Jeff Garzik: Bitcoin's second course-correcting hard fork is possible

If the first day of the Scaling Bitcoin Conference was focused on fostering constructive conversations, the second day of the conference explored how those conversations could be implemented after the conference and coalesce into a clearer vision for the future of Bitcoin open source technology.

Some talks at the conference, for example, provided broad analyses of current proposals and delved into theoretical considerations, such as how much capacity the Bitcoin network would need to handle and how measures of scale should be defined.

“When people talk about how bitcoin is going to scale, they throw in some story about Visa doing 20,000 transactions per second or something like that,” said Harry Kalodner, a member of Princeton University’s security and privacy research group. “There are other factors involved.”

Kalodner went on to say that if the Bitcoin blockchain were used for a domain name storage system, it could add 294 million transactions to the network, a figure that does not include expected use cases such as the Internet of Things. “There are 24.5 million cars in the United States,” he added.

In light of this, sometimes controversial alternative designs are discussed, such as the Lightning Network, which aims to add payment channels to Bitcoin.

The afternoon session featured 12 roundtable discussions, during which a code of conduct was proposed to help the development community grow.

“We need to have better resources so that new entrants are embraced by the community and not negatively impacted,” one moderator said.

Currently, the draft specification is just an initiative that will be refined and presented at the second Bitcoin Scaling Conference in Hong Kong in December this year.

Some thoughts on block size

One of the most anticipated talks of the day came from Bitcoin Core developer and BitPay employee Jeff Garzik, whose presentation was titled “Issues Influencing the Block Size Proposal.”

In July this year, Garzik proposed Bitcoin Improvement Proposal BIP 102, which is to increase the Bitcoin block size to 2MB through a hard fork. This short-term solution will alleviate the current concerns about the capacity of the Bitcoin network, but the specific pros and cons of the measure have not been specifically discussed.

“It’s very clear right now that we’re rapidly approaching the 1MB block size limit,” Garzik said, warning that user experience on the Bitcoin network will degrade when blocks reach the cap. This phenomenon, in his view, requires consumers to pay fluctuating fees to execute transactions, a feature that some consumers and consumer products are not yet equipped with.

“The 1MB wall will create a chaotic situation with fees, and when we hit that wall, businesses and users may stay away from Bitcoin because of the high fees,” he said. “If we can’t reach consensus at all, it will be hard to figure out where we are going, and if we just stay at 1MB, it will inhibit the growth and adoption of Bitcoin.”

Garzik suggested that large financial institutions might be tempted to use the bitcoin network, but that they are currently limited to experimentation because if they did, it would instantly cause the bitcoin network to reach its transaction processing limit.

“ A second course-correcting hard fork is possible, and all the coffee payments in the world are not meant to happen on the blockchain, you have to have layer two and all the other scalability solutions ,” he concluded.

Payment Channels

One of the core factors in the block size debate is how many transactions need to be recorded directly on the Bitcoin blockchain. For example, the Lightning Network, which is currently under development, proposes to update the Bitcoin protocol to support off-chain micropayment channels and then settle them on the blockchain.

Lightning Network developers Joseph Poon and Thaddeus Dryja’s talk wasn’t focused on their projects, with Dryja saying:

“The underlying assumption of these failure modes is that everyone will use Bitcoin as much as possible. We assume that everyone wants to use it.”

According to Dryja's hypothesis, if blockchain is used more and more widely, the required block size may grow by 50MB per year.

“In this scenario, you could run a full node on your phone. But 10 large institutions have the private keys. This is going to fail because the user doesn’t actually own the private keys. That’s the promise of Bitcoin being your own bank,” he continued.

In turn, Poon addressed the technical limitations of blockchain for micropayments, saying that the cost of a transaction using the Bitcoin network is 3 cents, making smaller transactions too expensive.

Words of Warning

While the conference was largely well-received, there were some controversial episodes at the end, with comments from MIT Media Lab and Wired magazine founder Nicholas Negroponte sparking outrage among many libertarian members of the bitcoin community.

"What is the difference between mission and market?" he asked. "If you think of it as a market, then you are my guest, but if you think of it as a mission, how do you do it? It takes a lot of different ways to make the world a better place."

Negroponte also harshly criticized the tendency of various sectors of the community to view the technology as a "get-rich-quick scheme" and to hoard Bitcoin in anticipation of its future value.

“What’s wrong with it being run by the government? If you think the government can’t do something like this, go take a train in Finland. Of course the government can do something like this,” Negroponte said, and he came to a conclusion:

“It’s the people who screw it up, not the technology.”

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