Bitcoin has surged more than 100% since the beginning of 2017, breaching the crucial $2,000 mark for the first time in May. Bitcoin’s price continues to trend higher and is now hovering around $2,300 mark. Despite strong fundamentals favoring the rally, the debate about its block size has been a dampener. Commonly referred to as bitcoin’s scaling disagreement, it revolves around the size of the blocks which are added to the blockchain.
Bitcoin blocks have a limited ‘storage’ capacity of 1MB under the original model, but with increased usage and transactions, congestion problems were reported. Thus, different segments within the bitcoin community pitched different solutions to enable smoother running by decongesting the blocks. However, there was a failure to reach a consensus.
On May 23, 2017, Digital Currency Group (DCG) published a post titled, “Bitcoin Scaling Agreement At Consensus 2017.” According to the post, the community supports the parallel upgrades to the bitcoin protocol based on the original Segwit2Mb proposal. It includes,
- Activate Segregated Witness at an 80% threshold, signaling at bit 4
- 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 represents: 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%. (See also: What Is Bitcoin Unlimited?)
The underlying original proposal reads, “Segwit2Mb is the project to merge into bitcoin a minimal patch that aims to untangle the current conflict between different political positions regarding SegWit activation vs. an increase of the on-chain blockchain space through a standard block size increase. It is not a new solution, but it should be seen more as a least common denominator. The sole objective of this proposal is to reunite the bitcoin community and avoid a cryptocurrency split.”
The price of Bitcoin was hovering around $1,300 levels at the beginning of May, and has moved up by $1,000 within the month so far. This is despite the negative publicity and drop by $200 after the ransomware attackers demanded payments in bitcoin. The scaling agreement is likely to provide support to Bitcoin’s price rally. (See also: Bitcoin Price Drops After "WannaCry" Ransomware Taint)