The fragmented mandate on Bitcoin’s scaling issue has been going on for more than a year. The issue revolves around the size of the blocks which are added to its blockchain​. Bitcoin blocks have a limited ‘storage’ capacity of 1MB under the current popular system of Bitcoin Core. With increasing usage, congestion issues have been reported on the Bitcoin network, resulting in more time and transaction fees necessary for verifying transactions. To resolve this, different sections within the Bitcoin community pitched different solutions to enable smoother running by decongesting the blocks. However, there was a failure to reach a consensus.

Blocks are files where data pertaining to the Bitcoin network is permanently recorded. A block records the most recent Bitcoin transactions that have not yet entered any prior blocks. Thus, a block is like a page of a ledger or record book. Each time a block is ‘completed’, it gives way to the next block in the blockchain​. A block is thus a permanent store of records which, once written, cannot be altered or removed.

"Such debates are not a one-time issue"

Mahin Gupta, co-founder and CTO of Zebpay told Investopedia, “Bitcoin is a decentralized technology. Which means discussions on changes to the network happen in the open, in public and not behind closed conference room doors. These debates are visible and can be messy. This is a feature of bitcoin, not a problem. Such debates are not a one-time issue. They will keep happening as bitcoin grows in popularity. I am confident that the community will come to a consensus soon and then we shall debate how to scale it again.” (Related reading, see: What Is Bitcoin Unlimited?)

Among the various solutions, Bitcoin Unlimited, SegWit2x, BIP148, gained more than attention than the others.

Segwit2x

SegWit2x came into the limelight in May when the Digital Currency Group (DCG) published a post titled, “Bitcoin Scaling Agreement At Consensus 2017.” According to that post, the community supports the parallel upgrades to the Bitcoin protocol based on the original Segwit2Mb proposal. It includes: a) Activate Segregated Witness at an 80% threshold, signaling at bit 4, b) Activate a 2 MB hard fork within six months.

According to the post, the group of signed companies is a good representation of the Bitcoin ecosystem. As of May 23, this group represented: 56 companies located in 21 countries, 83.28% of hashing power, $5.1 billion monthly on chain transaction volume and 20.5 million bitcoin wallets. Under the original proposal, 95% threshold was needed which has been lowered to 80%. The schedule for SegWit2x mentions July 21 as the day when signaling begins.

BIP148

Meanwhile, BIP148, another scaling solution, will be triggered on August 1, 2017. BIP148 is all set for User Activated Soft Fork (UASF) – “a mechanism where the activation time of a soft fork occurs on a specified date enforced by full nodes, a concept sometimes referred to as the economic majority.” Normally, a USAF does not to seek miners support, as it's a ‘user-activated’ soft fork. However, in this case, it does.

The UASF post reads, “BIP148 is a UASF that is designed to cause the existing SegWit MASF (miner activated soft fork) deployment to cause activation in all existing SegWit capable node software (which currently is 80% of the network nodes). From August 1st, 2017, miners are required to signal readiness for SegWit by creating blocks with the version bit 1. This will cause all SegWit ready nodes, which make up over 80% of the network, to activate and begin enforcement.”

With Segwit2x and BIP148 going active one after the other, fear on incompatibility has emerged. To this, John Light has recently said in his blog post, “As far as I can tell, BIP148 is not incompatible with the Segwit2x agreement. At the very least, BIP148 does not violate the spirit of the agreement, since it both activates SegWit and in no way, prevents signatories from running code for a 2MB hard fork once it’s ready.”

Bitcoin Unlimited

The third solution, Bitcoin Unlimited, advocates complete freedom and flexibility to increase the size of blockchain and this will be done by miners. Jihan Wu has been advocating and pushing for accelerated adoption of Bitcoin Unlimited. BITMAIN, a company co-founded by Wu has recently published a blog which calls, “BIP148 is very dangerous for exchanges and other business.” (Related reading, see: Who Is Jihan Wu, , and Does He Basically Control Bitcoin Today?)

A split in the network is the last thing the Bitcoin community would want at this point. So, are these developments a warning sign? May be not. “We recently partnered with China in a big way, if any of our business models were threatened by the scaling debate with bitcoin blockchain, I would be the first to give my opinion. Right now, I have no comment” said Ronny Boesing, CEO of OpenLedger to Investopedia.

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