ViaBTC ｜ Scalability Controversy: A Review of Bitcoin Forking History
Taproot, a soft fork upgrade of Bitcoin, has been approved recently and is set for activation on the Bitcoin network in November. Since its appearance, Bitcoin has undergone many upgrades, some of which are soft forks and others are hard forks. A soft fork is a change where old nodes recognize new blocks as valid, without causing a blockchain fork. By contrast, a hard fork requires all nodes to upgrade to the new version of the protocol. The incompatibility between the old and new versions of the software may lead to a blockchain fork. The Bitcoin Cash (BCH) fork event is a case in point.
In its early days, Bitcoin underwent hard fork upgrades, for example, the new function “OP_NOP”. Designated by Satoshi Nakamoto, that upgrade did not cause the blockchain fork. This is why such a hard fork upgrade won widespread support across the network back then. Bitcoin saw its first notable hard fork occurring on August 1, 2017, at 8 p.m. BCH miners started the hard fork at block height 478558. Six hours later, the first BCH block was mined by ViaBTC, which marked the official birth of Bitcoin Cash.
The split of BCH originated from the scalability problem of Bitcoin. As the number of Bitcoin users grew, so did the volume of transactions. With a 1MB block size limit, the Bitcoin network became congested. As early as 2015, Gavin Andresen, one of the Bitcoin Core developers, proposed that the maximum block size should be increased. However, the proposal failed to win support from other members of the Bitcoin Core development team, they believed that it was not in line with Bitcoin’s positioning.
Since then, the Bitcoin community has split into two distinct factions. One is the faction of bigger block supporters represented by Bitcoin ABC. In their view, Bitcoin, positioned as a peer-to-peer cash system, should be utilized for payment. The more people who use it for trading, the more likely it is to prove its value as a payment network. The other is the faction of smaller block supporters represented by Bitcoin Core, who argue that Bitcoin shouldn’t be used as a cheap, frequently-used means of transaction. Instead, they suggest optimizing the main chain structure with the Segwit solution and improving the payment experience in combination with Layer 2 network structures such as the Lightning Network.
The divide in the Bitcoin community grew wider over time. To bridge the gap between developers, the two factions in 2016 held a meeting in Hong Kong to express their views, finally reaching a consensus that the Segwit solution would be firstly deployed and then the block size limit be increased to 2MB through a hard fork. In 2017, the cryptocurrency market drew unprecedented attention. A streak of record-high prices worsened the congestion of the Bitcoin network. Given the fact that Bitcoin Core remained slack in increasing the block size to 2MB as agreed in the Hong Kong consensus, Bitcoin ABC finally decided to develop its own client software where the block size could be increased to 8MB and started to run it on August 1. This led to the first notable hard fork in Bitcoin history. Another consequence of the hard fork was the birth of a new currency type called “BCH”, with the current market value reaching $9 billion.
After the BCH hard fork event, the frenzy of cryptocurrency in 2017 triggered the emergence of more Bitcoin fork coins in the market, such as the Bitcoin Gold (BTG), an opponent of SegWit2x, and the Bitcoin Diamond (BCD), a coin making block generation five times faster compared to the original Bitcoin. Although there were as many as over 70 forked coins of Bitcoin available in the market, most of them bore no value and fell short of hashrates, therefore withering away soon.
However, Bitcoin forks didn’t come to an end. In 2018, Bitcoin ABC, the leading BCH development team, differed with the Bitcoin Satoshi Vision team headed by Craig S Wright, and directly lifted the block size limit to 128MB, thus sparking a hashrate war. Consequently, the Bitcoin Satoshi Vision team split BSV from BCH through a hard fork. Later, many users lost faith in BSV due to the fraudulent behavior of Craig S Wright. Ethereum founder Vitalik Buterin once suggested that most of the previous forked coins of Bitcoin could be ignored, except for BCH; BSV, for example, was a scam. (From “Endnotes on 2020: Crypto and Beyond” by Vitalik Buterin)
A look at the entire Bitcoin forking process reveals that the debate over the block size has never ceased, an issue that has caused the greatest divergence and controversy in the cryptocurrency community. Bitcoin, as a crypto representative, has never solved its problems of high miner fees and network congestion, which therefore undermines the user experience and hinders the Bitcoin network from becoming a widely accessible means of payment.
When El Salvador passed a bill to use Bitcoin as legal tender the other day, many people argued that the payment speed of the cryptocurrency was too slow to make it a legal tender for everyday use. Although the Lightning Network has been promoted in the country, it is far from highly accessible.
The divided opinion of Bitcoin Core and Bitcoin ABC on the Bitcoin positioning has led to the current co-existence of BTC and BCH. As the cryptocurrency with the largest market value, Bitcoin now boasts a massive user base, but it has gradually become a means of transfer exclusive for professional institutions and key accounts. For ordinary users, the high miner fee and slow transaction speed elevate Bitcoin’s transaction costs. The 100 free accelerations offered by ViaBTC every hour are often carved up by minders in seconds. This can indirectly attest to the dissatisfaction of users with the Bitcoin congestion. Compared with Bitcoin, BCH delivers a much better trading experience. Despite its suitability for transfers, BCH remains unknown to many users since it is a forked coin of Bitcoin. In other words, it has a smaller user base than the world’s best-known cryptocurrency.
Looking to the future, Bitcoin will face many problems with its transaction experience. The cryptocurrency has seen its trading advantages wearing thin, with the emergence of many other better digital currencies that can be used for peer-to-peer transactions. Far from the “peer-to-peer electronic cash system”, a positioning initiated by Satoshi Nakamoto, Bitcoin currently is more about providing its latecomers with the technical architecture and network structure for peer-to-peer transactions. Today, it has become a consensus-underpinned value storage network, as envisioned by the Bitcoin Core team.