The second Bitcoin expansion seminar is coming, is BIP 101's last ditch effort?

Editor's note: The issue of Bitcoin block expansion has recently heated up again. The second Bitcoin expansion seminar will be held in Hong Kong this Sunday. Nejc Kodrič, CEO of Bitcoin exchange Bitstamp, recently said that the exchange will support the BIP 101 expansion plan this month. In addition, Marek Palatinus, the operator of Czech Bitcoin mining pool Slush, revealed in an interview with bitcoinmagazine that the mining pool will allow miners to vote for BIP 101 again. Previously, Slush mining pool suspended this option due to DDoS attacks. Note: This article is translated from an opponent of the BIP 101 plan. The original author's views are not necessarily correct, nor do they represent the opinions of the translator or editor. Readers need to think independently.

By now, I’m sure you’ve heard about the ongoing debate regarding block size. For the few of you who have been living in isolation, I want to tell you that Bitcoin is rapidly approaching its hard-coded 1MB block size limit, and a full-blown “war” has broken out between the core developers, mining pool operators, and Bitcoin companies. BitcoinXT is the first shot in the war. It has the potential to not only destroy Bitcoin, but itself. However, before we get into that, let’s take a quick look at the forces involved and where they stand. The vast majority of the participants fall into one of four groups:

Against BitcoinXT. Against block size increase (so far)

This group is against any changes to the protocol that would result in a hard fork. Their reasons vary. Arguably the most influential entities in this group are some pool operators in China, who feel that the larger the blocks, the more disadvantaged they will be in mining due to the current network conditions. They may prefer to accept such a fork in the future when network conditions are more favorable.

Oppose BitcoinXT. Oppose block size increase (that’s it)

The group wants nothing to do with the block size increase. For them, the block size issue is not a problem at all. Their view on Bitcoin is that it should only be used to send large amounts of money. Smaller amounts can be done off-chain or on sidechains. That way, the network does not need to be forked. Another common concern of the group is that if Bitcoin increases, it will become more centralized.

Oppose BitcoinXT. Support block size increase

The group hopes to increase the block size in the near future, but believes that BitcoinXT is the wrong way to do it. They believe BitcoinXT is a hostile takeover by a minority group.

Support for BitcoinXT

Self explanatory. This group thinks the debate has gone on long enough. They want bigger blocks, and they want them now. This group thinks the influence of a few has prevented Bitcoin from growing.

Summary

This is a very basic summary of what is happening right now. A few articles could go into detail about each group’s views and where they would like to see Bitcoin in 5 years. I won’t go into detail, but if you are interested, here are some good starting points: 1, 2, 3.

Interestingly, some possible Satoshi impersonator has weighed in on the issue, using strong language, even going so far as to say that if BitcoinXT prevails, he will "declare Bitcoin a failed project". Holy crap! Satoshi used this email in the past, and it was confirmed within the last month, so this is either from him or someone who managed to hack into his account. Either way, it's a strong statement regardless of who the sender really is.

Straight to the point

Putting all the politics aside, there are really two major forces at work in the Bitcoin ecosystem: mining entities and the economic entity. Interestingly, each draws power from the other. Miners mine because the economy provides value for their work. The economy also works because of the security protections provided by miners. It's a very delicate balance, and interference with either side can cause great harm to Bitcoin.

Bitcoin XT currently lacks consensus, but at the end of the day, miners are the ones who decide whether XT prevails. However, even if BitcoinXT is supported by the vast majority of miners, this does not mean that economic forces will support BitcoinXT. So what if some large exchanges or companies, such as Bitpay, refuse to support BitcoinXT? And what about users? Will every Bitcoin user and company migrate to XT because miners say so? Probably not. The uncertainty and panic caused by this disagreement is something Bitcoin has never seen before. Trust in cryptocurrency will be completely shattered, and it will take years to recover from this worst-case scenario, if it is possible to recover at all. All I can say is that this will likely lead to Bitcoin's premature death in the grave.

No matter how big the current divergence is, XT is unlikely to switch completely. The ecosystem is too fragile to be able to handle it. For this reason, I believe XT is not worth considering.

What about forks?

Many people don't understand what will happen when XT forks, or what impact it will have on them. Let's use the following wonderful mspaint to imagine the situation:

BitcoinXT is currently compatible with Bitcoin (and will remain so until it controls 75% of mining power), currently represented by the blue line (because it is Bitcoin). Once XT controls 75% of mining power, the block size will increase to 8MB. When XT creates a block larger than 1MB (represented by the yellow dot), it will fork and create its own network (represented by the orange line). Since Bitcoin only considers blocks smaller than 1MB to be valid, this block will be discarded. Bitcoin will continue on its own path, represented by the blue line. The two networks are now completely independent and incompatible.

This brings up some interesting and complex scenarios. Bitcoin deposited to an address prior to the fork block is not just Bitcoin, it is BitcoinXT. This is where things get murky. Mismanagement of addresses or some transaction types can result in the effective loss of Bitcoin and/or Bitcoin XT. Once XT is all realized, Bitcoin users will need to be more careful to make sure they don't accidentally destroy their XT, as it will retain some value. Thinking along these lines, there is another issue to worry about - exchanges.

Exchange issues

It has become all too common for users to give up control of their coins to third parties, such as exchanges. For these users, the consequences of BitcoinXT taking hold could be devastating. Since they have no control over their private keys, their BitcoinXT holdings would be zero. It would be up to the exchange to decide whether they get XT or not. It is not hard to imagine a scenario where, for one reason or another, the exchange refuses to distribute XT. They could easily argue that users only deposit BTC and therefore have no right to XT. Perhaps they just don't want to deal with the headache of properly distributing XT. Or, more simply, perhaps they don't support XT and refuse to give it away in small amounts as a handout.

The threat of XT is very real. As of last week, 44% of hashrate is currently voting for 8MB blocks (editor's note: these are outdated). Just yesterday, someone mined the first XT block on the main chain. In order for XT to prevail, 750 of the last 1000 blocks would need to vote for XT, so it's still a long way from destruction. However, those of you who have BTC on exchanges should take this as a wake-up call to get your money out and put it in an address you control. If you don't, you could lose your entire investment. Even ignoring XT, it's not a good idea to have XT on an exchange, as evidenced by MtGox and others before it.

If this post has taught you anything, it’s that keeping your coins on exchanges is a very, very bad idea.

in conclusion

For the reasons above, I don’t think BitcoinXT is the right way to go. My view is that eventually the block size limit will need to be increased (Moore’s Law shows that handling large blocks will become a piece of cake), but now is not the time, and XT is not the way to go.

Original article: http://cryptolife.net/bitcoinxt-every-bitcoin-holder-needs-know/
Translator: yyy
Translator's Bitcoin account: 1AZ8NqLgxnhxZSH44V1RhxuUp6Z6a4nhF6
Editor: Satuoxi
Source (translation): Babbitt Information (http://www.8btc.com/estonia-supreme-court ‎)