For over a year, bitcoin has been embroiled in a circular debate about a code change that would allow the virtual currency to handle many more transactions. But this week finally saw a major shake-up that could change the course of bitcoin as we know it.
The issue at hand is the size of blocks of bitcoin data that get uploaded to its public ledger, the blockchain. These blocks are created by miners in the network that use powerful computers to solve math problems and receive a reward. The idea is that if blocks get too full—something that observers have noted is already happening—the network will slow to a crawl due to the congestion.
Scaling up the block size is essential for bitcoin's future, proponents argue, because merchants and customers won't use a system where their transactions take hours to be confirmed. Increasing the size of blocks would theoretically free up more space as more people start using bitcoin and keep everything running smoothly.
Opponents argue that there's a slew of reasons why this might not be desirable, mostly centred around the potential for disruption during a hard fork in the code, splitting the network.
Bitcoin Unlimited, an alternative to the popular Bitcoin Core client that has been at the epicenter of the block size debate, is taking a more brazen approach compared to the slow process of community deliberation. Bitcoin Unlimited allows miners to decide the size of blocks they create and the upper limit of blocks they're willing to process on their own and independent of any hard-coded limit. Forget about a smaller or bigger bitcoin—the aim with Unlimited is flexibility.
With Bitcoin Unlimited, miners still create normal-sized blocks on the regular bitcoin blockchain. But if enough miners mine larger blocks, and others signal that they're willing to process them, Unlimited will automatically start building on those larger blocks, effectively creating a new version of the bitcoin blockchain with no block size limits. It's a bold idea, since it effectively side-steps any larger discussion about the code change and lets miners decide for themselves.
"It is the opposite of disruptive"
"A block size increase through Bitcoin Unlimited should make things right, things would go back the way they were," Wouter Schut, a developer and Unlimited supporter, wrote me in an email. "It is the opposite of disruptive."
As opposed to Bitcoin Core, with Bitcoin Unlimited:
Miners manually decide the size of the blocks they create
Miners set the upper size limit of blocks they're willing to accept for processing
Miners set the acceptable "depth" of the chain; if the depth is five, then Unlimited will accept the sixth big block in that chain as valid
With Unlimited, miners create normal-sized blocks on the bitcoin blockchain but signal that they're willing to process larger blocks
If enough Unlimited miners signal they will process larger blocks, miners can start creating them
The danger for the bitcoin network here is that Unlimited miners will send large blocks through the regular bitcoin system without anybody being willing to process them, causing them to be lost. But Unlimited proponents believe that market dynamics will prevent people from making too much of a mess.
"You could visualise this as a group of people who try to cross the road together," Schut wrote. "All [Bitcoin Core] people will definitely not cross the road, but the [Bitcoin Unlimited] people can only safely cross the road if enough people join them. That's why they signal that they want to cross the road, and that they will follow the majority. If a safe majority is reached, someone will go and all Unlimited people will go."
Basically, because of a hard-coded limit, Bitcoin Core users can never create blocks larger than that limit. But with Unlimited, if enough people say to each other, "We will create and process larger blocks," then they can all safely do that together.
But it's not just a pipe dream, either—this week, mining pool ViaBTC decided to move all of its mining operations to Bitcoin Unlimited. ViaBTC controls roughly 10 percent of the entire bitcoin network's processing power. The bitcoin mining pool owned by virtual currency entrepreneur and luminary Roger Ver has also switched to Bitcoin Unlimited.
"We have mined a bunch of Bitcoin Unlimited blocks and intend to mine many, many more," Ver wrote me in an email.