There’s no central authority or ultimate decision maker for the Bitcoin cryptocurrency. It is decentralized and nimble by design, which has helped attract a lot of enthusiastic users over the years. And that’s just the problem — there are a lot of Bitcoin users now. This has led to a disagreement among the upper echelons of Bitcoin developers as to how the core software needs to evolve. This spat has gotten so bad now that a group has released a new version of the core software on its own, threatening to splinter the community and destroy the value of Bitcoin.
The root cause of the disagreement is esoteric to say the least. The two groups disagree about how to handle Bitcoin’s block size. A “block” is simply a bundle of Bitcoin transactions that are assembled before processing into the blockchain, Bitcoin’s master record. The version of Bitcoin that was created in 2011 by the mysterious Satoshi Nakamoto has a maximum block size of 1MB, which is suitable for about 300,000 transactions per day. Bitcoin could soon need significantly more, though.
Everyone agrees that the block size will need to be raised, but not when or by how much. One camp among the Bitcoin elite argues that the block size needs to be increased dramatically and soon. Otherwise, the currency could implode as it runs out of capacity. Transactions would take hours to process, rendering it essentially useless. The other side warns that boosting the block size too quickly could discourage many of Bitcoin’s decentralized processing nodes from participating, thus concentrating power with fewer nodes and individual users.
With no one in charge of Bitcoin, it takes a long time to work out these sort of structural disagreements. However, the first group mentioned above is apparently not willing to wait. A cabal of leading developers including Mike Hearn and Gavin Andresen have released a new version of the Bitcoin software called Bitcoin XT. They want miners, groups that run nodes with massive processing power to create new Bitcoins, to run the updated version. If they can get 75% of blocks processed by Bitcoin XT, the block size will be increased to 8MB and will double every two years going forward. At that point, any node running the old Bitcoin Core software would have no choice but to upgrade or create a fork of the currency.
See? It’s complicated, but that hasn’t stopped Bitcoin enthusiasts from having strong opinionson the minutiae of block processing. Many see Bitcoin XT as a threat to the stability of the currency. The Bitcoin sub-Reddit has gone so far as to ban any mention of Bitcoin XT. Still 13% of nodes are already on the new XT version of the software. It might be a rough couple of months for Bitcoin as this all gets sorted out — the value of a Bitcoin dropped below $200 yesterday before recovering somewhat.