The Looming "Hard Fork Missile Crisis"
We will leave the price talk to the analytical sections below because this week we want to discuss a pressing and existentially important issue facing bitcoin at the present time. Few are aware of this potential crisis, which is why we are highlighting it here.
First, let us start by saying that this is in no way meant to induce panic, or any other emotion for that matter. We simply want to inform our readers. So what’s going on? What is now being referred to as “the hard fork missle crisis” (http://qntra.net/2015/01/the-hard-fork-missile-crisis/) is turning out to be just that, a crisis. While the intricate mechanics of the arguments are beyond the scope of this publication, what is boils down to is whether or not to expand the maximum block size from 1MB to 20MB via a “hard fork” of the bitcoin network.
Now, bitcoin has seen a hard fork before, and has undergone many soft forks, however this one is different because there is no concensus yet. One side (Gavin/The Foundation) believes that in order for bitcoin to become a widely adpoted payment network and ecosystem, blocks need to allow for many more transactions than the current limit permits (~7 tx’s per second). This can only be done by increasing the block size. They contend this must be done in the near future, a point we take issue with.
In the other camp are those that claim that blockchain space needs to remain scarce in the long run to ensure network security even after the block subsidy ends. This happens via transaction fees, and these fees will only be large enough if space is scarce. Additionally, they posit that waiting until the limit is reached in order to collect data on the working economics of tx fee elasticity is vital prior to enacting an irreversible change to the protocol without the proper information.
While we tend to side with the bitcoin purists (do no increase block size until the proper data has been collect and research has been done), we know that the discussion is a very important one with respect to the long term sustainability of the project. Eventually block size does ultimate need a mechanism for expanding as necessary to keep the economics/incentives properly aligned and preserved, but lets make sure we do it right.
The thing that needs to be avoided at all costs is a rush to action. A hard fork that is not adopted by ALL the miners could lead to an all out blockchain war between “GavinCoin” and “BitCoin”. Lets continue the conversation (without threats), and the correct course will present itself in time.
BTCUSD 4hour chart [Bitfinex]
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