There is no war in Litecoin anymore, but what about the Bitcoin civil war?

Chapter 0 Introduction

With the conclusion of the Litecoin miners and developers’ roundtable, the Segregated Witness soft fork is about to be activated on the Litecoin mainchain. Will this have any impact on Bitcoin?

Chapter 1: Litecoin Community Facilitates Activation of Segregated Witness Soft Fork

After a series of back-and-forth arguments between Litecoin miners and developers, it finally ended at a roundtable meeting in late April:

After voting, the participating members unanimously agreed to adopt the following decision on the LTC protocol upgrade:

a. Implement SW soft fork upgrade on LTC.

b. After the LTC block capacity is used up by more than 50%, we will prepare a solution to increase the block size limit by 1M through a hard fork (or soft fork).

The price of Litecoin also rose happily.

Chapter 2: Controversy over the Segregated Witness Scheme in the Bitcoin Community

Segregated Witness was originally a technical solution proposed on Bitcoin to fix transaction scalability. It is not an expansion solution in itself, but it has a small expansion effect. On Bitcoin, the entire community, including various development teams, miners, enterprises and users, have no major disagreements on the technical optimization goals that Segregated Witness wants to achieve. However, there are fundamental differences in its implementation plan. Core developers designed the Segregated Witness soft fork, while there are still a lot of voices in the Bitcoin community demanding the use of a hard fork solution to fix scalability, and some Classic developers have already designed it and integrated it into Bitcoin Classic.

Therefore, the debate between SegWit and scalability essentially includes two controversial topics: the first is whether to expand the capacity; the second is whether the solution to fix scalability is to use a soft fork or a hard fork.

The core members of the Core developers insist that Bitcoin does not need to be expanded and use a soft fork to fix scalability. The vast majority of the community insists that Bitcoin needs to be expanded, and the attitude of expansion supporters is more moderate as to whether to use a hard fork or a soft fork to fix scalability.

On both sides of the dispute, Core holds the right to develop and is very powerful, while the other side is currently mainly miners and other development groups, who hold the power to choose which software to run. Both sides hold power, reasons and strength, and have supporters.

In particular, the Core developers and their supporters completely refused to negotiate and compromise. The Hong Kong consensus that was finally reached was also invalidated because Core unilaterally tore up the agreement. Even more shocking is that they also used speech control and hired water armies to create false statements to mislead the market, and even showed a professional reputation attack on the supporters of expansion. A large number of people who stood at the forefront of expansion have been knocked down. The most famous among them are Gavin, the successor of Satoshi Nakamoto, and Jeff Graz, the earliest Bitcoin developer, both of whom were squeezed out by the current core members of Core. And the companies at the forefront of expansion, including Coinbase, were suppressed by Core members into altcoin companies. Coinbase was really convinced and became an exchange that listed multiple currencies. Now Core and its supporters are aiming their firepower at Bitmain, which is at the forefront of expansion, especially its CEO Jihan Wu.

As for the miners, because the opinions of the major mining pool operators are different, some support Core; some hope to continue to wait for Core to compromise; some have already broken with Core and directly run Core's competitive client; some retain the right to vote but do not vote at all, and maintain the status quo. In addition to voting, miners will also choose to communicate with more developers, hoping that they can make better software to compete with the software of the Core development team.

From the perspective of interests, on-chain expansion will be able to continue Bitcoin's successful 8-year development experience, and the mining industry can also continue to develop healthily. However, if on-chain expansion cannot be achieved, and the segregated witness and subsequent second-layer network are used to transfer on-chain transactions to on-chain transactions, this is equivalent to directly competing with mining. Blockstream is also a company whose main business is to engage in off-chain transactions on the second-layer network of Bitcoin. Therefore, there is a huge conflict of interest between segregated witness and expansion. At the same time, because it has changed the economic development model of Bitcoin, whether the huge sunk costs invested by the mining industry will continue to have prospects is still an unknown. Therefore, the threat to the mining industry is very large.

Chapter 3 Controversy over the Segregated Witness Scheme in the Litecoin Community

What happened on Litecoin is much simpler. Since Litecoin has no need to expand, the first topic of debate automatically disappears. The controversy is mainly on the variant of the second topic.

Since there is only one development group on Litecoin, no one has proposed a hard fork solution to fix the Litecoin scalability issue. So miners only have one option.

So the controversy over Litecoin is essentially whether Segregated Witness itself is a good solution, whether it should remain as it is, or whether Segregated Witness should be activated. Another issue is whether Litecoin should be prevented from being used as a test guinea pig for Bitcoin.

Because miners have a lot of sunk costs, and Litecoin mining pools are often also Bitcoin mining pools, or at least are huge stakeholders in Bitcoin. Therefore, another layer of controversy is how to prevent Litecoin from activating Segregated Witness, which becomes pressure to promote Bitcoin to activate Segregated Witness.

Litecoin prices have been in a long-term bear market, and the market needs a hot spot for speculation. The Segregated Witness soft fork was chosen by the market and is considered to be an optimization solution for Litecoin. The developers also promised future lightning networks, anonymization, smart contracts, etc. Therefore, the market believes that this is a long-term positive.

There is still a discussion about which solution is better in Bitcoin, but there is no discussion about which solution is better in Litecoin because there is only one option. Whether it is really good or not depends half on the code of Core developers and the other half on luck.

Therefore, the power of the two parties in the dispute over Litecoin is completely unequal. Miners only have computing power, but no support from developers, and in the end no support from the public opinion market, so they are fighting alone. From the fact that developers threatened to bypass miners and use user-activated soft forks, it is clear that miners are completely at a disadvantage. Moreover, there are anonymous people or organizations behind the developers who launch DDOS attacks on disobedient mining pools to force them to obey.

In addition, from the perspective of the interests of both parties in the Litecoin dispute, there is no serious conflict. Behind the dispute over large and small blocks in Bitcoin is a huge conflict of interest and the definition of the future of Bitcoin, which is the key to the long-term development of Bitcoin mining. But there is no such conflict in Litecoin, because the transaction fee on Litecoin is not high, and the income of miners is basically determined by the block reward. If the price of the currency can be driven up by the market, it will be the biggest benefit for miners.

Against this backdrop, it’s no surprise that the Litecoin community quickly reached a consensus, ending with developers implementing their soft fork to activate Segregated Witness.

The gap between Litecoin’s SegWit and Bitcoin’s SegWit is so huge that it makes little sense for the latter to learn from the former.

Chapter 4 Conclusion

Any complex software project will not outlive the intellectual life of its developers, unless it can be encapsulated as scientific knowledge, which can only be passed on.

If Segregated Witness ultimately fails to form a subset of the Bitcoin & blockchain knowledge system, but is always released as a patch that pursues strange compatibility, then its lifespan, as well as the lifespan of the products it kidnaps, should be worth investors' repeated consideration.