The conflict over how to expand the bitcoin network has reached a critical point with no resolution in sight as the “halving” approaches in June, according to Paul Vigna, The Wall Street Journal’s “ Moneybeat ” blogger.
Bobby Lee, CEO of BTCC , compared the rift to a split between religions. The conflict pits bitcoin miners against bitcoin entrepreneurs. The Classic camp, consisting of the entrepreneurs, wants a more immediate fix to expanding the network by increasing the block size. The Core camp, consisting of miners, doesn’t want to increase the block size since some miners will be less likely to earn mining rewards.
Vigna gave an overview of the role mining plays in the bitcoin network. The Incentive Mechanism
For the bitcoin network to continue to operate in a decentralized manner, it needs its built-in incentive mechanism to sustain the miners that confirm the network’s transactions. In exchange for confirming batches of transactions, miners are rewarded. Twenty-five bitcoins are paid about every 10 minutes to the first miner to process one block of transactions.
Blocks have a size limit of 1 megabyte. As more people use bitcoin, the network has grown to a point where transactions are filling up the blocks. As a result, some transaction confirmations have started to slow. Some transactions have to wait for the next block of transactions to be confirmed. Increase The Block Size?
One solution to the problem is to increase the block size. This is technically feasible, but it affects the miners’ profitability. Enlarging the block size impacts mining’s economics, possibly shifting the advantage to larger miners at the expense of smaller ones. This could result in concentrating computing power in a smaller number of miners who would gain control over the network.
Concentration of power goes against bitcoin’s central purpose of being decentralized. […]
