DEFINITION of Bitcoin XT
A fork from Bitcoin Core that proposed increasing the size of blocks from one megabyte to eight megabytes. Bitcoin XT gained first attention in 2015.
BREAKING DOWN Bitcoin XT
Bitcoin was started by Satoshi Nakamoto in the 2008 paper “Bitcoin: A Peer-to-Peer Electronic Cash System.” The paper described the use of a peer-to-peer network as a solution to the problem of double-spending, with transaction details added to the end of blockchains. Managing the blockchains required substantial computational power in order to maintain security.
At the heart of bitcoin is its reference software, first released by Satoshi Nakamoto in 2008. This release is referred to as Bitcoin or Bitcoin Core. Since inception, the bitcoin community has proposed a number of improvements to the software, often focusing on increasing the size of blocks in order to improve transaction speed.
Blocks are files where bitcoin data is permanently recorded. They are created when miners – people who provide the computing power required to maintain records of bitcoin transactions – add new transaction information through a hashing algorithm. Each time a block is completed it gives way to the next block in the blockchain, with blocks in Bitcoin Core are limited to one megabyte. As the number of transactions increased, this size limit resulted in the development of bottlenecks that slowed down processing speeds. Bitcoin XT sought to address this capacity issue by increasing the size of the blocks.
In 2015, Bitcoin XT proposed increasing blockchain sizes from 1 megabyte to 8 megabytes. In effect, this would increase the number of transactions that could be processed per second eightfold. After the initial block size increase, the blocks would double in size each subsequent year. This approach was considered aggressive, though did gain initial support because increasing block sizes was considered one of the primary ways to improve bitcoin transaction performance.
Because bitcoin is not controlled by a single entity, decisions concerning changes are made through consensus. Any changes proposed have to receive substantial support from the greater bitcoin community. One of the primary reasons for this approach is that any organization that pushes forward with a change that other groups have not agreed to can result in “forking”, meaning that a different standard is being used from the previous one. Ensuring that a proposal receives majority support reduces the possibility of conflicting standards being used by different bitcoin nodes and miners. Once a new standard is accepted, previous software standards become obsolete.
By early 2016, the number of nodes using Bitcoin XT began to decline. Other proposals, such as Bitcoin Classic and Bitcoin Unlimited became more popular.