It looks like the digital money of the future is facing an existential crisis and the threat is coming from the very people who helped create it: the developers.
It comes down to a squabble over who gets to decide its fate. Last week two of the currency’s main developers released a competing version of the software that powers Bitcoin: Bitcoin XT.
One of the developers, Mike Hearn, says its adoption is essential for Bitcoin to cope with growing demand. But some are resisting this change because it will affect control over the currency.
Among the resistors are Bitcoin miners – people who earn Bitcoin by processing complex math problems – many of whom are situated in China. They will not adopt to the new platform unless it is universally accepted.
Here comes the science bit: the issue comes down to Bitcoin’s blockchain, a digital record of transactions which comprises 1MB blocks. Bitcoin XT wants to turn these blocks into larger 8MB blocks. Smaller blocks mean better security, but bigger blocks mean the technology is easier to scale for wider adoption.
If a consensus cannot be reached over which is better, the currency will be forked, totally forked. The worst case scenario, peddled by those wishing to stick to the current platform, is that the fork will render the currency worthless. Hearn thinks otherwise:
We don’t think the sky will fall if the chain forks. We think people on the small-blocks side of the chain will upgrade and continue on the bigger-blocks side. There will be plenty of time for them to know about the change and prepare.
Whatever happens there is lot riding on Bitcoin. Not only has millions of dollars of venture capital cash been injected into startups supporting the ecosystem, but entire economies – like Greece – could rely on its success.
Maybe this is a sign that the future of finance will not be defined by the battles on the trading floor or in the boardroom, but by a bunch of geeks squabbling over a laptop.
Photo: Antana