The Blocksize Wars

Most Bitcoin books are bad. Many fall in the category of overzealous Bitcoin Maximalist tracts, reading more like religious scripture than factually enlightening non-fiction.

The “Blocksize Wars” is of a different breed. The title admittedly sounds boring. And the subtitle – “the battle for control over Bitcoin’s protocol rules” – even more so.

That is precisely why you should read it. Jonathan Bier chronicles what on the face of it looked like a quite narrow technical disagreement within the Bitcoin community, but which revealed a deep underlying philosophical schism, with two competing visions for what Bitcoin should be. This was Bitcoin’s equivalent of Christianity’s split between Catholicism and Protestantism or the Shia-Sunni divide within Islam.

The two diverging factions that went to war between 2015 – 2017 became known as the small blockers and the big blockers. The former being textualists who wanted to stick to Bitcoin’s pseudonymous founder Satoshi Nakamoto’s original idea of how the cryptocurrency should work, whereas the latter faction preferred a more constructionist approach allowing greater scope for amending and adapting the Bitcoin protocol like a living constitution to new circumstances as time goes by.

The primary point of contention was Bitcoin’s blocksize limit, i.e. the amount of data available in each Bitcoin block. Whereas the big blockers deemed it necessary to progressively increase the blocksize limit in order to facilitate faster and cheaper transactions on the Bitcoin blockchain, the small blockers wanted to keep the original 1MB blocksize limit, (which was actually not included in the code at the time of Bitcoin’s initial release in January 2009 but was introduced by Satoshi a year and a half after in the summer of 2010).

As Bier recounts at stake was not only the technical matter of the blocksize limit, but the fundamental question of how Bitcoin’s protocol rules could be modified, and by whom. Does power over Bitcoin lie with miners or with the ultimate end users? And what time preference should Bitcoin be dictated by? Should Bitcoin be like a tech startup and prioritise gaining market share in the short term: or was it a long-term project, a new global money, that should think decades ahead when making decisions? Should its aim be to offer a fast and cheap payments network to compete with the likes of Visa and Mastercard? Or should Bitcoin’s rather aim to be a form of digital gold, that is used more as a store of value than for small daily transactions?

The plot has arguably gained renewed relevance in light of Tesla founder Elon Musk’s emergence in the cryptosphere as a late-coming big blocker.

The reason why Musk has turned his attention to Dogecoin is because his side of the argument lost. The small blockers won the war.

Why? Did Musk miss something?

At least the arguments Musk have recently been making about Bitcoin scalability sounds like a re-enactment of the [losing] arguments the big blockers made during the Blocksize war.

I will not provide a full account of the war. For that, read the book. But for the briefest of summaries: The opening shots were fired in August 2015 when ur-Bitcoiners Mike Hearn and Gavin Andresen threw their weight behind a new, incompatible version of Bitcoin, known as Bitcoin XT, that would increase the blocksize limit to 8MB and progressively double it every two years until 2036.

According to the big blockers such an increase was necessary for Bitcoin to be able to process more transactions cheaper and faster, which in their world view was a prerequisite for Bitcoin to offer a viable use case and gain mass adoption.

The scheduled implementation of this proposal was five months later in January 2016, and required a vote from the Bitcoin miners, with 75 percent support set as the threshold for activation.

What made the proposal instantly controversial was that it incompatible with the existing Bitcoin network, and thereby would require anyone running a Bitcoin node – (the decentralised network of computers that validate transactions and store the entire blockchain) – to upgrade their software.

If the upgrade had gone ahead it would have constituted what is referred to as a hard fork, i.e. a point where the blockchain can bifurcate and potentially split into two separate coins. To cut a long story short, Bitcoin XT and its successor proposals failed, but a hard fork splitting Bitcoin in two was eventually what happened with the birth of Bitcoin Cash on August 1st 2017. (And then in November 2018 Bitcoin SV split off from that chain again).

So why did the small blockers win the war? And what did it mean?

Interestingly they did win despite being the presumptive underdogs. Gavin Andresen was the closest thing to Satoshi Nakamoto’s heir apparent, and did not hide his pretensions to the throne. Almost all the big crypto corporations, Coinbase notably, supported the big blockers.

But as in Afghanistan an apparent underdog may very well conquer a materially superior enemy if it has strategic patience and more nimble tactics. Having a better understanding of the battlefield also helps.

The main philosophical differences between the small blockers and the big blockers can be summarised more or less as in the below table.

Small Blockers:Large Blockers:
Long termShort term
System resilienceUser experience
SustainabilityGrowth
Theoretical / ScientificPragmatic
Cryptography nerdsBusiness-minded
Ultra decentralisationMild Decentralisation

To over-simplify: the nerds beat the suits.

For uninitiated but crypto-curious readers The Blocksize Wars might be as good a primer as any. You have to jump down the rabbit hole from somewhere. Bier provides a very well detailed account of all the battles of the war, with all the technical intricacies at stake, which are interesting in and of themselves, particularly for more initiated readers. Yet he manages to convey the essence of the opposing world views in the overarching philosophical conflict in terms that are perfectly clear even to the lay reader.

The fact that Bitcoin is a decentralised network with an unknown founder makes it stand out remarkably from other emerging technologies in recent times, that have mostly fallen under the control of centralised oligopolies, the tech giants of Silicon Valley and their autocratic founders coming first to mind. As venture capitalist Marc Andreessen said in a recent interview the immaculate conception of Bitcoin from the depths of the Internet and the fact that its creator remains shrouded in mystery “is one of the most amazing things I have seen my entire life.”

What Bier’s book drives home very clearly is how the decentralised nature of Bitcoin limits the power of any one actor. For example Gavin Andresen thought he could use his authority as Satoshi’s heir to force through his vision for Bitcoin. But his hubris was quickly humbled. Likewise the “Fake Satoshi”, Craig Wright. As well as the Bitcoin miners.

At the outset of the Blocksize war the balance of power was assumed to lie with the miners. But what the war revealed was that while the miners play a vital role in running and securing the Bitcoin network, they are far from all-powerful and cannot force through change without the support of nodes and end users.

The most feared known unknown for Bitcoin is a so-called 51% attack, whereby a constellation of malevolent miners gains control of more than 51% of the network and can manipulate the Blockchain in order to potentially double-spend coins.

However, after reading Bier’s book you do start to question how real the risk of a 51% attack really is for Bitcoin, (Bitcoin SV appears to have suffered one recently). It is questionable how much rogue miners would be able to gain from committing a hostile attack without ipso facto negating the theoretical gains from the attack.

Without consensus the attackers may not be able to get very far. Even if the attackers should succeed in sustaining a malignant chain with a bigger number of blocks in it than the main chain for some time, it is questionable if they will be able to force acceptance of this chain on the rest of the community. The Blocksize war proved that the majority chain will not necessarily be considered the “legitimate” chain, solely on the basis of being the majority chain. In all likelihood the price of “Bitcoin” on the illegitimate chain would plummet, thus undermining the profits of the attackers and dis-incentivising miners from working on the chain. Even a successful 51% attack could thus easily prove to be a Pyrrhic victory at most, (as demonstrated in the somewhat similar case of Justin Sun’s failed attack on STEEM, which Vitalik Buterin has written interestingly in his post on Legitimacy).

It has become a cliche that bitcoiners are “in it for the tech”, not the money. The fact of the matter however is that the money talks. Technology follows the money. The two are inseparable. Technology will gravitate toward the most valuable blockchain. Value in turn depend on trust and legitimacy. If Bitcoin does not have trust and legitimacy it will not have value either. The reason why Bitcoin does have trust and legitimacy is because it is consensus-based. It is the monetary democracy. Attackers can in theory succeed in taking over the network, but not without dooming it and themselves. The likelihood that there exist an entity that possesses both a) the technological sophistication and resources to master a 51% attack, and b) the monetary ignorance to actually carry out such a self-defeating attack, must therefore be considered to be quite small, though it cannot be ruled out completely.

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