At the beginning of October, I tasked myself with finding an answer to a looming question: should I support SegWit2X, or should I stick with Bitcoin Core (the No2X crowd)?
On the surface this looks like a trivial matter – we have a big problem with congestion, and the combination of larger blocks and Segregated Witness is giving us both a short term solution and a long term route to further improvements that will ultimately make block limit a nonissue. Right?
But if the matter was indeed so trivial, why did it generate so much contention? Why did so many people become so political about it, and why did things become so personal for everyone? Why was everyone trading insults instead of sticking to constructive arguments? And, finally, why is everybody reneging on the New York Agreement when it looks like a clear compromise and seems to have almost unanimous support?
After reading many opinions and user comments in the Disqus comments sections under several Bitcoin news sites, and after digging through lots of Bitcoin related articles on medium.com, I believe I finally understand both sides of the argument, and can take a stand myself. I will try to get explain my thought process here, and I will try very hard to stick to the facts and not sound judgmental. This issue has created so much unneeded toxicity, I really don’t want this to happen to my blog. So, here we go.
What Agreement is the New York Agreement?
The New York Agreement (NYA) was forged in an attempt to break a year-plus long standstill between proponents of two different solutions to the block chain congestion issue that made Bitcoin transactions slow and expensive. It was reported as a huge success, with almost universal support. It was thought that everyone who did not like SegWit for one reason or another would go with Bitcoin Cash and their 8MB block limit, and that all would be great.
The first signs that not all was well and good appeared in early September. Suddenly it became apparent that many people did not support at all the NYA, and even though SegWit was activated, they wouldn’t ‘honor’ the other side of the bargain and would not stick around for the 2X part.
I am a businessman, and staying true to my word means the world to me. I simply couldn’t understand how somebody would not uphold their promise. Who were the people who would break their own word over this?
Important Parties outside of NYA
It turned out that I was misinformed. NYA was never that grand consensus it was reported to be, and many important voices went unheard when it was signed. Among the folks who never intended to support NYA were all developers that maintained the Bitcoin Core reference client. Although most of them undoubtedly have personal financial interest in Bitcoin, they are also the ‘purest’ supporters of the Bitcoin idea: most of them spent tons of time working on this project for years and gave it their best efforts long before it was successful, while us (merchants) and pool owners / ASIC manufacturers only appeared when it was already apparent that Bitcoin is big.
Also, the support for NYA was measured wrong. NYA support was signaled by a large majority of miners, but all miners are not all Bitcoin users. It can be argued that decisions such as the size of the block are not for miners to decide, as their economic initiatives are different than those of the other Bitcoin users. Without miners Bitcoin will not survive, but if Bitcoin sucks for whatever reason (slow, expensive transactions maybe?) it is the users who will decide to keep transacting or abandon it completely. And once there is nobody left to transact, miners can mine as long as they want, but the Bitcoin they earn will cost nothing. Also, signaling NYA support by the pool does not mean the individual pool members support NYA.
I’d rather not get too deep into the topic of who has rights to create consensus, as the topic is still quite painful and controversial. But I will say this: the ‘agreement’ part in NYA is very misleading. It is a very narrow agreement, very far from consensus among all interested parties (developers, miners/pools, and merchants/users).
Motives & Behavior
Mining pool owners and ASIC manufacturers have financial motives that are easy to understand. High transaction fees are good for them, but so are a larger number of transactions, even if individual cost is lower.
Merchants also have clearly defined expectations: we want Bitcoin payments to be cheap (so that we can profitably sell even the smallest goods and services) and reliably fast (so that we don’t delay delivery of the goods or services unnecessarily).
Thus, forward-thinking miners1 and all merchants are naturally inclined to support expansion of block chain capacity by all technical means available. Making room for more blocks seems like the most apparent of all apparent solutions to this problem. SegWit, with its promise to bring Lighting Network, Schorr signatures and other “second layer” tools on top of the original block chain, appears significantly more complicated and naturally caused suspicions.
Here was something that resembled an Occam’s Razor situation with a twist: increasing the block size is trivial, and the alternative (adding a whole layer on top of the existing infrastructure) looks so contrived that it is highly unlikely anything good would come out of it. So let’s go with increasing block size and f*ck the other solution.
Things were not made easier when the two sides in the argument quickly abandoned technical discussions and started trading political accusations and personal insults. That is why the underlying issue quickly became forgotten and gave way to speculations that ‘Bitcoin is getting wired for settlement’ and ‘Bitcoin Core has sold out to the banksters’.
Bigger Blocks == More Centralization. Really?
Many No2X non-technical supporters tried to justify their position by arguing that bigger blocks encouraged centralization, because it would make it even harder to store the full block chain, and subsequently the number of full bitcoin nodes would continue to decrease.
My own reaction to that was to call bullshit: the 1TB HDD for my own Bitcoin full node cost me around $45, which is the same as the cost of 5 ‘quick’ transactions during the congested times in August. I would gladly pay to upgrade my HDD every year or every other year to support the larger block chain if that would keep my fees, and the fees of my customers who would pay me in bitcoins, low!
However under this silly argument about hard disk storage and centralization lay the heart of the problem. It took me a long time to find some meaningful information, but I finally started coming upon posts by Bitcoin Core developers and other reports that made much more sense.
(Block) Size Doesn’t Matter; What Matters is How You Use It
The problem with larger blocks is not a problem with storage per se. Rather, it is a problem with the nodes having to validate all the transactions that would go into these larger blocks. Bitcoin devs like Luke Dashjr were simply afraid that the many underpowered nodes (a lot of nodes ruin oil Raspberry Pi units) would not manage to verify all transactions within the time it takes miners to uncover new blocks.
By removing some data from the block chain and by implementing off-chain transactions it would be possible to relieve these underpowered nodes. But implementing fixes requires time, and we as direct (miners) and indirect (merchants) profiteers from Bitcoin were not willing to give Bitcoin developers this time. With our eyes blurred by ambition and desire to use the block chain for our own convenience and enrichment, and without the technical knowledge and experience required to make a worldwide P2P network do our bidding, we were quick to turn around and judge the very people who made it possible for us to use Bitcoin and profit from it.
Patience is a Virtue
Once I came to this realization, it was quite easy to look back and reassess the facts. SegWit does work, and the number of compact transactions is steadily increasing. Transaction fees in September and October are much, much lower than during the August craze. Heck, I even wrote about this myself.
So, do we really have the time to spare and give it to the developers? Of course. When did we become so impatient with Bitcoin that we began demanding everything right here, right now? Bitcoin is only 8 years old, and there are so many other things about it that aren’t fixed yet. In Bulgaria, where I live and conduct my business, I still can’t legally use Bitcoin for accounting purposes, because the Bulgarian National Bank doesn’t publish a BTC:BGN exchange rate and the National Revenue Agency can’t recognize it as a valid currency without an official rate. Accounting practices are far from harmonized across Europe or North America, and I am pretty sure Bitcoin scaling problems will be fixed much sooner than national legislation.
Once I realized all of this, it was very simple for me to take a position in this argument with complete inner confidence. I shall keep supporting Bitcoin as it stays, and I shall not support attempts at changing the block size. I will give the Bitcoin developers whatever time is needed to fix the congestion issue, and if in the meanwhile it becomes absolutely necessary to use a less congested coin, I can always consider accepting Bitcoin Cash instead. I have no need for a B2X Bitcoin.