Hong Kong Summit is Coming, Block Size Debate Highly Anticipated

This year has been particularly strong in terms of funding and interest from financial institutions in startups, but behind the positive headlines in the bitcoin industry lies a sense of unease, as people have been debating for months whether to change the protocol that governs what is by far the world's most widely used and longest-running public blockchain.

This week the debate will be given new life when some of bitcoin’s most influential and historically low-key stakeholders gather in Hong Kong for two days of technical discussions as part of the second Scaling Bitcoin conference, a development conference sponsored by MIT, Blockstream, and PricewaterhouseCoopers, among others.

The attendees were all important representatives from the Bitcoin development team, including Blockstream Chairman Adam Back, core developer Jeff Gaezik, and leading developers Joseph Poon and Tadge Dryja from the team behind the Lightning Network.

Meanwhile, in the industry, the largest Bitcoin mining pools BW.com, F2pool, Antpool and BTCC Pool gathered together for a panel discussion to express their views on controversial topics.

Coming on the heels of an inaugural conference in Montreal this September, it’s safe to say that expectations are high and opinions are mixed among industry insiders heading into the event.

As bitcoin transaction volumes reach record highs, some industry observers worry that the bitcoin blockchain will soon be unable to cope with and process the large amounts of data.

Today, Bitcoin mining is capped at a maximum block size of 1MB per block, a process that occurs on average every ten minutes. For each new block, 25 bitcoins are added to the network.

Any transactions that exceed this limit when transmitting data are sent to the network's memory pool, where they wait in line in the verification order of unprocessed transactions until a miner is willing to accept the sender's transaction fee and include it in another block.

Of course, there are further complications to this debate. If the size is to be increased beyond the 1MB limit, 95% of the tens of thousands of computers contributing computing power would need to voluntarily upgrade to the new software, known as a "hard fork."

How stakeholders respond to the fears of this situation, which has led some to explore increasing bitcoin’s capacity without changing the block size, will also be discussed at the conference.

In conversations, the unease within the bitcoin industry’s business community about the debate was evident. Jack Liu, head of international at Chinese exchange giant OKCoin, admitted that “attention is starting to wander” when it comes to solutions.

Separately, Amos Meiri, CEO of blockchain startup Colu, said he hopes to see “progress and decisions” at the conference. “If bitcoin doesn’t scale soon, we’ll have to start looking at alternatives.”

An uneasy truce

Developer Paul Sztorc called the current situation a "looming contradiction" where there are groups that want to reach a solution through the conference, while the official position of the conference is that such a decision is unattainable.

For example, developer Adam Back tried to unite the community members on the message boards during the conference pre-event activities, arouse people's public spirit, and encourage users not to regard those with opposing views as enemies.

“For Bitcoin to scale, improve, and secure, it is critical that the user community, technical community, and ecosystem act together,” he wrote. “Our competition is with the inefficiencies of the banking and financial ecosystem, not with each other.”

Pindar Wong, an organizer of Scaling Bitcoin who also serves as a digital strategy advisor to the Hong Kong government, also had low expectations for the conference.

“We are just a platform, we try to bring some things together, to extend bitcoin with academic and scientific methods,” Wong told CoinDesk. “Communication leads to cooperation, and we hope that we can reach a consensus through communication, but this is beyond our control.”

To facilitate conversation, Wong said, there will be simultaneous interpretation in both English and Chinese, three social gatherings and technical talks, and the conference will be streamed on YouTube and Ustream.

As for follow-up actions after the meeting, Wong did not give a clear answer, only saying that his attention is now focused only on the Hong Kong summit.

“We want to make some progress on how to scale bitcoin. That’s clearly what the conference is designed to do. How to do that requires a combination of stakeholders’ perspectives. At the end of Hong Kong, we can look at what we’re going to do next and assess whether it’s worth doing from a technical perspective,” he said.

Slight increase

While there is consensus that the bitcoin network needs to change, some members of the development community remain unconvinced that increasing the block size is necessary.

If the block size doesn’t increase, they believe, users will have to pay a floating fee to get transactions on the blockchain, and a market will develop that would in turn affect bitcoin’s ease of use.

However, a common opinion among these industry participants is that the overall size of the Bitcoin blockchain needs to become smaller to be an advantage, as more and more individuals or legal entities have the ability to approve and bear transaction fees and store versions of the ledger. This, in turn, they argue, will make blockchain transactions more resistant to censorship by any one party.

“Today, the entire blockchain is over 50GB in size,” explained Bobby Lee, CEO of bitcoin mining and trading platform BTCC. “If we suddenly increase the blockchain size significantly, many miners’ computers may no longer be able to keep up with the blockchain. This could lead to overscaling.”

Still, developer Peter Todd noted that there is growing support for increasing block size among businesses that want to give investors confidence that they can accommodate more new customers on their platforms.

“I don’t think we’ll see a scaling ‘solution’ that is accepted by institutions like Coinbase and others who want to significantly increase the block size,” Todd told CoinDesk. “Big block proponents like Gavin Andresen have not yet demonstrated that their scaling solution has any benefit other than increasing centralization in exchange for cheaper transactions.”

So far, the BIP101 proposal has received support from Bitcoin service agencies such as Circle, Coinbase and itBit, but support for this proposal comes more from the mining community.

Todd said he expects a small increase in the block size to be approved at the Hong Kong meeting, but noted that any resolution would be an uphill battle.

“It’s impossible to satisfy both needs at the same time,” he said.

Developer Charlie Lee, creator of another cryptocurrency, litecoin, and director of engineering at Coinbase, said his company had no expectations for the conference but still expressed support for Andresen’s BIP101 proposal.

"We don't have any expectations. We hope that we can decide how to move forward. We'll see some good proposals and some good data," he said.

Patient Miner

It is worth noting that the mining company members attending the conference were not so concerned about the results of the conference. They told CoinDesk that they cared more about participating and learning.

Jake Smith, Bitmain’s director of overseas marketing, who also operates the Antpool mining pool, said his company was excited to attend the conference because he felt miners were not given enough of a voice at the Montreal conference. Perhaps for this reason, he said he was not optimistic that any solutions would be reached at the conference.

“What I personally hope will come out of this conference is that developers and miners can come to some form of consensus on how to make bitcoin more scalable,” he said.

Lee, whose BTCC mining pool controls 14% of the global network hashrate at press time, also expressed his views, saying that miners can make the final decision when it comes to decision-making.

One concern of the mining community regarding the BIP101 proposal is that effectively increasing the block size in advance would eliminate the possibility of voting on the issue later.

“It’s also a political debate whether the block size and future decisions should be decided by a democratic vote or by Satoshi Nakamoto or a dictator, or whether voting itself should be allowed,” Lee said. “We were invited to vote on BIP100 and BIP101, but should we be allowed to vote?”

Marshall Long, CTO of mining consultancy FinalHash, reiterated that the mining community is largely supportive of the BIP100 proposal. However, he expressed reservations that he hopes a “comprehensive solution” can be reached soon.

“To be honest, culture is probably the biggest issue, and I don’t mean language. Many Westerners just don’t ‘get it,’ ” he told CoinDesk.

The absence of important figures

Despite the presence of many industry heavyweights, some key figures will be absent. Gavin Andresen, a long-time Bitcoin advocate and one of the community’s most senior and active developers, said he will not be attending the Hong Kong summit.

Also absent was new R3 developer Mike Hearn, who, along with Andresen, backed the controversial Bitcoin XT proposal this summer. Bitcoin XT, known as Bitcoin Improvement Proposal 101, would increase the block size cap to 8MB, with an additional 40% increase every two years until 2036.

While Bitcoin XT appears to have similar motivations to the other proposals, it differs in that what Hearn and Andresen are actively promoting is an incentive for node operators and miners to switch to the client, effectively encouraging stakeholders to vote for a more advantageous proposal.

In the interview, Andresen expressed his hope that the industry can reach a consensus on the best approach even if he does not attend the meeting, although he also mentioned earlier that he hopes the block size discussion will continue after the meeting this weekend.

“I hope that something will come out of the Hong Kong meeting and that the developers attending can agree on a process to increase the maximum block size,” he told CoinDesk.

On December 6 and 7, CointDesk will be reporting live from Hong Kong on the Scaling Bitcoin conference.