Could a User-Activated Soft Fork Solve Bitcoin’s Scalability Challenge?

How to address Bitcoin’s scalability issue has turned into a heated discussion in the Bitcoin community and no agreement has yet been reached. As it stands, it looks like no agreement will be achieved anytime soon, which is threatening bitcoin’s use as a payment network as the number of unconfirmed transactions is increasing, and micropayments are becoming increasingly difficult to process successfully.

The most talked about update to the Bitcoin blockchain that has been suggested to resolve this issue is called Segregated Witness (SegWit), which has been proposed by Bitcoin Core developers last year. Segregated Witness is a proposed soft fork of the Bitcoin protocol that aims to update the blockchain network to effectively double block size and provide further scaling solutions. However, for the SegWit soft fork to be implemented 95 percent of Bitcoin miners must agree to the update. So far, the mining community has not shown lots of support for SegWit, which has left the community looking for other potential scalability solutions.

Other proposed scalability solutions include the Lighting Network, Bitcoin Unlimited and the use of sidechains.

The “Super UASF”

Now, there is a new proposed solution that is flaring up the scalability debate once again. The proposed solution, referred to as “Super UASF” (Super User-Activated Soft Fork), was suggested on the Bitcoin development mailing list by a pseudo-anonymous developer with the name of ‘shaolinfry’.

Shaolinfry suggests that a user-activated soft fork could be the solution for Bitcoin scalability issues. He suggests that instead of miners determining the next upgrade to the Bitcoin blockchain that the economic players in the ecosystem, such as exchanges, wallet providers, merchants, and payment processors, determine a soft fork that will upgrade the blockchain to make it more scalable.

He believes that enough people in the Bitcoin community support the SegWit upgrade, which also allows for Lightning Network implementation. By having the majority of economic players in the community soft fork the blockchain to make the upgrade, miners would also be forced to make the upgrade if they still want to be able to get paid in bitcoin for mining blocks.

“The hash powers’ role is to select valid transactions and to extend the blockchain with valid blocks. Fully validating economic nodes ensure that blocks are valid. Nodes, therefore, define validity according to the software they run, but miners decide what already valid transactions get included in the [blockchain],” shaolinfry stated.

Currently, soft forks are enforced using hash power, i.e. by the miners, but with shaolinfry’s suggested USAF Bitcoin nodes would not rely on miners to activate an update to a new software. Instead, nodes could simply have an agreed activation date in the future for the soft fork to be executed and wouldn’t require miners’ consent.

There are two main risks associated with the proposed “Super-UASF”. Namely, to gather and coordinate the full support from centralized Bitcoin services that are running nodes and miners being willing to mine the old chain as opposed to upgrading to the new chain and, thereby, creating a hard fork that could lead to one or more new Bitcoin blockchains, which the community generally wants to avoid.

Naturally, shaolinfry’s new proposed scalability solution is causing a heated debate and faces pushback from miners. However, if rejection is the outcome decided by the Bitcoin mining community for SegWit, a UASF of this sort could potentially be implemented provided enough stakeholders in the ecosystem agree to it.