Bitcoin chief: The currency is in serious trouble

Gavin Andresen, who was designated as the chief administrator of the currency by the creator of Bitcoin in 2010, said that if things continue to go down the way they are now, Bitcoin will have serious problems by the beginning of next year. He played the role of "core maintainer" during the rapid rise in the value of Bitcoin, and after stepping down last year, he is still actively involved in related work. He believes that transaction delays are becoming more and more serious, and there are still 3.3 billion US dollars worth of Bitcoin in the system. As the value continues to depreciate and drives people away, it may eventually die.

Andresen’s bearish prediction stems from the fact that Bitcoin cannot process more than seven transactions per second. Compared to payment systems like Visa, which can handle tens of thousands of transactions per second, Bitcoin’s processing capacity is too small, and he expects this limitation to cripple Bitcoin by early 2016.

Andresen's proposed solution also caused an uproar among the crowd, especially those who use or work for Bitcoin. He stopped working with the developers who maintain the Bitcoin code and released his own solution - an alternative version of the Bitcoin software called BitcoinXT, and encouraged community users to switch to it.

If 75% of users adopt this solution after January 11, 2016, a two-week grace period will be triggered and a modified blockchain with higher capacity will appear. Critics believe that this is playing with the future of Bitcoin; Andresen said it is necessary to prevent the currency from strangling itself. The following is an interview with Andresen by MIT Technology Review.

How serious is the problem of limited transaction rate of Bitcoin?

This is a priority. Looking at the volume of transactions on the Bitcoin network, we need to solve this problem in the next four or five months. As we get closer and closer to the limit of transaction volume, bad things will happen. The network will become congested and unreliable. If you want reliability, you have to pay higher and higher fees on your transactions, and the fees are so high that people will stop using Bitcoin.

Why take such a controversial step by releasing a new version of Bitcoin?

This was a difficult decision. I've been lobbying pretty hard behind the scenes for the last eight months, even with developers, to agree that this is a real problem. Now that we've done this, I think people are finally recognizing that this is a high priority. I think it's going to be a good thing in the long run.

Some major Bitcoin companies have agreed to your proposed block increase, and some users have adopted BitcoinXT. Other companies and major Bitcoin developers have criticized your move and proposed alternative solutions. Not everyone supports you. Why?

It's a bit of a mess. There's no clear way to make decisions about modifying Bitcoin, there's no one right answer to this problem. It's pretty messy, there's no central committee, there's no one person who makes these decisions for Bitcoin; it requires a consensus of the people who run the software.

Do you think consensus can be reached?

It is obvious that the maximum block size will increase. However, I do not know how much, or when, it will increase. I think it is not yet clear whether my proposal will gain sufficient consensus among users and other parties in the ecosystem.

What will happen if no action is taken?

Transactions will become unreliable, and it will get worse over time. My concern is that there won’t be any serious events that will get people’s attention — the slow death of Bitcoin. I tried to sound the alarm, “If we don’t do this, Bitcoin will be dead in four years.” But no one bought into that idea when there was so much controversy.

If BitcoinXT is launched, it will recognize existing Bitcoins but not new Bitcoins obtained by people who do not have a conversion system. Is there a danger?

No one is left behind. Once the Bitcoin Core software sees that 50% of people have upgraded and you haven't, it will warn you to upgrade. And the economic incentive to switch is very strong - you definitely want your Bitcoin to be the same as everyone else's.

How is Bitcoin developing?

It's firmly established in a few niches and growing. An early use case is people using Bitcoin to trade with international contractors because it's easier than exchanging dollars for local currency. The main hurdle to mainstreaming Bitcoin is making it part of your normal life in some way, as a way to pay for income, but it's not clear how mainstream it will be. I think Bitcoin can go mainstream first in places that have dysfunctional banking systems or payroll systems.

Don’t invest your life savings in Bitcoin, though. It’s still an experiment, and it may still fail.