Cryptocurrency hits all-time high, then bounces back down
Bitcoin's contentious upgrade plan, known as SegWit2x, has been called off, sending the cryptocurrency price past $7,800 – an all-time high – and then down several hundred dollars as profit taking set it.
Mike Belshe, CEO of Bitgo, a Silicon Valley blockchain security biz, announced the decision via a post to the Bitcoin-SegWit2x mailing list.
"Although we strongly believe in the need for a larger blocksize, there is something we believe is even more important: keeping the community together," Belshe said. "Unfortunately, it is clear that we have not built sufficient consensus for a clean blocksize upgrade at this time. Continuing on the current path could divide the community and be a setback to Bitcoin’s growth."
Belshe's white flag includes the names of other supporters of SegWit2x: Wences Casares (CEO of Xapo), Jihan Wu (CEO of Bitmain), Jeff Garzik (CEO of Bloq), Peter Smith (CEO of Blockchain), and Erik Voorhees (CEO of Shapeshift).
Proposed in May to increase the Bitcoin network's block size from 1MB to 2MB and to change how Bitcoin transaction data gets stored, the plan was to make Bitcoin transactions scale better.
Bitcoin's popularity has led to network congestion and higher transaction fees. The average transaction fee is now more than $10, about twice what it was in 2011. The technical changes of SegWit2x supposedly would have helped the Bitcoin network function more efficiently.
But altering the way Bitcoin works requires community consensus from those participating in the project and not enough people were on-board with the change. SegWit2x represents a hard fork of the Bitcoin code and would have been incompatible with older versions.
However, lack of enthusiasm from the Bitcoin Core developers, among others, has delayed the technical reckoning that Belshe suggests must come.
"As fees rise on the blockchain, we believe it will eventually become obvious that on-chain capacity increases are necessary," said Belshe. "When that happens, we hope the community will come together and find a solution, possibly with a blocksize increase."
Bitcoin contributor Dave Harding in an email to The Register, welcomed the suspension of SegWit2x, noting that he had actively petitioned against it.
"In the short term, I think SegWit2x being called off means a huge decrease in potential user confusion in the next several weeks," said Harding. "It's hard for full-time Bitcoin developers, executives, employees, and enthusiasts to deal with all the implications of a controversial hard fork – meaning it's far beyond most ordinary part-time Bitcoin users to figure out what they need to do. This can lead to significant loses of money, and can quickly erode confidence in Bitcoin."
Longer term, Harding doesn't believe the end of SegWit2X will make much of a difference to Bitcoin.
"Whether or not the SegWit2x fork had been activated, many users (including myself) were planning to continue using the original Bitcoin protocol, and we would've eventually faced the same problems of high transaction fees that SegWit2x advocates wanted to avoid."
Harding argues that while high transactions fees may be perceived as a problem for Bitcoin, they also provide a way to pay for the security of Bitcoin mining in the years ahead.
"We've seen huge innovation over the past two years in allowing users to choose the most appropriate fee for their needs – paying a low fee when they can patiently wait for miner processing, or paying a higher fee when they need urgent assistance – and there are several additional improvements in the pipeline, such as second-layer payment networks (e.g. Lightning Network) and better handling of fee auctions using outsourceable fee-bump broadcasting," said Harding.
The abandonment of SegWit2x, Harding contends, will provide the Bitcoin community with more time and more incentive to address technical challenges rather than kicking them down the road. ®