Has the 'Bitcoin experiment' failed?

A prominent voice in the Bitcoin community has announced that he is abandoning the cryptocurrency that he helped to popularize. Mike Hearn has revealed that deep divisions within the platform's "leadership" and a looming technical apocalypse threatens the system's entire existence. The creator of bitcoin has explained his position in a lengthy Medium post, saying that he has sold his coins and is washing his hands of Bitcoin. As far as he is concerned, the "Bitcoin experiment" has "failed."

There are several reasons behind his departure, but the most notable is that senior figures in the community are ignoring a key flaw in the software. In Hearn's mind, "the block chain [sic] is full," after an upper limit of 1MB per block was imposed on the system to keep traffic flowing smoothly. Unfortunately, this "temporary kludge," which was added years ago, by Satoshi Nakamoto, has not been removed, thanks to resistance from a group of vested interests. Hearn points a finger to a handful of miners who stand to lose substantial amounts of money if the issue was fixed properly.

One of Bitcoin's main selling points was the idea that there was security in mass volume, since it's hard to get millions of people to comply in a fraud at the same time. The platform was built in such a way that it would require someone to hold upwards of 49 percent of all the world's Bitcoin computing power to control it. As impossible as that would have sounded a few years back, Hearn says that just two Chinese miners control "more than 50 percent" of that "hash power."

Those parties stand accused of blocking fixes to Bitcoin's core architecture that would end the platform's crippling slowdowns. You see, controlling so much of the system's computing power means that these unnamed Chinese miners are always likely to be the first ones to validate transactions. The only thing that holds this back is the "Great Firewall of China," which slows internet speeds in-and-out of the country to a crawl. If the individual blocks were allowed to grow beyond 1MB, it would put that group at a significant disadvantage and competing miners get a better shot at validating the transaction. Don't forget, that every time a new block is mined, it's worth roughly $10,000*, so there's a lot of money at stake.

Unfortunately, efforts to remove the block limit has sparked something close to a civil war inside the Bitcoin community. The group has split into two: those who want to maintain the status quo and those looking to implement fixes to maintain the service's future. The latter, of which Hearn is/was a member, created a fork of the software called Bitcoin XT, which enabled individual miners to vote on increasing the limit.

The move prompted the figures running Bitcoin.org to ban all mentions of XT, saying that the platform is an entirely separate cryptocurrency altogether. In addition, XT users have suffered numerous DDoS attacks and Coinbase -- a website supporting XT -- was taken offline altogether. Hearn told the New York Times that a single Russian hacker was paid by a third party to kill the project, although their identity is, as yet, unknown. Hearn feels that investors in Bitcoin are now being misled by the attempts to censor XT and the technical issues -- and where people lose money, regulators are never far behind.

Another issue with Bitcoin that Hearn takes issue with is a forthcoming tweak to the "core" version of the platform (version 0.12). He believes that the amendments will make payment fraud a nailed-on certainty between people and businesses. The change will enable people to take advantage of the now very long delay between transaction and validation to withdraw their payment afterward. In essence, it'd be like buying a round of beers with a check and then canceling the check as soon as you got home that night. Hearn feels that, if implemented, businesses will rapidly lose confidence in the cryptocurrency altogether.

Hearn also points a finger at the developers leading the Bitcoin cause, saying that they are resisting the principles upon which Satoshi Nakamoto built the software. He says that they don't believe the system's endless growth is sustainable, and that an increase in popularity would threaten the currency's decentralized setup. Nakamoto appeared to be blasé on this point, believing that ever-increasing internet speeds would overcome the increasingly bloated blockchain.

Now, it's worth saying that Hearn is a single, albeit prominent, voice in the Bitcoin community and that he may have an axe or two to grind here. Then again, having quit a lucrative job at Google and devoted the last few years of his life to developing the currency, it's easy to see his criticisms as having weight. If he is right, then the capacity crunch he predicts is likely to happen fast enough that he can start saying "I told you so" to his many critics.

* Figures converted at time of publication.