Is the Bitcoin Dynasty Gradually Dying?

Author: Velvet Gold Mine

A well-known bitcoin developer's latest bitcoin experiment ended in failure. Since bitcoin became popular a year ago, there are still many areas to be developed. Although this incident has cast a veil of mystery over this currency, it has also increased people's desire to explore.

"The outlook for bitcoin is not optimistic," developer Mike Hearn wrote on his Medium blog. "No matter what happens to the price in the short term, it will be lower in the long run. I will eventually give up my bitcoin development and sell all the coins I currently own."

There are many reasons for the slow growth of Bitcoin, the first of which is the limitation of the Bitcoin network caused by the capacity of the currency transaction ledger, and as the ledger capacity gets smaller and smaller, the limitation on the Bitcoin network becomes stronger and stronger. If the capacity limit is not increased accordingly, then Bitcoin development will stagnate. To solve this situation of capacity limit, it requires a slight change in the system, which originally benefited customers who used heavy computer power to record transactions.

Hearn himself has long expressed his support for the expansion. However, Bitcoin is an open source software, so any changes to it must be agreed upon by the majority of developers and users. The problem is that everyone has their own opinions, and the road to change is not easy.

Hearn is not the first person to pronounce Bitcoin's death sentence, but as a well-known developer in the Bitcoin field, his words undoubtedly hit the sore spot in the Bitcoin field. After a few months of stability, the price of Bitcoin finally fell sharply by 20% last week, falling to $358. Although it rebounded slightly over the weekend, the price continued to fall as Hearn predicted.

“Bitcoin has long been criticized and misunderstood,” said Sean Neville, president of mobile wallet startup Circle. “Just because Bitcoin has become more mature, more and more management and technical issues have emerged, which has created a misconception that blockchain technology is useless and will eventually fail.”

There is another controversial issue with Bitcoin. Bitcoin believers praise Bitcoin for its use outside the normal financial system, away from central banks and exchanges. But Bitcoin skeptics see it as a weird currency whose value can soar or collapse instantly, and everything is just a casino for computer technology geeks. But government officials can't even say whether Bitcoin is a currency or a commodity.

The current differences in people's understanding of Bitcoin have caused many investors to gradually lose confidence in it. They are now increasingly hopeless about the "blockchain" (a ledger used to record someone's ownership of something), which they originally recognized as the most promising invention in the Bitcoin field.

Private transactions are packaged into blocks and then subjected to highly complex mathematical calculations. The winner of the calculation will receive a newly minted Bitcoin as a reward.

Bitcoin's code limits the size of these blocks to one megabyte. To change the block size, the so-called miners (people who have accumulated the computing power to solve all transactions) must agree. Minting bitcoins is expensive and requires an entire company to invest in it. And participants are worried that changing the capacity limit at will will affect their economic income.

But not making changes also has an impact. Due to capacity limitations, the Bitcoin network is congested and some transactions are severely delayed in confirmation.

In August, Hearn and another important Bitcoin developer, Gavin Andresen, formally proposed to increase the size of the block, suggesting that an alternative version of Bitcoin called Bitcoin XT replace the original smaller version. In the software world, this behavior is called "hardware replacement" - that is, developing a new version of the system to force users to use the new version.

The war between advocates of Bitcoin’s XT and original versions, known as “Core,” is now intensifying, sparking heated debates on Reddit and social media, commentary on message boards, and anonymous cyberattacks against users and companies. While XT started out with much fanfare, it ultimately fell short of consensus.

The battle between XT and the original version was at a stalemate, and in the end Hearn was convinced that Bitcoin had begun to collapse from within. Although some people still had hope for it.

The XT/Core debate dragged on, and another idea emerged, a proposal called Bitcoin Classic. This is a version of Bitcoin with a two-megabyte limit, and it has been tested and reasonably expanded. This version of Bitcoin seems to be gaining support quickly.

Fred Wilson, an employee of Bitcoin venture capital firm Union Square Ventures, wrote on a philosophy blog: "Sometimes a crisis can make people realize the problem and unite together. Perhaps this is the only way to resolve the block size war."

JPM compiled from

Wall Street Journal, Is Bitcoin Breaking Up?