By Tom Simonite
The way things are going, the digital currency Bitcoin will
start to malfunction early next year. Transactions will become
increasingly delayed, and the system of money now worth $3.3 billion
will begin to die as its flakiness drives people away. So says Gavin
Andresen, who in 2010 was designated chief caretaker of the code that
powers Bitcoin by its shadowy creator. Andresen held the role of “core
maintainer” during most of Bitcoin’s improbable rise; he stepped down
last year but still remains heavily involved with the currency (see “The Man Who Really Built Bitcoin”).
Andresen’s gloomy prediction stems from the fact that
Bitcoin can’t process more than seven transactions a second. That’s a
tiny volume compared to the tens of thousands per second that payment
systems like Visa can handle—and a limit he expects to start crippling
Bitcoin early in 2016. It stems from the maximum size of the “blocks”
that are added to the digital ledger of Bitcoin transactions, the
blockchain, by people dubbed miners who run software that confirms
Bitcoin transactions and creates new Bitcoin (see “What Bitcoin Is and Why It Matters”).
Andresen’s proposed solution triggered an uproar among
people who use or work with Bitcoin when he introduced it two weeks ago.
Rather than continuing to work with the developers who maintain
Bitcoin’s code, Andresen released his solution in the form of an
alternative version of the Bitcoin software called BitcoinXT
and urged the community to switch over. If 75 percent of miners have
adopted his fix after January 11, 2016, it will trigger a two-week grace
period and then allow a “fork” of the blockchain with higher capacity.
Critics consider that to be a reckless toying with Bitcoin’s future;
Andresen, who now works on Bitcoin with the support of MIT’s Media Lab,
says it is necessary to prevent the currency from strangling itself. He
spoke with MIT Technology Review’s San Francisco bureau chief, Tom Simonite.
How serious is the problem of Bitcoin’s limited transaction rate?
It is urgent. Looking at the transaction volume on the
Bitcoin network, we need to address it within the next four or five
months. As we get closer and closer to the limit, bad things start to
happen. Networks close to capacity get congested and unreliable. If you
want reliability, you’ll have to start paying higher and higher fees on
transactions, and there will be a point where fees get high enough that
people stop using Bitcoin.
Why take the provocative step of releasing an entirely new version of Bitcoin?
It was a difficult decision. I’ve been lobbying pretty hard
behind the scenes for the last eight months, but was having trouble
even getting developers to agree that there was a problem. I had to go
public and actually release the code and let people essentially vote
with their feet. Now that we’ve done that I think you see people finally
coming around to the idea that this is a high priority problem. I’m not
happy that it had to come to that, but I think in the long run it will
be a good thing.
Some major Bitcoin companies have endorsed your proposed way of increasing the block size,
and some miners have even adopted BitcoinXT. Other companies and
prominent Bitcoin developers have attacked your move, and suggested
alternative solutions—not all backed by working code—that are rapidly
gaining support. What’s happening?
It’s somewhat chaotic. There’s no well-defined process for
coming to a decision about changes to Bitcoin and there’s no one correct
answer for how to solve this problem. Things are pretty messy – but
that’s by design. There’s no central committee. There’s no single person
making these decisions for Bitcoin; it takes consensus among the people
running the software. It’s a good thing that decisions like this are
really hard to make happen.
Do you think that consensus can be reached?
It’s pretty clear that the maximum blocksize is going to
increase. I don’t know exactly how or exactly when. I don’t think it’s
clear yet that my proposal will generate enough consensus among miners
and the other ecosystem players.
What will happen if nothing is done?
Transactions will get unreliable and it’ll get worse and
worse over time. My fear is there’ll be no critical event that causes
people to react—Bitcoin just kind of has a long slow death. I’m trying
to set off alarm bells for ‘You know, guys, if we don’t do this, Bitcoin
will be dead in four years.’ It’s not easy to sell that, especially
when there’s so much controversy.
If BitcoinXT activates, it will recognize
existing Bitcoins. But not new Bitcoins created by miners who don’t
switch. Is that dangerous?
It’s pretty hard to get left behind. Once the Bitcoin core
software sees that 50 percent of mining power has upgraded and you
haven’t, it’s going to warn you that you need to upgrade. It would be
awfully difficult to be taken by surprise. The economic incentives to
switch would be so strong—you want your Bitcoins to be the same Bitcoins
that everyone else is using.
How widely established is Bitcoin now anyway?
It’s firmly established in a few niche areas and growing
there. An early use case is people who pay international contractors in
Bitcoin because it’s easier than figuring out how to transfer dollars
into local currency. The major barrier to it going mainstream anywhere
is there has to be some way of getting Bitcoin as part of your normal
activity. Until part of your paycheck is regularly paid in Bitcoin, I’m
not sure how it would really go mainstream. I can imagine places in the
world where there are not functioning banking systems, or payroll
systems, where it could go mainstream first, because you’re not trying
to replace the way people are already doing something.
I still say do not invest your life savings in Bitcoin. It is still an experiment and it could still fail.
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