The Scaling Controversy and the Political and Economic Prospects of Bitcoin

The Scaling Controversy and the Political and Economic Prospects of Bitcoin

The situation that the Bitcoin block size cannot meet market demand has lasted for more than half a year. There was originally a consensus to expand the block size, but there was a debate on how to expand the block size. However, the recent disagreement seems to have evolved into a debate on whether to expand the block size, and as the decision-making moment approaches, the debate has become unprecedentedly fierce, making it impossible for everyone who has been paying attention to and investing in Bitcoin for a long time to avoid it.

The complexity of the whole debate lies in the fact that it involves long-term and short-term considerations, risk and efficiency trade-offs, and even rationality and emotion. This is not only a technical issue, but also an economic, political, and even ideological issue. Comprehensive and systematic investigation and analysis is not an easy task. However, the extensive and in-depth discussions in the community provide a good foundation for understanding and solving the problem. With the help of the discussion results of all parties, this article attempts to sort out the current expansion dilemma.

1. Consensus and Disagreement

Faced with the urgent contradiction between block capacity and market demand, the basic consensus of the Bitcoin community is: "The number of transactions that the Bitcoin system can accommodate must be increased." The differences lie in four aspects:

• Main chain expansion VS off-chain expansion .

1. Main chain expansion refers to modifying the 1M capacity limit in the system code to 2M, 8M, or setting rules to dynamically adjust the block capacity based on the average size of blocks over a period of time. Reasons: Code modification is simple, the expansion effect is direct, and the system characteristics are not changed; Objections: Increase the hardware burden of network and node transmission and storage, leading to node centralization.

2. Off-chain expansion means keeping the block capacity within the 1M limit, developing side chains or third-party systems to absorb the growing transactions, and the main chain capacity is mainly used for settlement transactions of side chains or third parties. Reason: The main chain should be scarce; Objection: Change from currency to settlement system.

• One-time expansion vs. step-by-step expansion .

1. One-time expansion advocates a one-time modification of the rules, allowing the block capacity to be automatically adjusted dynamically with demand like difficulty, which can be called elastic expansion or unlimited expansion. Reason: The market size is constantly expanding and fluctuating, and the block size should meet dynamic market demand. Objection: The code is relatively complex, which increases risks, and miners have too much power to vote on capacity.

2. Step-by-step expansion advocates gradually expanding the block capacity, for example, expanding to 2M first, then expanding to 8M after full capacity, and then expanding according to the situation. Reason: safe and controllable. Objection: not adapting to market changes, and each expansion may cause disagreements.

• Expansion first vs stability first

1. The first point of the expansion is that the most pressing issue for Bitcoin at present is to immediately expand its capacity to meet market demand. Reason: Market demand is growing rapidly, and Bitcoin may be surpassed by competing coins if it fails to meet it. Objection: Bitcoin has huge advantages and cannot be replaced by competing coins.

2. Stability is the most important thing. The security and stability of the Bitcoin system is the most important thing at any time. The capacity limit only temporarily slows down the development, which is not fatal. We should not rush to expand the capacity. Reason: Bitcoin has a wide ecological impact, and security is the most important. Objection: Over-emphasizing security and stability will make Bitcoin lack the motivation for innovation and lose the ability to adapt to fierce competition and resist strong repressive forces.

• Hard fork expansion VS soft fork expansion

1. Hard fork expansion advocates expanding block capacity through hard forks. Reasons: The hard fork code is simple and does not increase the technical complexity of the system. Objections: It is incompatible with previous versions and there is a risk of splitting into two systems.

2. Soft fork expansion advocates expanding transaction capacity through soft forks (such as soft fork segregated witness). Reason: compatible with previous versions, can make the transition smoother. Objection: the code is more complicated, which increases the technical burden of the future system.

The dispute over the expansion route between the settlement network and elastic expansion

Regarding the expansion and future development direction of Bitcoin, the differences in the above four aspects are intertwined to produce multiple routes. The two main routes that are currently hotly debated are the settlement network route and the elastic capacity route.

1. Settlement network route : This is the route advocated by some members of the Core development team. The core is "soft fork segregated witness + lightning network = settlement network", that is: first implement segregated witness through soft fork, improve the performance of the Bitcoin system, and provide a technical basis for the implementation of the lightning network. No more main chain expansion, capacity congestion reduces small transaction users, increases the scarcity of the main chain, and forces a large number of small users to migrate to the lightning network or other side chains. The main chain gradually becomes a settlement network for lightning nodes, side chains or other third-party payments.

2. Elastic capacity route : Immediately hard fork to achieve elastic capacity. The common saying is "unlimited capacity", but "unlimited" can be distorted to eliminate the scarcity of main chain capacity. It is recommended to use "elastic capacity" for more accuracy. This route does not completely oppose Segregated Witness and Lightning Network, but believes that hard fork expansion is very urgent at the moment, and hard expansion should be done first.

There are three key technologies involved in the two routes: Segregated Witness, Lightning Network, and Elastic Capacity. The relative characteristics of the three are as follows:

1. Segregated witness is slightly complex and risky, but it is very important in both the short and long term : technically, it requires modifications to the transaction format of the existing main chain, which has a wide impact and is slightly more difficult to do technically; realistically, it will improve the operating efficiency and expansion space of the entire network in terms of transaction transmission, verification, storage, etc., and will have a positive impact in both the short and long term.

2. Lightning Network is difficult but has low risk and is important in the long run : Lightning Network is a side chain technology that can significantly reduce the transaction burden of the main chain and expand more payment modes, which is very important for the long-term development of Bitcoin. The technology to implement Lightning Network is relatively complex, but because it is carried out on the side chain, it hardly affects the technical security of the main chain, so the risk is low.

3. Elastic expansion has risks, but the technology is simple and the demand is urgent . Elastic expansion mainly modifies the fixed block capacity of Bitcoin so that it can adjust automatically. Technically, it is simpler than Segregated Witness and Lightning Network. The risk is that it is implemented through hard forks, and if there is insufficient consensus, it may cause the system to split. In order to meet the urgent need for expansion, hard forks are the simplest and most direct way, and elastic expansion also prevents the system from having the same expansion problem in the future.

After comprehensively weighing the technical complexity, implementation risk, urgency and system improvement effect, the three technical links have their own emphasis, and their importance and feasibility are comparable. Simply put: all three are important and should be implemented. The key to the current divergence between the two routes is that Core as a whole does not commit to expanding the main chain, and may move towards the settlement network route, while the elastic capacity route insists on expanding the main chain as soon as possible and firmly opposes the settlement network route.

3. Interests and power structure of Bitcoin ecosystem

In order to analyze the long-term impact of the two routes on Bitcoin and to understand the positions and views of the parties in the debate, we need to analyze the interest structure and power structure of the various participants in the Bitcoin ecosystem. The interest structure fundamentally determines the motivations of the parties, and the power structure determines how the parties influence each other.

• Interest pattern

• Common interests: The main chain is strong and the ecosystem is expanding. The health and security of the Bitcoin main chain and the continuous expansion of the Bitcoin ecosystem are the common interests of all parties.

• Trading users: stable price and convenient use. For users who use Bitcoin as a means of payment, the price of Bitcoin should be stable and they should be able to receive and pay safely and conveniently.

• Coin hoarders: The price continues to rise. Currently, the payment scope of Bitcoin is limited. More coin holders are optimistic about the future application space and price and make long-term investments. They expect the price of Bitcoin to continue to rise.

• Application companies: business expansion and profit growth. Different application companies conduct business and obtain profits in different ways, with different specific goals and profit-making methods.

• Mining pool: The algorithm remains unchanged, but the transaction fee increases. The algorithm remains unchanged to ensure that the mining machines invested in the early stage are available. The increase in transaction fees is not very important in the short term, but in the long term it will gradually replace the new block reward and become the main source of income.

• Developers: Realizing ideals and self-worth. Currently, there is a lack of independent economic incentives for developers. If developers do not have the above identities at the same time, then they mainly develop for their ideals and self-worth.

• Power structure

• Transaction users: use or give up. Features: decentralized decision-making, small individual impact, overall long-term decision-making system survival.

• Coin hoarders: hold or sell coins. Features: decentralized decision-making, less individual influence, the main source of trading users, and overall short-term determination of the ecological scale.

• Application enterprises: adjust the direction of capital business. Characteristics: relatively centralized decision-making, fierce competition among each other, a tendency to accumulate users, technology and market share in their respective business fields, and a natural tendency to seek monopoly advantages.

• Miner pool: participate or exit, vote by computing power. Features: relatively decentralized decision-making, simple decision-making, full competition, implementation of decision-making system rules, and security guarantee of common interests.

• Developers: design and write system rules. Features: directly determine the evolution of the Bitcoin system, including the direction of evolution, evolution security, and error correction. Strong technical expertise, obvious experience accumulation, significant accumulation of individual influence, and a tendency toward centralized decision-making.

4. The Political and Economic Structure of the Current Bitcoin Ecosystem

Based on the above interests and power structure, the current political and economic structure of the Bitcoin ecosystem has the following prominent features:

(I) Trading users and coin hoarding users are the foundation for the survival and development of Bitcoin . Although there are currently very few Bitcoin trading users, the fundamental reason for the formation of the current Bitcoin ecosystem is its proven viable currency payment function, which has formed an optimistic expectation for the scale of future applications, thus giving rise to coin hoarding users. In the short term, coin hoarding or investment users are the main groups in the ecosystem. In the long term, whether trading users can continue to grow as expected is the foundation for the survival and development of the system, and this also requires more coin hoarding investment users, because they are generally early users and advocates of transactions.

(II) Mining pools are the fundamental guarantee for the security and stability of the system . At present, the competition among mining pools is very fierce, and it is difficult for mining pools to control the miners’ stay or departure. Therefore, mining pools generally follow the interests and decisions of miners. Miners are the core of the security of the existing Bitcoin ecosystem because

1. They are almost completely compatible with the interests of the entire ecosystem: "The longevity of the main chain and the expansion of users" are the guarantee of their interests;

2. Their decision-making mechanism is simple: dig or not dig;

3. Their competition is simple, crude and brutal: if the mining machine performance is backward, it means absolute failure;

4. Difficult to evade decision-making responsibility: Compared with other entities, mining machines are specialized equipment with almost no recycling value and alternative uses. They are completely sunk costs. Miners find it difficult to avoid making decisions and can only make rational decisions as much as possible. These ensure that miners maintain the security of the system in the simplest and most direct way, which is completely driven by interests and has nothing to do with nationality, beliefs, or morality.

(III) Application companies are the driving force behind the development of the ecosystem . Application companies are the key to the expansion of the entire ecosystem because:

1. The products and services provided by the enterprise directly promote the expansion of trading and coin hoarding users;

2. Enterprises are the main source of innovation in various Bitcoin applications and business models;

3. Corporate innovation and business diversification provide unlimited possibilities for the development of the Bitcoin ecosystem;

4. Enterprises’ pursuit of monopoly and full competition among enterprises are the basic driving forces for the continuous innovation and development of the Bitcoin ecosystem.

(IV) The responsibilities and powers of developers exceed their interests . So far, the technical development of the Bitcoin system has been mainly achieved through open source. If we do not consider that developers are both traders and coin hoarders, then developers mainly devote their time, energy and talents to the realization of their hobbies, ideals and self-worth. As the Bitcoin system and the economic models of all parties gradually mature, the pioneering passion will decline, the interests and power games of the ecology will become more intense, and the motivation for development will become more and more realistic. The huge responsibilities and code decision-making power borne by developers are extremely disproportionate to the economic benefits they obtain, and it is difficult to ensure that the decision-making is rational and prudent enough.

(V) Insufficient competition between application companies and development teams leads to centralized decision-making . Individual application companies have the nature of pursuing monopoly. When the market is not large enough and competition is insufficient, companies are more likely to form monopolies based on their first-mover advantages in operations, technology, and markets. It is a natural trend for market development that companies with strong monopoly motivations combine with developers with insufficient economic incentives. Developers are more likely to form development teams under the strategic planning and financial support of application companies, which will improve development efficiency and maintain development continuity. However, in the absence of sufficient market competition, it is very easy to form centralized decision-making, which is the main systemic risk of the current Bitcoin ecosystem.

5. The Nature and Future of Elastic Capacity Solutions and Settlement Network Solutions

Based on the above analysis of the interests and power structure, we can judge the nature of the two competing schemes of elastic expansion and settlement network, and speculate on their future development.

1. The nature of the elastic expansion plan . The core of the elastic expansion plan is to change the block size parameter from the current limited 1M to a dynamic elastic adjustment based on market demand. It seems radical mainly because:

1. Changing this parameter requires a hard fork.

2. Dynamic adjustments are implemented through miner voting.

Considering that Bitcoin's accounting decisions are originally the responsibility of miners, there is nothing wrong with the size of the account page being adjusted by the accountants according to the accounting needs, not to mention that the voting rules are set by the developers. Hard forks are just a means of system upgrades. Fundamentally speaking, elastic expansion is just an emergency technical upgrade to solve the bottleneck problem that restricts the development of the entire ecosystem. It does not generate new conflicts of interest and power reconstruction. The existing interests and power of the ecosystem have not changed. Clarifying this point and forming a consensus will make hard forks risk-free.

(II) The future of the elastic expansion plan . Elastic expansion has no inherent contradiction with other Bitcoin system improvements envisioned by teams including Core and Unlimited, such as Segregated Witness, Lightning Network, Thin Blocks, etc. If the elastic expansion plan is implemented smoothly, each other improvement can be independently examined for feasibility and whether to implement it, and will not be hindered by elastic expansion. On the contrary, the implementation of elastic expansion can exempt other improvements from considering the limitations of block capacity, thus leaving more room for choice. Simply put, the elastic expansion plan is an emergency plan to eliminate capacity bottlenecks, so that the future of the Bitcoin system originally envisioned by people will not change. The specific prospects will be analyzed later.

(III) The nature of the settlement network solution . If the isolated witness is adopted, the transaction capacity will be temporarily increased by 1.7 times without changing the 1M block limit. When the lightning network opens up side chain transactions and becomes the main payment channel, the block 1M limit will no longer be exceeded. As a result, the main chain will become a channel for the lightning network node or other side chain nodes to settle. This actually changes the nature of the Bitcoin system, making it an international financial settlement system similar to UnionPay, SWIFT, Ripple and R3. Bitcoin has existed and developed as a currency payment network that everyone can participate in since 2009, and it has been proven to be feasible. The settlement network solution recently started with a soft fork isolated witness, which seems very safe, but its goal of changing the nature of the system is very bold and radical.

(IV) The future of the settlement network solution . In theory, this route is likely to succeed, with the main chain becoming the world's largest settlement system, and global users using the lightning network and other side chains to use Bitcoin transactions. However, the possibility of failure is also high:

1. The expansion achieved by Segregated Witness and Lightning Network is targeted at specific types of transactions and cannot meet the needs of expanding all existing main chain transaction types;

2. Segregated witness capacity will be filled up quickly, the Lightning Network will take a long time to mature, and the urgent market demand for capacity expansion will be difficult to meet in the near future;

3. The current expansion of the scale of transaction users is a key factor in the development of the ecosystem. The main chain capacity limitation reduces the transaction experience of small users and will seriously hinder the expansion of the ecosystem scale.

4. The Lightning Network cannot mature instantly. In the process of small users being driven from the main chain to the Lightning Network, a considerable number of them will transfer to other trading systems, such as legal currency and competing currencies.

5. Some large users who serve small users will also follow the small users and migrate to fiat currency or altcoins;

6. The Matthew effect of the payment system will allow a few nodes in the Lightning Network and side chains to form a monopoly advantage, and the main chain will become a settlement channel between a few nodes;

7. A minority of nodes would rather form a settlement mechanism through political consultation, thereby converting the huge cost of POW (currently nearly 10 million yuan per day) into corporate profits. In this way, miners will disappear.

8. Existing international financial giants are unlikely to adopt the Bitcoin settlement network. They are more inclined to choose to transform the existing settlement network with blockchain technology or establish a new blockchain network.

9. For small users, the Bitcoin settlement network and other settlement networks are all backend operations, and mainly rely on client services. A new Bitcoin settlement network without the support of traditional financial giants and without a large number of small users has almost no advantages and is unlikely to succeed.

10. The Bitcoin system, which failed in its transformation into a settlement network, missed the best period for user expansion and is likely to be unable to regain lost market share.

Such a huge risk is only suitable for a small number of people or competing coins to try, and is definitely not worth the Bitcoin community placing all its bets on.

6. Economic Prospects of Bitcoin Ecosystem

The deep-seated contradiction in the expansion dispute lies in the different understandings of the economic prospects of Bitcoin. The settlement network solution provides a new economic prospect for the Bitcoin ecosystem: a compact anonymous main chain where everyone can run a full node + a lightning network with unlimited capacity. Elastic expansion mainly solves the current capacity limitations and does not affect the existing economic prospects of Bitcoin. If the main chain capacity limitations are resolved and the current development direction is maintained, Bitcoin is likely to become a global economic infrastructure covering multiple levels such as currency, settlement, finance, and notarization, which is fully resilient to economic fluctuations.

The world's basic currency . Bitcoin has now become a transnational currency. In the context of international political and economic turmoil, the prevalence of protectionism, intensified national economic frictions, and strengthened domestic government intervention, the demand for free cross-border currency is unprecedentedly high. If Bitcoin eliminates capacity restrictions as soon as possible, it may become a truly world currency. This currency function is first realized through the main chain. For traders and holders who emphasize the high freedom and security of currency and do not care about the confirmation time within half an hour, main chain currency holding and trading are necessary. Large settlement users must use the main chain as the main settlement channel. These trading users are numerous and highly concerned about the security of the main chain, which is the basis for the existence of the current and future Bitcoin ecosystem. This main chain currency is similar to the basic currency (cash and reserves) of the traditional financial system. Its issuance is stable and predictable, which can eliminate the disadvantages of government intervention in legal currency and is the basis for the entire Bitcoin ecosystem to achieve financial stability.

Global settlement network . Under the premise that the main chain has a large user scale and has become an important world currency, the main chain is strong and secure enough. Existing off-chain wallets and exchanges, future lightning network (or other side chain) nodes, and traditional banks that accept Bitcoin can settle with each other on the main chain. This type of settlement is extremely low in cost compared to traditional settlement networks, and is safe and simple, and has strong competitiveness. Through the deposit, loan, exchange, transfer and payment services provided by these settlement institutions to their respective users, the currency function of Bitcoin has been extended and has the flexibility to adapt to economic fluctuations.

Derivative financial system . With the influence of the settlement network and the development of sidechain technology, various financial instruments such as existing credit, insurance, financial management, futures, etc. can be carried out on the currency system and settlement network provided by Bitcoin. According to the specific characteristics of financial products, some can be transformed through blockchain technology to reduce third-party trust credit and transaction costs, while others can still be operated with the help of third-party credit intermediaries. The only criterion is to create more profits. Through these derivative financial systems, Bitcoin's resilience to economic fluctuations is further enhanced.

Global notarization system . In the process of forming a currency system, settlement system and derivative financial system based on the Bitcoin main chain, on the one hand, the Bitcoin main chain has become the world's most credible information database, and on the other hand, people's economic activities have established close and extensive connections with the main chain directly or indirectly. This makes it possible for people to establish various notarization models with the help of the Bitcoin system for social and economic activities involving identity authentication, information notarization, transaction authorization, etc., thus giving birth to the world's largest notarization system.

Market competition regulates the main chain capacity, transaction fees and user experience. Many people worry that the Bitcoin system will expand more economic functions and make the system capacity unbearable. This worry is not necessary because:

1. This process happens gradually. The hardware and software conditions for solving the problem grow in tandem with the development of the problem. What is important is that problems are solved in a timely manner.

2. Most functions are implemented through side chains, which adds little capacity burden and technical complexity to the main chain;

3. The main chain, side chain, and third-party credit each have their own capacity and performance characteristics. The market will spontaneously allocate resources through competition. When the main chain transactions are congested, transaction fees will increase, the experience will decline, and low-yield transactions will turn to the side chain or third party.

The economic resilience of the Bitcoin ecosystem . The issuance of Bitcoin on the main chain provides a stable and predictable base currency for the Bitcoin system. On this basis, the settlement network and derivative finance have greatly expanded Bitcoin's ability to serve the global economy. In the global market system, various economic entities can make economic decisions and bid on multiple levels such as the main chain, side chain, and third-party credit system by weighing multiple factors such as profit, cost, data occupation, transaction time, security, and stability. They can achieve full economic resilience and adapt to the fluctuations and flows of the world economy in time and space, thus surpassing sovereign currencies and becoming an important engine for the development of world economic integration. In today's world of prevalent trade protectionism, this prospect is extremely attractive.

The global users of the main chain provide the necessary market depth and social power for the Bitcoin economy. The multi-level financial ecology based on this makes Bitcoin a resilient monetary and financial system that can serve the global economy. This is the ideal economic prospect of Bitcoin, and it is probably the only economic prospect. Because, as a free currency that transcends sovereignty, it has no physical support, no protection from national, ethnic, linguistic, or religious barriers. In the most liquid global monetary and financial system, stagnation means being surpassed, and being surpassed means extinction. As Satoshi Nakamoto said, Bitcoin is either great or nothing.

7 Political Prospects of Bitcoin Ecosystem

The road to Bitcoin’s promising economic prospects is long, and the Bitcoin community will face many important and difficult decisions along the way. How can we make collective decisions when the various participants in the community have different purposes, technical expertise, depth of understanding, and values? This is the inevitable politics. All we have to choose is: either communicate the decision patiently and rationally, or let it be manipulated, or just get out.

The basic political structure achieved by the Bitcoin protocol . Bitcoin itself is a political system, and its core political principle is: decentralized political democracy is achieved through open competition based on the assumption of self-interest and private property. The basic political structure established by the core technology is: asymmetric encryption protects the basic property rights of individuals; distributed ledgers ensure the basic consensus of property rights; blockchain technology ensures openness and fairness; and the proof-of-work mechanism uses simple and direct resource consumption to configure the right to record accounts.

The political structure of Bitcoin in its early days relied on ideals and enthusiasm . The basic political structure determined by the basic protocol is the foundation for the long-term existence of the Bitcoin ecosystem. However, in the early days of Bitcoin development, the full competition required by this structure was difficult to achieve. The formation and development of the Bitcoin ecosystem largely depended on the innovative interest and idealistic enthusiasm of early participants. The most important forces were developers and GEEK groups, who coded, tested, mined, hoarded coins, traded, promoted, attacked, defended, etc., and gradually led to the formation of the Bitcoin ecosystem. This early ecosystem emphasized freedom, open source, decentralization, anonymity, and anti-censorship.

Towards maturity requires a shift in core motivation towards economic benefits . As the influence of Bitcoin goes beyond the GEEK group, more non-technical people are joining in. What attracts them is the prospect of currency application provided by Bitcoin, which includes value-added profits, property security, entrepreneurial opportunities, arbitrage space, etc. In short, economic benefits are increasingly becoming the main motivation for people to accept Bitcoin, and this is the only core driving force that Bitcoin can rely on for long-term development as an economic system. The Bitcoin ecosystem must change from being driven by ideal enthusiasm to being driven by economic benefits, which is the foundation of a mature political landscape. The core of this mature ecosystem emphasizes bringing lasting economic benefits to all parties, and other aspects such as decentralization, security, convenience, freedom, and anti-censorship all serve this purpose, and can only be maintained for a long time because of the support of interests.

Centralization of development teams is the main political risk at present . In the mature Bitcoin ecosystem, full competition and decentralization based on economic interests are the core advantages of Bitcoin over legal tender, and are the source of the system's common economic interests. Politically, this is manifested as decentralized competition decisions. Now, trading users, coin hoarders, and miners have all achieved decentralized competition to a relatively full extent. On the corporate side, even seemingly centralized mining pools and exchanges will quickly decline if they violate the interests of miners and users, and other companies are facing similar situations. At present, centralization of development teams is a shortcoming of the political system. Although theoretically development is open source, in reality, due to the centralized code submission and review authority, the high technical threshold for development, the long accumulation cycle of development technology, and the accumulation of developer reputation, developers are not fully competing and have obvious first-mover advantages. Even so, when developers are independent of each other, it is still a decentralized competition decision, but once the main developers form a team, the power is concentrated, and the centralization of development rights becomes an important political risk in the system.

Developer-led decision-making direction restricts ecological evolution . Bitcoin has different characteristics at different stages of development, and the expertise on which its decisions depend will also change. In the early stages of development, the main task of the Bitcoin system was to improve the system technically, so developers had absolute direction dominance. As the development stage advances toward a profit-driven mainstream currency system, the problems encountered in development increasingly need to be considered from an economic and political perspective, and technology is only a means to achieve different decisions. The formation of the current core development team and its anarchist preference for decision-making fully reflect the contradiction between the technology-led decision-making mechanism and the needs of market development. If a mechanism cannot be formed to transfer decision-making dominance from the technical team to economic, political and legal experts, Bitcoin's political structure will not be able to evolve to a new stage, and Bitcoin will be unable to assume the functions of a mainstream currency.

Competition among development teams driven by interests is the key to political maturity . The threshold and first-entry advantage of technology development are inevitable, while the trend of development teamization is unstoppable. Close collaboration will improve development efficiency and make system maintenance and development more professional. The key to solving the centralization risk of development teams is to form a competitive landscape among development teams with different interests. The technical strength and actual influence of development teams determine that it is a general trend for enterprises or other economic organizations to employ and fund development teams, and there is no need to cover up or block it. The key is to form competition among development teams driven by different enterprises or interest groups. This competition not only eliminates the problem of centralization of development teams, but also solves the problem of developers lacking economic interest drive and the problem of decision-making dominance shifting to economic, legal and political experts. This enables market competition based on economic interests in all aspects of the Bitcoin ecosystem and truly completes a decentralized political landscape.

After the competition mechanism of development teams based on interest competition was formed, the idealism of Bitcoin in its early days faded, and a mature political structure was realized, thus having the political foundation to resist external shocks, and being able to steadily integrate into mainstream society, establish various political connections with governments, multinational corporations, interest groups, international organizations, etc., in which conflicts and cooperation are intertwined, and open a new chapter in the development of Bitcoin.

8. Ideology in the Debate on Expansion

In most cases, ideology is a derogatory term, referring to some concise and refined ideas that are generally recognized by the public but deviate from the public interest. These ideas are often the spiritual force that supports the old system. In this expansion debate, the Bitcoin community also reflected some ideologies that reduce the depth of people's rational thinking and decision-making ability, and hinder the transformation of the early Bitcoin ecosystem to a mature ecosystem. Under the influence of these ideologies, the political risks faced by the Bitcoin system are further amplified.

The anarchist ideal conflicts with mainstream society. The core advantage of Bitcoin is to eliminate the government's improper intervention in currency. Therefore, anarchism has deep roots in the Bitcoin community and is an important spiritual force supporting the community. However, in the process of Bitcoin moving towards the mainstream society, idealistic anarchism has become an important obstacle. In the debate on expansion, it is mainly manifested as follows:

1) Exaggerating the threat of government control on Chinese mining pools, with the intention of weakening the role of miners or even abolishing the Proof of Work (PoW) mechanism;
2) Emphasize that any individual can run a small block full node, so that the Bitcoin system can be hidden in the individual to resist government censorship and intervention. However, the government, like the market, is a product of the evolution of human civilization. They have their own strengths and cannot be completely replaced. A good market needs a good government. The emergence of Bitcoin has freed the issuance of currency and the dissemination and verification of transactions from the control of the government, but to integrate into the economic life of the majority of people, it is inseparable from the necessary supervision and supporting services of the government. The invisible Bitcoin network that evades the government can only be the need of a very small number of people, and can only survive underground and become a hotbed for illegal transactions. This is definitely not the future of Bitcoin. There is no need to worry about the government controlling the mining pool, because there are very limited things that can be done after control. The blockchain cannot be eliminated, the private key cannot be cracked, and even the miners cannot be retained. The government is also rational and talks about interests. Why bother to do things that are fruitless? The continuous expansion of the Bitcoin market is the fundamental way to force most governments to recognize and resist individual irrational governments.

Centralization tendencies conflict with decentralization. Centralization is the mortal enemy of Bitcoin, but centralization has always been the selfish choice of good people. In any society, people are unwilling to hand over power to bad people. Power is always concentrated in the hands of smart, capable, courageous, and caring people, who use it to serve the people and gain trust and become leaders. Leaders practice dictatorship out of paternal love and a little bit of insurmountable selfishness, and people support dictatorship out of trust, worship, inferiority, gratitude, loyalty, and laziness. From then on, the wisdom of the leader replaced the wisdom of the whole people, mistakes were difficult to correct, selfishness continued to expand around the leader, the drawbacks of dictatorship increased day by day, and the people lost the knowledge and power to reflect and resist. Satoshi Nakamoto's retirement and Gavin's handover of power have well prevented the emergence of this situation. However, in the expansion debate, we heard the familiar voices of supporting leaders. The debate was not based on logic and reason, but on seniority and merit, claiming that the core team was "extremely smart" and selfless, and worthy of "trusting one's life to them". All we need to do is trust the core team, and the problem will be solved. This is a dangerous signal, and it also shows that the Bitcoin community still lacks the necessary political and historical knowledge. If this kind of centralized thinking of "trusting one's life to them" becomes mainstream, the decentralization of the Bitcoin system will end, which is far more harmful than mining centralization, corporate monopoly, and government censorship. The source of this harm is not mainly from the Core team, which is just doing what it should do. The source is that the followers give up thinking and get used to following. In the Bitcoin community in underdeveloped and non-market economies, we should be especially vigilant against this tendency.

Hard fork phobia that conflicts with the mechanism of technological evolution. Faster technological evolution is an important advantage of Bitcoin over fiat currency, and it is also an important guarantee for absorbing innovations from competing currencies and preventing being surpassed. Some major technological improvements will affect changes in transaction or block formats, which is a fork relative to the previous blockchain. Improvements can be divided into soft forks that are compatible with previous versions and hard forks that are incompatible with previous versions. The advantage of soft forks is a smooth transition, and the disadvantage is that it increases complexity and technical burden for compatibility; hard forks are simpler, but require all nodes to update the version in time, otherwise the two versions will result in two blockchains. Modifying block capacity limits and segregated witnesses are both major improvements involving transactions and block formats. Many people originally believed that they could be achieved through hard forks, but due to the Ethereum hard fork that caused Ethereum to split into two currencies, ETH and ETC, there were also serious differences within Bitcoin between focusing on the market and focusing on stability, and between the direction of the settlement network and the direction of mainstream currency. Core finally chose soft fork SW, and some supporters of core further exaggerated the harm of hard forks, turning it into a commandment of "only passive hard forks can be used to fix vulnerabilities urgently, and never active hard forks can be used." This rule eliminates the hard fork improvements that should have been actively adopted in order to improve performance, adapt to economic or political situations, and absorb altcoin innovation, and can only make soft forks. Although the complexity risks and technical burdens caused by a soft fork are not significant, the risks and technical burden accumulated by continuous soft forks will increase exponentially. Judging the situation, the evolution route of combining soft and hard is healthy, and giving up active hard forks is equivalent to breaking one's own hands and feet.

: : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : If the current two routes truly form a situation of equal strength and stalemate, it means that the two directions have the possibility of success and failure. At this time, splitting is a rational choice. Whether both are successful or one is successful, it reduces the risk of overall failure of the system. If two coins are generated, the trading user can choose the one with a better user experience. The coin hoarding user holds two coins. The miner can choose to mine one or split the computing power to mine. The company chooses the direction based on its own judgment of the route. There will be fluctuations in the price of the currency at the moment, but once the split is realized, the uncertainty disappears, the market demand will be realized quickly, and the Bitcoin ecosystem will expand rapidly. In fact, at the last moment of splitting, the swinger will have to make a choice. It is very likely that the route with a smaller chance of success will quickly lose support and fail, so that there will be no actual split at all, at most a short fork.

Nine Summary

At present, the Bitcoin ecosystem is at the juncture of the transition from the start-up period driven by ideals to the mature period driven by interests, which coincides with the outbreak of the crisis in the world's fiat currency financial system and faces unprecedented historical opportunities. However, the battle for expansion and the dispute over the route behind it brings great uncertainty to the future of Bitcoin. Transaction blockages and increased fees have reduced the user experience. Opportunities are passing, and all parties need to work hard to get out of the predicament as soon as possible.

The root cause of this dilemma is on the surface a technical issue of expansion, but in fact it is a dispute over the long-term development direction of Bitcoin.

1. The settlement network scheme attempts to maintain block capacity limits and expand capacity through isolation witness and lightning networks, thereby extruding the general payment function of the main chain and converting it into a settlement network;

2. The elastic capacity route attempts to dynamically adjust block capacity according to market demand and hardware restrictions, so that the main chain can accommodate as many transactions as possible, in order to maintain Bitcoin as the existing direction of the currency system.

The settlement network solution has received strong support from some core developers and companies. The main motivation of developers is to maintain the compact main chain of small blocks to achieve full nodes that everyone can run, so as to ensure the anonymity and anti-censorship of Bitcoin. The company's support is mainly to gain the advantage of the future settlement nodes and gain a competitive advantage. However, once the main chain transactions are restricted, the transaction experience is declining, Bitcoin's first-mover advantage gradually loses, the market depth and social impact will also decline, and it is difficult to compete with the traditional and mainstream settlement systems in blockchain transformation, and may even be replaced by altcoins.

The elastic capacity expansion solution is mainly to eliminate the bottleneck caused by blockchain capacity on the development of Bitcoin, and does not change the initial goal since Satoshi Nakamoto founded the Bitcoin system: to build a monetary system that surpasses fiat currency. In the current situation of severe global fiat currency system turbulence, eliminating the block capacity bottleneck can rapidly expand the market capacity of the Bitcoin main chain and gradually move towards mainstream currencies. On this basis, it realizes global settlement functions, and derive more financial functions through side chains and third-party institutions, and thus become the world's largest and most trusted notarized information system. This will be the main infrastructure for the application of global blockchain technology.

At present, the systemic risk that hinders the transformation of the Bitcoin ecosystem from the start-up stage to the mature stage is not the hard fork expansion, but the centralized decision-making problem of the core development team that lacks economic incentives exposed in the expansion debate. The main threat lies in:

1. Lack of economic incentives leads to unreasonable and cautious decision-making and neglect of market demand;

2. After forming a team, overwhelming decision-making will lose the ability to correct mistakes and be easily misled and exploited;

3. Technical teams lack the ability to control complex political and economic problems in mature ecology. The solution is not to curb the formation of development teams, but to accelerate the formation of full competition among development teams supported by different stakeholders.

In the debate on expansion, many people shouted about the decentralization of nodes and computing power, but enthusiastically supported the core development team that holds major centralized power, attacked miners with dispersed power, fierce competition, and simple decision-making. This amplified the impact of the centralization problem of the development team, and the out-of-time radical anarchism tendency was widely spread, and hard forks were demonized, opposing community division and maintaining the core position seemed to be an unquestionable bottom line. In fact, hard forks are an extremely important technical means in Bitcoin evolution, and community division is inevitable, even positive when there are irreconcilable contradictions between values ​​and development routes, because this division gives Bitcoin an additional possible route of success.

At present, the global demand for Bitcoin’s safe-haven market is growing rapidly. Whether this demand can be transformed into a sustainable development of Bitcoin lies in whether it can provide a safe and convenient trading environment and user experience. At present, the first task is to complete the expansion as soon as possible to meet market transaction needs. However, to complete this task, it is necessary to clarify the differences between all parties, especially major developers, important enterprises and large mines, to clear the ideological fog, clarify their own interests, make clear judgments on the dispute between the two routes, and then act decisively. If a consensus can be reached on the route, the expansion will be deployed as soon as possible according to this route; if a consensus cannot be reached, the hard forks of each course should be implemented as soon as possible, and the possibility of the forks of the niche routes will be very high; if the two currencies coexist after the split, they will focus on their own routes and will compete with each other. This competition will make the entire ecosystem more dynamic and robust.