Bitcoin 1.x: The New Knight of Bitcoin On-Chain Scaling

Original title: Time for Bitcoin 1.x An open letter to developers supporting on-chain expansion

Here, Bitcoin Unlimited leaders and developers launched a call to full node developers who maintain competing versions of the bitcoin software, including some free-thinking developers in the Classic, XT, btcd, Core camps, and developers in other camps.

A fork in the road

Bitcoin was described, coded, and launched by Satoshi Nakamoto. It doesn’t matter who that person or group is. Seven and a half years later, Bitcoin has grown and its unit value has appreciated rapidly, now approaching the price of an ounce of gold. However, depending on the path it takes today, its potential in a few years will be very different. A fork has occurred, but it is not a fork of the blockchain, nor a fork of the software, but a fork in a higher-level development direction:链上（on-chain） or链下（off-chain）扩容. In fact, both directions are advanced, but the current development direction has greatly tilted towards off-chain expansion, while on-chain expansion has been marginalized, like a poor Cinderella.

The signing of this open letter is to uphold the original vision of Bitcoin as a global peer-to-peer currency, scaling to VISA-level processing power from the first principles on-chain. Of course, we also welcome off-chain solutions, as they can support greater scale, especially for small transactions. However, the use of Bitcoin (off-chain) must be driven by market forces, with competitive pressure from all other cryptocurrencies, rather than being suppressed and at the expense of expensive on-chain services.

Bitcoin off-chain services should compete with the most scalable on-chain services because if they can still attract transaction volume on their own merits, then there will be little demand for alternative cryptocurrencies.

Bitcoin mining is a success story

Bitcoin has intrinsic value due to its utility as a payment network: fast, permissionless, semi-anonymous, peer-to-peer transactions. Its growing user base and network effects attract speculative value (especially since the total amount of Bitcoin is limited), and then as the total computing power of the network grows, the Bitcoin monetary unit becomes more trustworthy as a permanent store of value. A virtuous cycle is created between storage, usage, market price, and security.

Shortly after the next halving occurs, the sum of Bitcoin block fees may exceed the block reward. Maintaining Bitcoin's security and long-term value storage is incentivized by the transaction fees received by miners for confirming transactions. By choosing off-chain solutions, miners will have a large amount of their income siphoned off by third-party service providers. Although some miners may think that they will have their own third-party services and hope to benefit from them, the reality is that the business model of these services will be very different from mining and they are not based on repeated operations such as SHA256. Bitcoin miners who support off-chain solutions are taking a high-risk gamble. History has shown that many world-leading companies have failed miserably because they moved to a new business model. Bitcoin 1.x recognizes that miners are still the leaders, and what they are doing is protecting a new financial system for the world, which is beneficial to both themselves and Bitcoin.

While higher transaction volumes will put more pressure on non-mining full nodes as Bitcoin becomes larger, the growth of the ecosystem will encourage more new nodes. We believe that those with deeper pockets will run new nodes to improve the quality and capabilities of the nodes. This is the opposite of today, where users and investors are cautious as they see on-chain transaction volumes reaching a ceiling, which has caused the number of full nodes to stagnate.

A controversial barrier to on-chain scaling

The 1MB block size limit on the transport layer was set temporarily by Satoshi Nakamoto in 2010 to prevent spam transactions. By 2016, it became clear that transaction fees and confirmation times were becoming volatile, which was detrimental to the normal operation of the network. Over the past 12 months, a variety of Bitcoin implementations have emerged. These proposals would have allowed for larger blocks, which would have prevented harm to the network and ensured that users continued to enjoy consistent fees and confirmation times. Sadly, these proposals have failed time and again, in part due to a failure to adhere to a universal block size limit.

What does Bitcoin 1.x look like?

We believe that the general version of on-chain scaling will achieve 60 transactions per second, which is version 1.0. The "x" represents a minor version, which is usually released at regular intervals. We welcome the Classic team to move in this direction. If real-world demand reaches 60 tps, Bitcoin will surpass the fiat currencies of high-inflation countries in the global economy and replace many cross-border transfer payment methods. Smart contracts and colored coins technology have great potential, but the value of Bitcoin is to provide a new digital currency value, not the value of digitized non-monetary instruments. Bitcoin's monetary base has reached $10 billion for the second time, perhaps permanently. It is no longer an experimental money, but real money, just like gold and silver. There are several key changes that make Bitcoin 1.x a more viable solution:

1. By separating non-mining full nodes from mining full nodes, regular node owners do not need to upgrade like miners, or accept a risky "flag day" event. Bitcoin Unlimited has implemented node differentiation through BUIP001 , where non-mining nodes always track and verify the longest working chain. In the rare case of a fork, it will alert users so that those who receive funds can wait for a sufficient number of confirmations and fork resolution. It has been shown that 30MB is the current maximum feasible block size, so the default transition block size for non-miners is 16MB .

2. With BitPay's adaptive solution, the voting threshold is 75% , plus a 28天activation grace period. Non-miners are incentivized to upgrade early, and then they don't have to care about how the block limit is decided (even if miners ultimately choose a 2MB block limit, or a better median of 8MB). Once miners can independently decide on the block size limit, they can act quickly and decisively in their collective interest. Note that the block size still has a natural limit in a healthy transaction fee market.

3. Xthin blocks are adopted, which can achieve fast block propagation. Recent test results show that blocks can be expanded by up to 20 MB, and the experiment involves nodes in China and abroad (testing the impact of China's external bandwidth restrictions). Of course, the average block size will remain small, which may last for several years. Miners are conservative and responsible. They want Bitcoin to achieve a higher and stable value. Therefore, miners will not generate many large blocks but transactions with low transaction value. Such blocks are likely to be isolated.

Other considerations

The rapidly increasing cost of processing signature operations (sigops) has been addressed in Bitcoin 1.x and we consider this to be one of the “meta” features of Bitcoin 1.x.

Complex enhancements such as Segregated Witness (SW) will be added to Bitcoin 1.x after the first release. Segregated Witness has many powerful benefits, but it changes the underlying architecture of Bitcoin. For this reason, we favor experimenting with this solution in Litecoin. After 6 to 12 months, we will combine the experience of Litecoin and apply Segregated Witness to Bitcoin.

in conclusion

For all developers who think that off-chain solutions are overemphasized (and who believe that on-chain scaling is necessary), please consider joining us in implementing some key changes and creating the first general-purpose version of Bitcoin. This will be the beginning of a new era.

Let’s implement Bitcoin 1.x!

Signatory (Bitcoin Unlimited)
Andrew Clifford (Conductor)
Peter Rizun (Architect)
Andrew Stone (Lead Developer)
Andrea Suisani (Developer)
Peter Tschipper (Developer)