate in Bitcoin's consensus-based process for authenticating Bitcoin transactions, preventing a few big companies from gaining de facto control over the network.

This seemingly esoteric debate has nearly torn the Bitcoin community apart over the last two years. While Bitcoin insiders squabbled, competitors like Ethereum have soared in value and gained developer mindshare.

The new agreement aims to bridge the divide between the warring factions, bringing Bitcoin users faster processing times and lower transaction fees. The larger question is whether this deal will become the foundation for a new, more collaborative approach to expanding the Bitcoin network—or whether it will merely represent a temporary ceasefire in the Bitcoin community's increasingly bitter civil war.

Warring camps have different visions for Bitcoin’s future

At root, the debate over changing Bitcoin's block size is really a debate about what kind of payment network Bitcoin should become. Freelance writer and Bitcoin expert Kyle Torpey told me that many traditionalists see Bitcoin as akin to digital gold. Their top priority is preserving what makes Bitcoin unique: the decentralized architecture that keeps the network beyond the control of any company or government.

These traditionalists worry that a larger block size will raise the minimum amount of computing power required to fully participate in the Bitcoin network's peer-to-peer process for clearing transactions. To fully participate in this process, a computer needs to receive a copy of every transaction that has ever been made on the network, which can add up to gigabytes of data every month. If the block limit is raised, then running a Bitcoin node will become even more resource-intensive, potentially pricing out smaller players.

On the other side of the debate are people and companies who are focused on growing the Bitcoin network. For them, ideology is irrelevant and decentralization isn't necessarily a virtue.

"They just want something to happen. They don't care what specific proposal happens, they just want a capacity increase on the network," Torpey says.

In short, traditionalists are willing to sacrifice growth, if necessary, to preserve Bitcoin's decentralization. Pragmatists are willing to sacrifice decentralization, if necessary, to promote growth. Hence, each camp sees the other as a threat to their vision of Bitcoin's long-term evolution. That's a big reason the debate has dragged on for so long and become so bitter.

Of course, the traditionalists don't see themselves as anti-growth. They've devised a number of technical workarounds that they believe will—eventually—allow the network to process many more transactions without increasing Bitcoin's block size. The most mature of these proposals, called segregated witness (SegWit), moves the digital signatures that secure each transaction to a data structure that's stored outside of the blockchain, allowing more transactions to fit into a block.

Hardly anyone objects to SegWit in principle, but advocates struggled to achieve the consensus necessary to put it into practice. That's largely because SegWit has been championed primarily by traditionalist opponents of larger blocks and came to be seen as an alternative to raising the block size limit. Big-block advocates worry that accepting SegWit without an increase in the block size could help to cement the current 1MB block size limit as a fundamental part of Bitcoin's design. So for about two years, the Bitcoin community was stuck in a stalemate, with no major changes being made to accommodate Bitcoin's growth.

That stalemate seemed to end at a Bitcoin conference in New York in May, when a broad coalition of prominent individuals and companies in the Bitcoin world announced a compromise. Under the terms of the agreement, SegWit would be implemented first. Then three months later, Bitcoin's block size limit would double to 2MB.

The agreement averted a potential crisis for the Bitcoin world

Bitcoin's technical design gives unique influence to miners, the entities that update the shared transaction ledger called the blockchain. The network operates by consensus, with each miner's influence proportional to its computing power.

The Bitcoin community has also used a consensus-based process to approve changes to the Bitcoin protocol. The New York agreement stipulated that 80 percent of Bitcoin miners—measured by computing power—needed to signal their acceptance of the deal for it to go into effect.

For non-controversial changes, this system works well. But for controversial changes, it has become, well, controversial because it gives outsized influence to the miners. Other major stakeholders in the Bitcoin ecosystem, like merchants, bitcoin exchanges, and consumers, don't necessarily like the idea of miners having the final say over Bitcoin changes.

These concerns have been heightened in recent years as the Bitcoin mining world has become more professionalized and concentrated. In the early years, anyone could mine bitcoins on a home PC, giving mining a democratic character. But as the computational race for Bitcoins has intensified, ordinary users have been priced out of the market. Today, a handful of organizations called mining pools control a majority of the network's computing power. These organizations, many based in China, have little accountability to the rest of the Bitcoin economy.

This issue nearly came to a head in the debate over adopting SegWit. Code for implementing SegWit was developed last year and was scheduled to activate once 95 percent of miners signaled their acceptance of the change. But that didn't happen: for most of 2017, support for SegWit—measured by miner computing power—remained stuck below 50 percent.

Frustrated supporters of SegWit decided to try to force miners' hands. Their strategy: change their own software to refuse to accept blocks created by miners who don't support SegWit. This was a dangerous strategy, essentially playing chicken with the future of the Bitcoin network. If miners blinked, SegWit would go into effect with no ill effects. Miners' power could have been permanently diminished.

But if miners stood their ground, the Bitcoin network could have been split into two mutually incompatible networks. That could have resulted in chaos, with ordinary users unsure which network they should use. That could have shaken public confidence in Bitcoin and hurt everyone in the Bitcoin community.

Supporters of this strategy set an August 1 deadline for miners to accept SegWit. It's not clear who would have won this showdown, but the threat may have given miners a sense of urgency about accepting a compromise—which they did last week by signaling support for a deal that implements SegWit while also increasing the block size.

The real fight is over control of Bitcoin’s future

While the fight was officially over technical changes to Bitcoin's architecture, the deeper fight was about who has ultimate authority to make changes to the Bitcoin network. As we've seen, miners are one of the most powerful factions in the Bitcoin ecosystem. Another key force is the developers who write the Bitcoin software.

The reference Bitcoin client is maintained by a small group of programmers known as Bitcoin Core. This group doesn't have any formal authority over the Bitcoin software—it's an open source project anyone is free to fork—but as a practical matter the Bitcoin Core team has a lot of influence over the platform's evolution.

And in the last couple of years, key members of the Core team have become vocal supporters of the small-block side of Bitcoin's partisan divide. Core developers tend to be early adopters of the technology, and this means they buy into the decentralist ideology that motivated most early Bitcoin users. That has been frustrating to pragmatists, particularly well-funded Bitcoin startups who are focused on maximizing growth and profitability.

So one important element of the new Bitcoin compromise was the creation of a new Bitcoin client called BTC1. The new client was created by Jeff Garzik, a widely respected Bitcoin developer who was the driving force behind the compromise. Switching to the software—a fork of the standard client—provided miners with an easy way to comply with the terms of the agreement.

But Garzik has larger ambitions for BTC1. "I really want to create a community that’s more professional that doesn’t spin narratives and sling mud and that welcomes more developers," Garzik told Coindesk's Alyssa Hertig in a recent interview.

Garzik took pains to emphasize that he wasn't looking to pick a fight. "We want to work with Bitcoin Core, not against Core," he said. "Even if they disagree with us working with them, we want to work with them."

Still, the implications of the move are clear. Control over the standard Bitcoin client gives small-block purists on the Bitcoin Core team a lot of power over the network's evolution. If Garzik's project catches on and his software becomes widely adopted, it will dramatically reduce the power of the small-block faction.

In an ideal world, that would lead to a more professional, consensus-based process for managing the Bitcoin network's evolution. But there's a risk that the move will simply deepen the community's ideological schism.