On August 15th, Bitcoin XT was released, creating what is known as a 'fork' in the blockchain. On one side of the fork is the original code known as 'Bitcoin Core' and on the other, the newly released 'Bitcoin XT'. The fork has been the topic of heated debate within the Bitcoin community, with some referring to it as Bitcoin's 'Civil War'. Bitcoin XT has been developed by Bitcoin Veterans Gavin Andresen and Mike Hearn.

The main subject of the internecine, is whether or not to increase the block size. In 2010, an upper limit of one megabyte was placed on the block size. Hearn and Andresen want to increase the block size to eight megabytes. A block size 1MB limits Bitcoin to 7 transactions per second (10,080 per day). It is estimated that the current system will exceed this volume by 2017. Bitcoin XT, aims to increase the block size in order to avoid running out of capacity.

Bitcoin XT and Bitcoin Core, are almost identical and are running on the same blockchain. XT will not increase the block size until January 11 2016, and will only do so if 75% of the Bitcoin Community is using the XT version of the system. This gives people time to decide which system they want to support before the final consensus.

What's the Forkin Problem?

From the outside, we would not expect Bitcoin XT to cause this much controversy. After all, Bitcoin, and the blockchain are run on an open source system. This means that developers are free to make alterations as they see fit. It is up to the community to decide whether or not to adopt these changes. This is precisely what Bitcoin XT appears to be doing. They have proposed a change, and have established an avenue for the community to place their votes.

The issue is about more than just the block size, it's also philosophical. Some believe that increasing the block size would deviate from the intended design of Bitcoin as set out by Satoshi Nakamoto (who set the block size limit in 2010). Others believe that the 1MB limit was only intended as a temporary solution, and that Satoshi acknowledged that at some point the block size would need to increase to cope with the growing network.

Another objection is on the mining side. Increasing the block size, means that it would take more computing power per block to mine Bitcoin. This would discourage individuals from mining Bitcoin, and cause mining to become more concentrated within the large scale mining operations. It is our opinion that Bitcoin mining is already becoming centralized. Bitcoin mining has become less profitable thanks to increasing difficulty and the falling value of Bitcoin. This problem will only become worse when the mining reward is halved (which is expected to happen between 2016 and 2017). Larger blocks gives the system more processing power, but also makes mining less attractive.

How Will the Forkin War End?

If Bitcoin XT successfully gains 75% consensus, then their code will become the new standard. If they do not, then Bitcoin Core will remain the standard. It would appear that some of the larger players in the Bitcoin world are supporting Bitcoin XT, as stated in a communal letter signed by representatives of 9 companies. We can't predict who will win the consensus, but as with so many civil wars, we expect this one to end in a split.

Essentially Bitcoin will split, and an alt coin will be formed. Those who won the consensus will retain the name Bitcoin. The other group will have to operate a new cryptocurrency under a new name. No matter which side wins, this forkin war is bad for Bitcoin. It gives an image of a system with uncertain direction, and no clear leadership. At a time when Bitcoin is striving for increased adoption, negative publicity can be costly.

What are your thoughts? Would you support a larger block size? Should XT form their own alt coin, or is their version within the spirit of Bitcoin? We'd love to hear from you in the comments section below.