| Bitcoin Averts A Split |
| Written by Mike James | |||
| Saturday, 22 July 2017 | |||
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The big problem with Bitcoin is that it has been far too successful. The algorithm it uses is a brilliant, if slightly unworkable, solution to the problem of distributed trust. It works, but it is slow by design. Now there are moves to improve the algorithm and this has nearly split Bitcoin into two different cryptocurrencies.
With so much at stake the Bitcoin community has been very nervous about the future. So much so that there is even a website dedicated to detecting a fork of the block chain - https://www.btcforkmonitor.info/. The block chain is what records Bitcoin transactions and it is both the clever part of the algorithm and the problem. When it was designed, the 1Mbyte block looked plenty big enough to hold all of the transactions that a single addition to the block chain represented. To add the block to the block chain, the block has to be verified by a process that involves a "proof of work". The first "miner" to complete the proof-of-work task gets to verify the block and add it to the block chain. The miner receives a reward for doing this and miners compete to complete the proof-of-work first and it is the reward that keeps them at the task. Recently the number of transactions has reached the point where it can take hours or days to get a verification and processing charges have to be paid to speed things up. To give you some idea of how bad things are. the Bitcoin network manages to process roughly seven transactions per second, which can be compared to Visa's 2000 transactions per second. The average cost of a Bitcoin transaction is about 83 cents.
There are two possible solutions to the problem. The most obvious is to increase the block size and this is the option said to be favored by the miners. However, Bitcoin Core, the developers of the software used, seem to favor moving some of the transaction details off the block chain. It is almost as if the block chain moves away from being a complete ledger and more like an index to the ledger. The proposal was initially called SegWit for Segregated Witness meant moving some data from the block chain. It also proposed increasing the block size to 4Mbytes and this was the part that the miners didn't like because it represents more work for the same reward. To get agreement SegWit2 was proposed and this changed the block size update to 2Mbytes, to be implemented three months after SegWit was implemented. The proposal was put to everyone as part of BIP (Bitcoin Improvement Protocol) 91 and voting was done by miners using SegWit to mine blocks. By the end of the week support for BIP 91 reached nearly 100% and was well beyond the 80% threshold needed for adoption. This should mean a stable Bitcoin for some time to come, with improved transaction speed and lower transaction costs. However, it isn't likely that the change will make Bitcoin scale to the point where it can become a cryptocurrency for micropayments. Transaction volumes are likely to remain a constraint as the whole algorithm is limited to one block every ten minutes on average.
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| Last Updated ( Saturday, 22 July 2017 ) |
