Despite bitcoin’s recent successes, there’s a war breaking out in the community which threatens the digital currency’s future. Transactions have become time consuming and problematic which could turn customers off, and serious issues have arisen over the best way to deal with it.
According to Business Insider, developers and stakeholders are locked in a battle over how best to scale the network, stating that “bitcoin is in crisis”.
Problems recently faced were down to the currency becoming so popular that the software can’t handle the traffic flying through it. The war brewing is focused around what’s the best cause of action to take to ensure the currency can flourish and continue to grow.
‘average time it takes to complete a bitcoin transaction is 13 minutes’
Business Insider breaks down the complex logistics of where the issues lie: “Bitcoin transactions are processed in so-called “blocks” that involve complex cryptography to verify and set the transactions. But as the currency grows and more and more transactions take place, the one megabyte size limit on blocks that is built into the system is becoming an issue, causing delays in processing transactions. A purchase might take hours to confirm, making it unwieldy for real-world use.”
The average time it takes to complete a bitcoin transaction is 13 minutes, and companies including Bitpay and Coinbase are increasing the cost of their administration services to cater for the antiquated and time consuming transaction process.
Experts say that if bitcoin is to become a commercial success, then these issues need to be ironed out for long-term growth. However, although the community is in full agreement that a revamp is needed, there is massive divide over what is the best course of action for an effective streamlining process.
The two opposing arguments derive from ‘Bitcoin Unlimited’ and ‘Segregated Witness’. Both organizations have proposed updates to the bitcoin network that could change its functionality, both notions are innovative but can’t co-exist. The two ideas could theoretically form two different digital currencies.
Bitcoin transactions are stored in “blockchains”, which is a series of blocks of transactions linked together. The entire transaction history of all bitcoin can be viewed on the blockchain. The new proposals suggest the best method is a “hard fork” which would split this chain in two, producing a new chain of transactions splitting from the original one. The issues arise as to whether it should be a centralized or de-centralized system.
To understand this, you should also understand bitcoin mining, which is where the “miners” mine through the transaction data to verify the transaction and are in return rewarded with newly issued bitcoin. This incentive allows people to give up their computer power to make a more centralized system work.
Bitcoin Unlimited would allow miners to increase the block size as and when required, which would effectively give them control of the Bitcoin network. Miners argue this is important, they state that “the programming of bitcoin limits the lifetime supply of bitcoin to just 21 million. Once they are all in circulation, miners will need some sort of incentive to process transactions — hence control of fees,” Business Insider writes.
Segregated Witness is proposing a different system which is favored by many bitcoin developers, and keeps the currency more de-centralized.
Segregated Witness wants to rejig the makeup of transactions, “stripping out some details such as signatures. It would also add some extra functionality, including possibly moving some transactions off-chain in a way that might not benefit the miners. This solution would keep control over the bitcoin network de-centralized.”
The sell and draw of bitcoin to date has been the fact that it works independently of any bank, financial organization or any source of centralized source of power or control. Experts state that keeping the system as a more de-centralized body will work in its favor.
The US Securities and Exchange Commission recently rejected an attempt by the Winklevoss brothers to launch a Bitcoin exchange tracker fund (ETF) which would have revolutionized the currencies commercial reach, and diversified it from a de-centralized system.
Bitcoin is constantly looking at innovative ways of becoming a more commercial entity, one that not only revolutionizes online payments and currencies, but one that will be adopted by everyday citizens without fear of losing their ‘bitcoin’. Time will tell, but one thing is certain bitcoin is certainly a safe and viable option for businesses to look at for streamlining their payment systems.