For bitcoin, November is a step into the unknown.
After years of debate on the best path forward, a new code proposal called Segwit2x is set to put the cryptocurrency – the world’s largest by value – to the test. And while it boasts significant support from miners and businesses, it remains unclear whether the new code will change bitcoins’ rules, or if another new cryptocurrency will be created (one already being branded bitcoin2x by some).
Quite simply, there’s never been a larger change to the platform, nor one that has been the subject of such criticism and scrutiny.
And it might not be all free money. As developers are keen to note, this is bleeding-edge science; in short, we’re in uncharted territory, and if past forks are any indication, decisions could lead to consequences – for users, investors and the market at large.
To help readers navigate the upcoming hard fork, CoinDesk is assembling our best content on the issue, allowing readers new and old to get up to speed in real-time.
So, what exactly is Segwit2x? And how does it work?
First thing’s first, it’s both a proposal that seeks to change bitcoin’s technology and a formal written agreement reached between certain parties interested in that change.
In CoinDesk’s official explainer, we’ll walk you through the basics: from how the protocol works to why Segwit2x represents something we haven’t quite seen in the world of blockchain.
Who supports who?
Now that you’re caught up, we can dive into the dissent.
As an open platform, bitcoin thrives on the “co-opetition” between various parties. But as the following articles show, this delicate balance has been thrown into discord.
An open-source protocol, bitcoin relies on a group of volunteer and startup-sponsored developers to fix bugs, propose changes and maintain operations.
As such, it may be particularly noteworthy that on the subject of Segwit2x, members of this group continue to maintain that they’re emphatically not involved. Back in May they protested widely, and as our recent reporting shows, not much has changed.
The large companies that operate the machinery required to solve bitcoin’s puzzles and approve its transactions, miners are a more evasive bunch.
Originally supportive of the move, that confidence may now be waning. Notable here is the decision-making role miners play, and how this indecision could contribute to November’s results.
The group that’s seemingly put the most weight behind the change, startups use the bitcoin protocol to offer services to customers. In this way, they’ve perhaps had the most direct relationship with the technology, paying its fees and building infrastructure on its code.
Startups remain optimistic changes to the blockchain will correct concerns around scalability, though as new statements show, they’re preparing for worst-case outcomes.
- Bloomberg – Bitcoin is Having a Civil War Right as it Enters a Critical Month
- Forbes – Will This Battle For The Soul Of Bitcoin Destroy It?
- CoinDesk – Why Are Miners Involved in Bitcoin Code Changes Anyway?
Of course, there’s a deep history at play here.
Discussions have gotten taken out of context and arguments have turned fiery, leading to some confusion in the market over who’s right and who’s wrong, if there’s even a direct answer there.
While both sides generally want the same thing – bitcoin to be used by more people – the sides argue whether that’s a near-term or longer-term problem.
Still totally lost? Well, you’re in good company…
- CoinDesk – Bitcoin’s Battle Over Segwit2x Has Begun
- CoinDesk – Bitcoin’s Broken Record: Why the Scaling Debate Isn’t Going Away
- CoinDesk – Calm Before the Fork? Segwit2x Goes Silent as Bitcoin Split Looms
- CoinDesk – BitPay Is Growing? How Suspicions Are Fueling Bitcoin’s Fork Debate
Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which helped organize the Segwit2x agreement.
Understanding Segwit2x: Why Bitcoin’s Next Fork Might Not Mean Free Money
Bitcoin is gearing up for what could be the biggest (and least understood) change to its software to date.
Often called simply a “digital currency,” bitcoin is best viewed as a protocol (a set of code) that delivers data (in this case bitcoins) in defined quantities (called blocks) that are then stored in a sequence (called a blockchain) on a distributed set of global computers. Bitcoin is decentralized – in that many people help make the network function, and in choosing to run its software, users all agree to abide by the same rules to keep it operational.
It’s these qualities that make the proposed change particularly divisive.
Called Segwit2x, the plan calls for a very specific fork (or a change to bitcoin’s rules), one that would make certain rules valid that weren’t valid before. Specifically, Segwit2x would change the size of the blocks passed regularly around the network and stored in the blockchain from 1 MB to 2 MB.
Some users think this is a good idea, others don’t.
But to begin, it’s important to note how this fork differs from others. Coming on the heels of the bitcoin cash and bitcoin gold forks, bitcoin users might be accustomed to certain outcomes – ones that might not be guaranteed in the case of Segwit2x.
With bitcoin cash and bitcoin gold, for example, bitcoin users could have paid little to no attention and it wouldn’t have impacted their transactions. If you held bitcoin on certain exchanges (or your own wallet), you received new cryptocurrency.
This smooth outcome, however, isn’t guaranteed with Segwit2x. Complicating matters is that in many ways, Segwit2x sounds (and is) similar to other bitcoin forks.
Like other recent forks, Segwit2x is:
- An alternative software – A modification of the bitcoin software run by network participants and that enforces the protocol rules. In this case, Segwit2x’s code is called BTC1.
- An attempt to increase the block size – Most forks focus on one specific rule of the network (block size), despite other possible optimizations that could lead to capacity boosts.
- A hard fork – Anyone whose software is not upgraded to the new rules will no longer be a part of the network.
It’s the differences, however, that stand out this time around.
First and foremost, whereas bitcoin cash developers appeared content to create a new blockchain (with new rules), Segwit2x’s goal is to keep all bitcoin’s existing users on one blockchain.
In this way, Segwit2x could have different outcomes.
- Bitcoin’s rules change. Most (or all) miners upgrade their software. The bitcoin blockchain continues to function but features larger blocks. Segwit2x’s rules become the rules of bitcoin.
- Two bitcoins are created. Only some miners upgrade their software. This creates two blockchains – a so-called “legacy” bitcoin, and a “Segwit2x” bitcoin, both with different rules and unique cryptocurrencies.
- Bitcoin’s rules do not change. No significant miners run the new software, and the network continues to run the current rules.
For or against?
However, it’s the second outcome that might be of most concern to users, given it appears possible.
The reason is that those who support the change, and those who do not, both appear to have support from different parts of the community. In short, while Segwit2x claims to have a super-majority of miners and exchanges, it can’t be said that 100% of network users support just one side.
Segwit2x draws the most support from:
- Miners – The network users who run hardware necessary to secure the blockchain and profit from bitcoin’s block rewards.
- Startups – The businesses that profit by providing a service to bitcoin users, allowing them to spend, store or purchase cryptocurrencies.
- Bitcoin should be digital money. It should compete with the U.S. dollar or other fiat currencies, and thus, a priority should be put on its use as a means of exchange.
- Competitors are gaining because of bitcoin’s inaction. They believe protocols other than bitcoin have continued to gain traction because they’re useful for payments; those protocols are currently capturing value that otherwise would have been bitcoin’s.
- Existing upgrades aren’t enough. They say the addition of code to the blockchain in August hasn’t brought about the capacity increases promised.
Other groups oppose this thinking.
- Developers – The voluntary group that maintains bitcoin’s code; this group includes a number of people that have arguably worked on the bitcoin protocol the longest.
- Node operators – The bitcoin users who store copies of the blockchain’s full transaction history (with bigger blocks, they will see rising storage costs).
- Bitcoin is a store of value, not a payment network. Though, they seem to think the latter is possible in the future as the technology advances.
- Segwit2x is risky. Should bitcoin break or fail to deliver transactions, they believe this could undermine the project as a whole.
- Segwit2x gives miners and business too much power. They argue that this effectively centralizes decision-making for a decentralized network, undermining bitcoin’s strongest value proposition.
How likely is a split?
For now, it’s perhaps too early to say for sure. But with that in mind, we do have some indications given the mechanics of how Segwit2x has been coded.
This is because:
- Segwit2x uses BIP 9 activation. This means that the rule change is governed by the percentage of miners running the new code.
- Miners mostly support Segwit2x. 1Hash, Bitfury, Bitmain, Bixin, BTC.com, BTCC, BTC.Top and ViaBTC all signed the original agreement, reached in May.
On paper, the plan boasts roughly 80% of the network’s miners as signatories, a group some believe is big enough to switch the majority the network over to the Segwit2x chain, and quickly (for fear of being left on an unprofitable software).
The reasoning here goes like this – the Segwit2x chain will quickly accumulate the most mining power, making the original bitcoin unprofitable (or unmanagable) to mine, and ensuring a total migration.
Yet, that’s not to say all these miners will eventually run the code.
While more complex, the reasons why include:
- Many back bitcoin cash. Bitcoin’s China-based community tends to be more invested in this bitcoin alternative, which already increases block size to 8 MB.
- Miners aren’t likely to act unilaterally. Signatories like ViaBTC and BTC.Top are mining pools that primarily sell software subscriptions to other miners. This means that they will likely give users the option to mine Segwit2x, but all of their users aren’t guaranteed to switch over.
- Some miners aren’t supporting. This includes F2pool (which governs 5.6 percent of the network) and Slushpool (responsible for 7.3 percent), both of whom have said (with varying degrees of certainty) that they won’t run the code.
Also of importance here will be the perceived value of a Segwit2x cryptocurrency.
Already, exchanges are experimenting by listing a version of the coin – one that lives only on their order books – as a way to test the value.
At press time, the value of the new version of bitcoin was estimated at just over $1,000, double the price of bitcoin cash ($450) and much higher than bitcoin gold ($130).
When will all this occur?
But while there remain many ifs, one thing we do know is the fork will occur on or around Nov. 16.
However, an exact date can’t be pinned down. This is because the change will be enacted at a specific block (number 494,784), at which time miners will be able to run the new software.
Still, those involved with the project are adamant that it is moving forward, with the project’s lead developer stating just last week that the updated code will be released based on the mid-November plan.
Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which helped organize the Segwit2x agreement.
Broken chalk image via Shutterstock
“The chain will fork, life will go on.”
Pseudonymous Bitcoin Core contributor BTCDrak views bitcoin’s upcoming Segwit2x hard fork – which has a chance of splitting bitcoin into two competing networks – with a bit of boredom.
And that blase tone seems to resonate with several of bitcoin’s most active developers, even those who were vocally unhappy when the Segwit2x proposal was first unveiled in May. But just a couple weeks away from the fork itself, it appears this outrage has turned steadily into annoyed acceptance.
In short, the contributors to bitcoin’s open-source code are optimistic for a simple reason: they don’t think Segwit2x will succeed in its attempt to become the main bitcoin blockchain.
Against the backdrop over the past few months, in which two hard forks led bitcoin to split into new assets with different developer teams, bitcoin’s long-time developers largely believe neither has come close to surpassing bitcoin by any significant metric.
And they don’t expect differently from Segwit2x.
While the group behind the effort has secured the support of a number of startups and mining pools, they argue there’s not much of a difference in the support as compared to previous forks. Though the next fork has yet to occur (it’s expected in mid-November), they already see Segwit2x as a blip in bitcoin’s history.
BTCDrak told CoinDesk:
“Miners will continue to mine bitcoin.”
No more compromise
And other developers feel similarly.
Blockstream CEO Adam Back and Bitcoin Core contributor Eric Lombrozo claim they tried to be diplomatic when the proposal was first unveiled in June, arguing they wanted to work with those supporting Segwit2x to come to a scaling agreement.
Back explained that he sincerely wanted to “build on the proposal,” although he advocated for a longer hard fork timeline and a specific hard fork mechanism.
Yet, both are less willing to compromise as the hard fork date inches closer.
Central to this sentiment is that, ultimately, developers think Segwit2x will fail because the way it’s implemented goes against how bitcoin is intended to work – that, and because it tries to push through a change that doesn’t have broad support.
As a result, developers contend that the group is using a centralized strategy to drive decision-making on a decentralized network.
“I was hopeful that the intent of this whole thing was to activate SegWit and then work together, as a community, on building consensus for further upgrades in the future,” Lombrozo said. “Instead, it turned into a coup.”
Back voiced similar concerns.
“It sets a very bad precedent that a small group of CEOs can get in a hotel room and make a pact that they then try to impose on bitcoin. That is no longer bitcoin.”
And with that, both developers believe the proposal will die by its own hand.
Tale of two bitcoins
But before it dies – or launches – crypto investors are trading on the possibilities.
Future versions of bitcoin (should bitcoin remain whole after the fork) and a new Segwit2x bitcoin (should the hard fork create a new coin) are trading on a handful of exchanges. And it seems developers believe this sheds light on events to come.
According to Back, the price of the Segwit2x coins – trading at about 14 percent of the price of bitcoin currently – is a sign of just how successful the cryptocurrency will be.
Back continues, pointing out that this is just about the same percentage that bitcoin cash coins were trading at before it launched via a hard fork of bitcoin in August.
“Investors will sell Segwit2x [coins] in droves,” Back claimed.
And he can say that because he’s offered to sell his own bitcoin for the new Segwit2x coin at a series of different swap rates, starting with a 1-to-1 rate.
“When [investors] didn’t buy that, I offered a 3-for-2 swap, and now I am offering a 2 -for-1 swap – a chance to double their [Segwit2x coin] holdings,” he said. “None of them bought. So, clearly, they do not have commitment, nor belief in what they are saying.”
Still, many Core developers believe the Segwit2x hard fork will result in another cryptocurrency.
And while many bitcoin users and investors see previous forks as a net positive (since they were effectively airdropped free money) Lombrozo hopes something else will come out of the process.
Summing up his feelings, Lombrozo displayed almost a sense of exhaustion.
He told CoinDesk:
“The whole thing is stupid, I just hope this serves as a good lesson for everyone on how not to do these things.”
It’s hard to find a franker bunch in the world of blockchain.
While the attitudes of more corporate miners may have created the impression the sector itself is shrouded in secrecy, the trope doesn’t exactly hold weight. And though it’s true those who run the computers that secure bitcoin can be evasive, they’re often also brash – a trait no doubt heightened by the fact that they effectively create value out of thin air.
But combine this penchant with linguistic and cultural gaps, and you have a recipe for mixed signals. Quite simply, it can be hard to tell where miners stand on issues related to the technology – even those in which they arguably play a leading role.
Not to mention, in an industry that changes fast, miner’s opinions can evolve just as quickly.
Jiang Zhuoer, founder of the world’s third-largest mining pool, BTC.Top, for example, isn’t shy about his opinion on bitcoin’s upcoming Segwit2x fork, the third this year following bitcoin cash and bitcoin gold.
But Zhuoer, whose pool serves 12.4 percent of the world’s bitcoin miners, appears to already be personally embracing alternatives, even after signing an agreement that might suggest his preference would be otherwise.
He told CoinDesk:
“To be honest, I do not care about bitcoin now, bitcoin cash is bitcoin. I earn by mining bitcoin, [selling it] and buying bitcoin cash. We mine for the most profit and buy bitcoin cash.”
Such statements can send conflicting signals. After all, many of the network’s code proposals effectively call on miners (a significant stake of the network’s node operators) to initiate contentious changes to protocol rules. And while this practice has encountered criticism, it nonetheless persists.
Indeed, one of the biggest open questions ahead of bitcoin’s upcoming Segwit2x hard fork is how many miners will actually stand by their agreement to run the software, and if they will do so unilaterally, dedicating all their hash power to the cause.
As of now, metrics are only relative.
While most miners who signed the agreement write the phrase “NYA” into the blocks they produce, doing so isn’t binding. Further, due to the semantics of how mining works, it remains to be seen whether enough of the network will move to change bitcoin’s rules so as to eliminate the chance of creating another cryptocurrency.
The pool problem
Personal opinion aside, Zhuoer is in the business of selling what amounts to software subscriptions – the BTC.Top pool coordinating global miners into a unit whereby any rewards collected by any participant are distributed equitably.
So, while he may have certain opinions, Zhuoer must also consider users, a fact he acknowledges.
He notes, for instance, BTC.Top’s own mining aside, the company plans to allow customers to “choose to mine any coin” or automatically switch between blockchains, turning their computing power to whatever coin is most lucrative, even after Segwit2x.
So, while his mind is made up, he is less clear on whether he believes a blockchain split is likely, or that his opinion is material on the outcome.
“I do not know. We should ask bitcoin users,” he said via WeChat. “They decide the result.”
Haipo Yang, CEO of ViaBTC, the fourth largest pool by mining power, agreed, indicating that his pool will only offer bitcoin mining on the original bitcoin chain to begin.
“We have not received user request to run 2x. If 2x survives and the users request it, we will support both. Let the users have a choice,” he told CoinDesk via WeChat.
If Zhuoer and Yang’s statements are any indication, then, it might not be best to view the proposed figures for how much hashing power will support Segwit2x as set in stone.
Also on the record for backing out of Segwit2x is bitcoin mining pool F2Pool, with its operator Wang Chun telling CoinDesk in August that he didn’t support the New York Agreement any longer. At press time, F2Pool is no longer “flagging” for the change in its blocks.
Still, as with Zhuoer’s operation, Chun operates a pool and it’s unclear whether his miners will be given the choice to run a version of the bitcoin software of their choosing. Chun did not respond to requests for comment.
Although, there is some precedent for slow adoption of new software. In the rollout of bitcoin cash, mining pools slowly opened up to the new software, with ViaBTC launching the option first and BTC.Top and Bitmain’s AntPool following suit soon after.
The new statements suggest a similar, staggered approach could be ahead.
But, as noted in our explainer, the difference here is that bitcoin cash wanted to leave the bitcoin blockchain behind, while Segwit2x is seeking to make its code “bitcoin’s code.”
As such, a choppy rollout could have unseen and possibly unsafe implications, creating a period where there are two chains, even though one may win out.
But not everyone agrees that one version is likely.
Jan Capek, CEO of the fifth largest mining pool Slush Pool, said he’ll be aligning behind Bitcoin Core developers in their rejection of the Segwit2x software.
In his view, the introduction of the Segwit2x software will definitely “lead to the creation of two bitcoins” – one of which runs on a blockchain with bitcoin’s current rules, and the other which features the rules proposed by Segwit2x supporters.
Despite the fact that businesses are backing the proposal, he sees Segwit2x as the latest in a trend that’s bound to bring diminishing returns.
“I would expect that every new fork will have a smaller impact than the previous one,” he said.
It’s also notable that smaller miners seemed more inclined to believe a split is more likely. Li Ang, who operates 1 petahash-worth of mining equipment for a smaller mining pool called Canoe Pool, called it “an event with a high possibility.”
Likewise, litecoin developer ‘PZ,’ an organizer of a meeting that led to litecoin miners passing a tech upgrade in April, said Segwit2x “will create a new currency.”
Finally, Jack Liao, the CEO of Lightning ASIC, the company behind the bitcoin gold hard fork, also forecasted that “four chains” with four unique cryptocurrencies will likely survive November.
Still, the wild card appears to be whether bitcoin cash has effectively shifted perception, as the blockchain boasts an 8 MB block size, considerably higher than the 2 MB block size Segwit2x will introduce.
With this in mind, it isn’t just Zuoer who noted he prefers bitcoin cash to Segwit2x. Roger Ver, CEO of Bitcoin.com, an educational website that offers a mining pool, said that while he’s “very bullish” on the fork in the short term, he’s “even more bullish” on bitcoin cash in the long run.
Inked in May, the New York Agreement predates the creation of bitcoin cash and so doesn’t appear to factor that cryptocurrency in. But industry observers believe the creation of the bitcoin cash protocol and the investments that have been made into it have shifted long-term strategies for miners.
Evoking the grand terms that sometimes best befit bitcoin power games, Steven Mosher, head of sales and marketing at mining chip maker Canaan, believes that, in the long-term, miners will support Segwit2x as a way to boost investment in bitcoin cash. Indeed, Mosher, whose company sells chips to miners big and small, said his customers largely have a preference for bitcoin cash, and he noted he sees them participating in the build-up of what he called a “long-term infrastructure play.”
All in all, he sees the Segwit2x fork as part of some behind-the-scenes power jockeying that will continue to pit miners against developers against businesses, perhaps in the self-interest necessitated all along by the nature of bitcoin’s distributed system.
“In the mining world, they believe value follows hashrate. More chains equals more hardware.”
You’ve probably heard the phrase “let the free market decide.”
It’s the concept that consumers and businesses determine the prices of services and products and whether they gain traction; an expression of the idea that the economic system should be one wherein supply and demand are unhindered from any government, authority or monopoly intervention.
More than an ideal, it’s also the very real lens by which bitcoin’s startups are looking at Segwit2x, a proposed change to the bitcoin software that’s just weeks away from being introduced to the network.
Some users, namely many Bitcoin Core developers (and the miners and businesses that ideologically support their work) don’t plan to go along with the changes, and so it seems more and more likely that the mid-November fork will lead to the creation of a new bitcoin cryptocurrency (yes, another one).
That said, the Segwit2x group has managed to secure two important blocks of supporters: miners and bitcoin businesses, and they continue to claim that these entities are broadly representative of users.
Those claiming to go along with the upgrades include mining pools (representing around 80 percent of bitcoin’s computing power, though the figure is a bit misleading) and many bitcoin companies, including two of the most popular consumer wallet providers – Blockchain and Coinbase.
Segwit2x opponents have tended to demonize the companies involved in Segwit2x, arguing they’re trying to “corporatize” or “take over” bitcoin in that the proposal tries to push through a bitcoin rule change that not all users agree with. But, as to be expected, many startups don’t see it that way.
Firstly, startups feel they’re merely advocating for a change that at least a subset of their users are behind. And secondly, startups don’t see themselves as all that powerful.
“The truth is this is a material event which may demonstrate where the ‘consensus’ center of gravity lies between miners and the development community; not all actors in the ecosystem are as influential as those two groups,” said Hugh Madden, CTO of bitcoin exchange ANX.
“Most users and businesses can’t do much beyond stating a view, stepping back and waiting for the dust to settle.”
Planning for a split
This view is also reflected in the policy updates bitcoin startups have released ahead of Segwit2x.
Again, although the goal of Segwit2x is to upgrade bitcoin, not split it – it’s a contentious proposal, and it’s looking quite possible that not all users will move over to the new blockchain.
With that in mind, bitcoin companies that support Segwit2x are gearing up for this possibility.
“There is a significant possibility that the planned hard fork will result in two bitcoin blockchains,” a post from bitcoin wallet provider Blockchain reads, outlining further how it will deal with user funds in the event of a split.
In the post, the startup explains it will follow the chain with the most accumulated difficulty (a metric meant to denote the number of computers securing the blockchain) and refer to that as “bitcoin.” If the cryptocurrency on the so-called “minority chain” has significant value, it will be made available for customers to hold or trade.
The post goes on to make clear that outgoing bitcoin transactions could be temporarily suspended for a period of time during any network instability that results from the hard fork.
Updates from other bitcoin companies outline similar steps to be taken in the event of a split.
Over email, Ripio founder and CEO Sebastian Serrano indicated much the same – that its wallet will follow the chain with “the most accumulated difficulty.”
And BitPay, the network’s largest transaction processor for payments, followed suit, announcing on Wednesday that it would “suspend payment acceptance, payment disbursement and debit card reloads approximately 24 hours prior to activation of Segwit2x.”
While startups seem on the same page about how to deal with a split, they have mixed views about whether a split will actually occur.
Yours co-founder Ryan X. Charles, an ardent support of Segwit2x believes Segwit2x will win out due to the commitment from miners and businesses.
But, other startups (and even some miners) don’t share the same outlook.
“As of now, it seems relatively unlikely that Segwit2x will emerge as the major token,” said Crypto Facilities co-founder and CEO Timo Schlaefer, citing prediction markets and node counts as the reason.
But that’s not a problem for all startups. Some see a Segwit2x-induced split as a way to grow their business amidst what could be a volatile time for the network. GoCoin founder Steve Beauregard, for instance, said the payment processor will “likely” accept tokens from both chains “provided the liquidity is satisfactory” for each.
Still other firms, even original signees of the Segwit2x agreement, plan to take a wait-and-see approach.
ANX’s Madden told CoinDesk:
“It is a mess. We will schedule a significant outage and monitor the situation carefully, before deciding which, if not both, chains will be supported.”
Free market devotees
But apart from pragmatism, ideology is also at play.
For the companies that signed the Segwit2x agreement, bitcoin should be considered a payment mechanism, one that would flourish with a larger block size capacity that would allow more transactions per block and lower fees for users.
“I am convinced that we need greater capacity to reach the next 100 million bitcoin users, and by the time the New York Agreement took place, most of us we were sure that Segwit2x was the best way to break the lock on the bitcoin project development,” Ripio’s Serrano said.
In this way, Shapeshift CEO Erik Voorhees, too, believes the agreement has already helped move the network forward, evoking the original intent to pass SegWit and increase the block size.
“We remain committed to our agreement to upgrade the bitcoin protocol to both SegWit and a 2 MB base block size. It is our opinion that SegWit activated because of this very agreement (after failing to achieve even 40 percent of mining support on its own), and we will honor our part to carry it to completion,” he said.
But, Voorhees is also attempting to be diplomatic to potential customers, suggesting – similarly to Beauregard – that businesses are keen to ensure that their decisions now don’t harm their future growth.
“We understand some people disagree with this approach, but this is an open, decentralized protocol, and we will work to help it move in the direction we believe to be in the best interest of bitcoin’s long-term development and growth,” he continued.
Still, in the end, many of the industry’s startups remain devout to the idea the market should decide.
“If the market prefers the status quo, we will accept that, and we’ll happily continue building along with consensus. If the market prefers the Segwit2x upgrade, our preferred outcome, again we’ll happily continue building along with consensus.”
Jameson Lopp is a software engineer at BitGo, creator of statoshi.info and founder of bitcoinsig.com.
In this guest feature, Lopp provides a deep dive into whether bitcoin can truly be understood as a technology, coming up with more questions than answers and delivering an impassioned appeal to open-mindedness and exploration.
When I first became interested in bitcoin, I found myself spending countless hours absorbing as much information about it as possible, trying to put all of the pieces together.
After years of learning, I now devote a fair amount of my time trying to help others understand bitcoin better. While many people have referred to me as a “bitcoin expert,” I still consider myself a student – I have yet to determine how deep the rabbit hole goes.
Andreas Antonopoulos had this to say about explaining (and thus understanding) bitcoin:
“I wrote a book that answers the question ‘What is Bitcoin?’ It’s 300 pages long, was obsolete the moment it was printed and has to be corrected and updated every three months just to keep up with changes.”
The multifaceted nature of bitcoin
With enough studying you can teach yourself how bitcoin currently works from a technical standpoint.
I maintain a list of educational resources that is sufficient to keep anyone busy for several months in pursuit of this goal. However, this approach of information ingestion will only expose the tip of the bitcoin iceberg.
Meltem Demirors posted a chart that’s spot on:
One challenge to understanding bitcoin is that it is a multifaceted cross-disciplinary system that is constantly evolving.
Ferdinando Ametrano put it well:
Ferdinando hits a key point that I’ll be delving into – bitcoin is not just a technology; it’s a technology that represents something even less tangible.
Bitcoin is a living protocol that emerges from a melting pot of ideas, philosophies, cultures and politics after they undergo trial by fire.
You can read the “Rise of the Cypherpunks” to learn how we came to be where we are today.
Satoshi’s understanding of bitcoin
“Writing a description for this thing for general audiences is bloody hard. There’s nothing to relate it to.” – Satoshi, July 5, 2010
Even Satoshi didn’t fully understand what he built with regard to bitcoin’s security model. He (or she) ended up fixing a multitude of bugs in the first few years of bitcoin’s existence.
After it was 18 months old, the rate of bug fixes had slowed down to the point that new vulnerabilities were categorized and documented. Let’s cover a few of the flaws that were fixed before bitcoin gained adopters.
In the first versions of bitcoin, anyone could spend anyone else’s coins:
“The opcode OP_RETURN originally just caused the script to end early instead of fail, so you could steal anyone’s bitcoins by simply using the scriptSig OP_TRUE OP_RETURN. It was also possible to put a pushdata opcode right at the end of a scriptSig to turn the entire scriptPubKey into a constant (which evaluates to true). Satoshi fixed these bugs by changing the behavior of OP_RETURN to cause the transaction to immediately fail and making it so that scriptSig and scriptPubKey are evaluated in two separate steps.”
Satoshi fixed a major consensus flaw by changing the ‘best chain’ logic from using the longest chain to using the chain with most proof-of-work. Technically, it could be argued that this was a hard fork, though it didn’t actually cause a chain fork because the longest chain at the time was also the one with the most proof-of-work.
Satoshi also set the block-size limit as protection against denial-of-service attacks. The block size was originally only implicitly limited by the network message size of 32MB.
There is also a bug in OP_CHECKMULTISIG that exists to this day. It’s mentioned in BIP-011:
“(OP_0 is required because of a bug in OP_CHECKMULTISIG; it pops one too many items off the execution stack, so a dummy value must be placed on the stack).”
– Gavin Andresen
And who could forget the value overflow bug that allowed someone to create 184 billion bitcoins!
In my quest to find more early Satoshi bugs that aren’t well-known, Greg Maxwell recalled a juicy one:
“In the early versions of bitcoin, any user could hard fork any released versions from any other versions! This design flaw showed he didn’t fully understand the required conditions for safe upgrades when it was first released, but his fix showed he did understand them later.
There was an opcode called OP_VER which pushed the verifying node’s version number onto the stack. (Satoshi always believed there should only be one piece of bitcoin node software.) The apparent purpose of that opcode was so that you could add features to script and have only the newer supporting versions see those new opcodes (there also was originally 16 bits of opcode space in the codebase.) But someone could have used this maliciously like “OP_VER 1234 IF FALSE RETURN ENDIF TRUE” to make version 1,234 reject a block mined by any other version. So, any user could make the system fork any any time! When he removed OP_VER, he added the OP_NOP, which is what makes modern style script soft forks possible. This change itself was a soft fork because the original versions ignored unknown opcodes.”
Researchers have also discovered some flaws in Satoshi’s white paper regarding the description of the system’s security.
Bitcoin clearly didn’t follow a ‘code is law’ view, but rather ‘Satoshi’s vision is law’ given that he made a number of tweaks in the first few years as it was discovered that the code didn’t fully align with the intent of the code creator.
I think this distinction is particularly relevant given that: a) Satoshi stopped contributing to bitcoin many years ago, and b) bitcoin has no formal specification.
Software is never finished
You can tell how little bitcoin is understood simply by the vast amount of research being done to analyze and improve upon it.
Google Scholar articles published mentioning Bitcoin:
— Jameson Lopp (@lopp) December 17, 2016
Satoshi once stated that the core design was set in stone and other implementations would be a menace to the network. People often take this quote (and others from Satoshi) and use it to fallaciously argue (via appeal to authority) that the bitcoin protocol must evolve in a specific way.
I pose to you that this was just another case where Satoshi was mistaken.
As we’ve seen, Satoshi actually had to make a lot of changes to bitcoin as early developers were exploring the code and discovering edge cases. There are also over half a dozen bitcoin client implementations running today that aren’t disrupting the network. We have even seen that a single implementation can be a menace to the network when machine-level differences can cause consensus failure, as happened in 2013 with the Berkeley DB chain fork.
Recall my earlier description of bitcoin being the result of a melting pot of contributions. This really took hold once Satoshi released his pet project that he had been working on in secret for several years.
The very first week that bitcoin launched, it also gained its first collaborator, Hal Finney. Hal was one of the few people who believed early on that bitcoin could actually work, which is clear from Satoshi’s original white paper release:
“[Hal Finney] allegedly showed a lot of flaws in the early code, which were fixed by reducing the opcodes. Hal Finney was the cypherpunks’ cypherpunk. He had a rare ability to both code superlatively, see the forest and the trees and describe what he saw. We all read his posts carefully, I don’t think there is anyone else who commanded such respect.”
– Ian Grigg
Finney released a number of his emails with Satoshi to the Wall Street Journal; they’re an interesting read. You can see Satoshi’s surprise as he manages to find several bugs that Satoshi had not anticipated even though he had “tested heavily”.
Unlike some systems (such as ethereum), bitcoin doesn’t have a formal specification. Even if bitcoin did have one, it wouldn’t be any easier or harder to make changes to the protocol from a technical standpoint, though it might from a social standpoint.
As Charlie Lee noted in response to Andresen’s suggested definition, it’s amorphous:
Definition of Bitcoin is like a definition of a word. It can morph and slowly change over time. No one controls it.
— Charlie Lee (@SatoshiLite) February 7, 2017
Nor is there an objective process by which changes are enacted:
While the Bitcoin protocol determines consensus objectively, the means of determining changes to the objective consensus are subjective.
— Jameson Lopp (@lopp) February 25, 2017
Paul Stzorc spoke about making objective decisions with bitcoin development, but it’s far from being realized.
His presentation was based upon this blog post.
I pose to you that bitcoin’s strength comes not from being the embodiment of some dogmatic beliefs of immutability, decentralization or other buzzwords, but from collaboration. The process of taking collaboration and using it to determine human consensus can be noisy and messy, but it’s the governance model within which we must work.
Sergej Kotliar penned this piece years ago describing why bitcoin has similarities to religion. As he notes, there is a bit of magic to the fact that the system works as a whole, because it relies upon non-technical components.
The well-aligned incentives of the system form an “invisible hand” that guides it.
Most bitcoin users probably don’t realize it, but they are subscribing to a sophisticated subjectivist ontology by participating in this collectively reinforced belief in the system of rules that comprises bitcoin.
To put it in simpler terms:
1) Public permissionless consensus systems let you use them w/o trusting any one individual. However, you must trust everyone in aggregate.
— Jameson Lopp (@lopp) June 26, 2016
While bitcoin can be described as trustless in the sense that a full node operator needs not trust any other participants on the network, at a meta level there is often some form of trust involved. For example, almost none of bitcoin’s users actually read and understand the software and the protocol itself.
They are trusting the developers to be careful not to introduce flaws.
It appears to me that the fact that few people have a deep understanding of bitcoin’s technical operations results in people with lesser understanding deciding which ‘experts’ to trust. As such, when experts clash, the crowd divides and takes sides behind the experts whose arguments they find most compelling.
Unfortunately, this means that sometimes politics are injected into the decision making process.
As Shaolin Fry recently noted, we should strive to avoid politicization of proposed protocol improvements. To be clear, this doesn’t mean ‘nobody in the ecosystem is motivated by political ideals’. Rather, it means that the direction of the system is not driven by politics in which one group of people forces their beliefs upon another.
For example, the concept of ‘voting’ generally means that a political process is occurring. We should instead strive for a system of permissionless innovation wherein participants can signal that they want to interact in certain ways, regardless of what other participants signal.
“We already have a lot of options for currencies which are (indirectly) controlled by political whim. Bitcoin should be sounder stuff than that. I would love to be able to say that the complete consensus rules on day one were involatile (‘set in stone’) but engineering reality makes that unrealistic. That dream for bitcoin died the day the first unambiguous and serious consensus flaw was found. The deactivation of buggy opcodes further weakened it, requiring more changes to be fully general again. But the world is seldom so conveniently black and white. Bitcoin can still deliver on the promise of being a less political money without being totally set in stone.”
– Greg Maxwell
Some bitcoin users achieve such a sufficient understanding of the protocol that they begin to envision potential improvements, at which point they try to change the system to better fit their perspective.
This is a ‘command and control’ mindset that is human nature; I myself have been guilty of making this same mistake in the past by trying to project my perspective onto bitcoin rather than ingesting the perspectives of the community.
There are far more considerations that go into debates about bitcoin’s evolution than just the technical aspects of how changes would affect the network.
Ryan X Charles covered the high-level philosophies of the two most popular viewpoints in the scaling debates. Much of the contention in these debates comes from: a) different priorities and b) different beliefs in the use cases for bitcoin.
Unfortunately, a significant portion of participants in these debates have taken their perspectives and developed them to the point of dogmatic belief, which makes it nearly impossible to engage in intellectual discourse.
Dogma: “Doing X is an attack on Bitcoin!”
Discourse: “I disagree with doing X because my vision for Bitcoin is Y.”
— Jameson Lopp (@lopp) February 28, 2017
One reason I believe that it is easy for people to project their perspective upon bitcoin is due to its lack of specification and thus lack of clear objectives.
For example, Satoshi described bitcoin as a ‘peer-to-peer electronic cash system’. But even this simple description can easily be interpreted in many ways. ‘Peer-to-peer’ provides no context around how many peers there should be; ‘cash’ provides no context around what the speed or cost of transactions should be.
Much as you can find a variety of perspectives and interpretations of the US Constitution or the Bible or the Quran, so can the writings of Satoshi be interpreted and debated.
The projection of individual perspectives onto bitcoin has led to the same sort of fracturing we can observe in political, philosophical, and religious systems. A group starts out on mostly the same page, but then an issue arises about which the group can not form a consensus.
The individuals begin to polarize their perspectives and support actions that foster tribalism. Party lines are drawn, litmus tests are applied to newcomers, dissenting speech is suppressed, propaganda is perpetuated, communications break down, and echo chambers are formed.
As a result, today, bitcoin debates often devolve into fallacious assertions and name calling, where one party considers the other party to be either ignorant or malicious. This is unfortunate because people often end up talking past each other under the assumption that they are right and the other party is wrong.
It’s troubling to see the ossification of perspectives into dogmatic beliefs that degrade the quality of discourse in the community.
I pose to you that there is no single ‘correct’ approach to viewing bitcoin, but rather a multitude of perspectives. The diversity of perspectives and use cases was the topic of one of the first articles I ever wrote about bitcoin.
I’m not saying that you have to agree with rhetoric propagated by people with conflicting perspectives of what bitcoin should be. I will suggest, however, that you should recognize it as such – not as a malicious attack that you must defend against with a direct counterattack.
If a debate is becoming too heated and discourse is breaking down, you can always disengage.
Keep in mind that all humans fall prey to biases; we can’t avoid being affected by them, but we can consciously choose how we respond to other biased people. It may also help to remember that bitcoin doesn’t need you to defend it – you defend your own perspective of bitcoin by choosing which software to run and by choosing the system in which you store your money.
The Tao of bitcoin
Andreas once spoke about the “noisy” scaling debate.
While it can be unpleasant, we should remember that it is the result of a feature rather than of a flaw in bitcoin.
Bitcoin ecosystem participants should be humble when discussing it rather than confident that our understanding of the system is superior to that of others participating in a discussion. I, for one, have found my conversations to be more productive after making this realization.
I’ve also wasted a lot less time by avoiding conversations that were clearly going to be unproductive due to the dogmatic views expressed by the other party.
You can achieve the ‘Tao of Bitcoin’ by accepting that bitcoin is on its own path that is outside of your control. Don’t be frustrated if your vision of bitcoin does not align with that of other users. Bitcoin will naturally converge upon the least common denominator of human consensus – that which is beneficial (or at least not harmful) to the greatest subset of participants.
The Tao of Bitcoin is not understanding bitcoin, it is accepting that bitcoin is what it is.
Thanks for playing, everybody – you’re all correct! Everyone who has a vested interest can /try/ to influence Bitcoin. None can control it. pic.twitter.com/chfbUtZAZi
— Jameson Lopp (@lopp) March 2, 2017
Bitcoin breaks bad
First step to understanding Bitcoin: admitting you don’t understand Bitcoin.
Final step: realizing that “understanding” is a moving target.
— Jameson Lopp (@lopp) February 8, 2017
I’ve attempted to present sufficient evidence that bitcoin defies conventional educational approaches and even defies self-professed authorities who claim to understand it. The result can be bewildering, but there is no need for negativity.
We should remain hopeful that bitcoin will continue to ‘fail to scale’ just like the internet has.
Jimmy Song also made a great case for optimism in the face of deadlock and despair.
“In short, bitcoin is maturing and the market is starting to define what bitcoin is going to be. I’m sure there are people on both sides of the debate that won’t like what it’s going to become, but that’s what you get with a decentralized currency.”
I will continue my quest to consume as much information as possible about this new ecosystem, but have long since given up the goal of understanding bitcoin.
The faster I run toward the finish line, the further it moves away from me. While some people in this space are more confident than others about its future direction, the truth is that we’re blazing new trails and learning as we move forward.
You don’t understand bitcoin, and that’s OK – neither does anyone else.
You can be any of these things…
* whale investor
* early adopter
* C-level exec
… and still not understand Bitcoin.
— Jameson Lopp (@lopp) February 8, 2017
Author’s note: Thanks to the many people with a wide variety of perspectives who provided feedback on this article.