If you have even a casual interest in Bitcoin, then by now you probably know that on Friday developer Mike Hearn publicly declared the Bitcoin project a failure. And if you’ve followed Bitcoin over the years, then you also know this isn’t the first time the mourning bells are tolling. According to the scorekeepers, the count is now up to 89.
This one, however, is different from the rest. The person throwing dirt over the coffin last week was not an outsider, as has most often been the case. It was not some mainstream economist who just “doesn’t get it.” It was not a misinformed journalist fishing for clicks. It was Mike Hearn, a former Google developer, the guy who wrote the first java implementation of Bitcoin. He’s a regular presence at conferences and a tireless educator of Bitcoin novices. And his most passionate vituperations were aimed at the people he is now leaving behind. Bitcoin failed, he wrote, “because the community has failed.”
Regardless of what you think about Mike Hearn and his assessment of Bitcoin’s woes, his words must be taken seriously, if only because there are plenty of other people out there who take his words seriously—enough, in fact, to inspire a 15 percent fall in the market price of Bitcoin on the day he published his diatribe.
The bulk of Hearn’s condemnation comes down to this: Bitcoin has a technical problem. It doesn’t scale and it’s finally reaching a level of adoption where this will soon cause major disruptions in the speed and reliability of Bitcoin transactions. Some, including Hearn, say the technology has actually already reached the breaking point.
Solutions have been proposed. But the developers responsible for making the decisions about what gets incorporated into the Bitcoin Core source code, who were at first slow even to proceed with a discussion, are now mired in stalemate over which option is best.
In order to push the issue, Hearn and Gavin Andresen, who until recently was one of the senior members of the core development team, did the unthinkable. They splintered off, concocted their own update to the Bitcoin software—Bitcoin XT—and presented it to the world as an alternative. It was a risky gamble, because if it were only partially implemented would have split Bitcoin into two competing currencies. In the end it failed to garner enough support from Bitcoin miners—the sector of the community that was handed the go button—to take effect.
The proposal, although ultimately unsuccessful, at least raised the stakes for everyone involved. Two conferences were hastily organized. The first one, held in Montreal last September, provided a forum to discuss Bitcoin’s technical growing pains. The second one took place three months later in Hong Kong and addressed the various possible solutions.
Now it’s January, the core developers have still not added a permanent fix to the source code and, according to Hearn, they never will. In his post, Hearn comes up with some pretty nefarious reasons for the hold-up. He accuses those in charge of willfully denying the severity of the situation, employing stall tactics, censoring community debate, and ultimately steering technical development in a direction that is most likely to increase the profit potential of various side projects. In other words, Hearn is leaving, in large part, because he thinks the people who run Bitcoin Core don’t actually want Bitcoin to reach its potential—that they are negotiating in bad faith.
Certainly it’s a mess. This whole thing has turned way uglier than it had to. And Hearn is right that if the core developers are surreptitiously restraining technical development then there’s reason to lose hope. But let’s assume the opposite for a moment—that everyone involved wants to see Bitcoin thrive and grow. Let’s assume that Zooko Wilcox, one of the most staid and good-natured personalities in the Bitcoin realm, was correct when he put up this tweet on Saturday:
If that’s true, then why all the acrimony? I was present in both Montreal and Hong Kong. I’ve spoken with many of the people who are now seemingly at war with one another, and I’ve loitered around the impromptu cigarette break venting sessions long enough to understand that much of what we have here is a failure to communicate. The rest of the problem is caused by a paralyzing fear of breaking the system.
Allow me to play family therapist for a second and explain the problems I’m seeing from my modestly technical vantage point.
The debate over how to proceed has focused on a series of technical proposals, most of which tinker in some way with Bitcoin’s block size. But in the chaos of this crisis climate, a deeper, more philosophical conflict is being neglected.
If you don’t know what the block size is: It’s a hard limit on the amount of data that can be added to the blockchain (Bitcoin’s distributed database) with each update. [This video should help.] As such, it also sets a limit on how many transactions Bitcoin miners can process every 10 minutes, which is the approximate rate at which the Bitcoin blockchain gets updated. Right now, the block size is set to 1 megabyte. Allowing bigger blocks is the most obvious way to immediately increase the transaction capacity of the Bitcoin network.
However, the proposals for changing the block size vary not only in the size of the increase. They experiment as well with different modes of determining the size in the future. The limit, which serves as a constant in the code today could be made dynamic by tying it to fluctuations in transaction fees, to miner preference, or to historical measurements of the actual block size. Or it could just keep going up by incremental steps that everyone agrees on today.
But, really, you don’t even need to know what all the proposals are. All you need to know is that the block size parameter, which Hearn has glibly characterized as an arbitrary number, is also a lever that is tied to every other lever in the network.
Each patch presents a slightly different set of tradeoffs. Here’s an incomplete list of the potential inadvertent repercussions of the various proposals (including the option of changing nothing).
- Reshaping the market forces that ultimately set the price of the transaction fees users pay to miners.
- Changing the amount of decentralization in Bitcoin mining.
- Changing the level of participation by full nodes, who provide crucial security checks for the network.
When balanced properly, these are the aspects of Bitcoin that make it special, that distinguish it from the currency options we have had in the past. They are fundamental to the network’s ability to provide a censorship-resistant, permissionless, unfederated payment platform.
The scaling issue is contentious because no one has found a solution that allows Bitcoin adoption to grow without threatening to weaken, completely eliminate, or at the very least, change these core features of the network. Before settling on one solution, it seems that all parties need to discuss openly and honestly what they value most about Bitcoin. And that is not the discussion that is taking place.
This became most obvious to me in Hong Kong. A few people—really important people like Roger Ver, whose financial investments and energetic evangelism have been critical to Bitcoin’s early adoption—were milling about outside the conference talking about proposals to increase the block size limit.
Among them was Paul Sztorc, the founder of Truthcoin. He kept trying to ask a rhetorical question: how can you muster consensus about the best way to increase the block size when there’s not yet any agreement about what purpose the block size serves? It took him at least five tries to get his point across, simply because every time he referred to one of the proposals, someone else in the conversation ran the car off the road to talk about the faults and merits of that specific proposal.
Everyone wants to get to the “will it work right” part of the conversation. But they’re skipping the whole conversation about what Bitcoin looks like when it does work.
And the “will it work right” question itself is fraught with anxiety, because, honestly, no one knows the answer. Bitcoin is like nothing we’ve ever seen before. It is a galaxy of unexplored planets navigating interdependent orbits, and everyone, even the most experienced developer, is in uncharted waters.
“We’re all amateurs in this,” Eric Lombrozo told me after the first night in Hong Kong. “And the margin for error is so small.”
One of the conference organizers was at the table with us and he chimed in as well. “You’re trying to build a house in the middle of a mine field with meteors all around,” he said.
The fear stems from the fact that there are so many unpredictable moving parts in the Bitcoin network, each of which operates under the constraints of multiple combined forces—technological, social, and economic.
But the real reason this is so scary is because Mike Hearn is right. Bitcoin the “experiment” is kaput. Today, all of the bitcoins in circulation are worth over US $6 billion. Life savings have been dumped into Bitcoin. Companies have been founded on the technology. No “experiment” has ever had stakes like that.
So, the experiment is over. But that may not mean Bitcoin is dead.
There is a fix to this situation and it’s what everyone is calling the elephant in the room: Bitcoin needs a governing body. Although the topic was verboten during the formal sessions at both events, multiple people admitted to me that they now think it’s necessary. As Pindar Wong, the organizer of the Hong Kong event told me, “community doesn’t exist. It’s a story we tell ourselves.”
What some people perhaps once thought was an organic process of community consensus building has devolved into a screaming match and a series of political campaigns.
Emin Gun Sirer, a Cornell University computer science professor and a speaker at the Montreal conference recently wrote a useful blog post about the power that Bitcoin users could have over technical decisions, if they would only wield that power and express their preferences. In it, he pleads with the companies that represent users by proxy to “please work hard to acquire a seat at the bargaining table over changes to the Bitcoin blockchain.”
But where is that table? As far as I can tell, it doesn’t exist.
There was a lot of interesting talk at the conferences this fall. But until there is a formal process for debate and voting, where all of the stakeholders are invited, then we won’t really ever know whether the core developers are acting in the best interests of the community or simply kowtowing to a very vocal subgroup.
Assuming that Bitcoin survives, the block size debacle is not the last time the developers will need to balance the needs of the network, make a decision, and hold their breath. If everyone is pushing the button together, it will be much less terrifying.