The blocksize war was a battle for control over Bitcoin’s protocol rules that took place between 2015-2017. The blocksize war consisted of two camps. The small blockers wanted to keep Bitcoin’s block size small. The large blockers, on the other hand, pushed for an increase in Bitcoin’s block size.
The conflict over whether and how to increase Bitcoin’s block size divided the community. The blocksize war eventually led to a hard fork, producing an alternative coin called Bitcoin Cash (BCH).
On August 15, 2015, prominent and respected Bitcoin developers Mike Hearn and Gavin Andresen expressed their support for a new, incompatible version of Bitcoin called Bitcoin XT. Bier, Jonathan: The Blocksize War. The Battle For Control Over Bitcoin’s Protocol Rules (2021), pp. 1. This started the blocksize war.
The idea behind Bitcoin XT was to increase the blocksize limit to 8 MB and then double it every two years until 2036. The result would be an eventual blocksize limit of around 8,000 MB total.
At the time, Bitcoin had a blocksize limit of 1 MB. In the very early days of Bitcoin, blocks were rarely full. This kept transaction fees low. But as Bitcoin matured, blocks became increasingly full.
This meant, transactions had to wait until enough space in a new block was available to process the transaction. Large blockers argued that this hindered Bitcoin’s adoption and use case as peer-to-peer cash.
They believed that with increased adoption, blocks would become so full that the payment network couldn’t scale. This would drive up transaction fees and make Bitcoin unsuitable as a means of payment for daily transactions. Bier, Jonathan: The Blocksize War. The Battle For Control Over Bitcoin’s Protocol Rules (2021), pp. 1ff.
Large blockers thought that this would drive people to alternative cryptocurrencies. They also felt it undermined Satoshi’s original vision of Bitcoin. Bitcoin. “Bitcoin: A Peer-to-Peer Electronic Cash System” Accessed May 6, 2022. And it would lead to merchants not accepting Bitcoin. To large blockers, this posed an existential threat to Bitcoin.
The solution proposed by Mike Hearn and Gavin Andresen increased the blocksize relatively aggressively. This should keep Bitcoin’s value proposition as digital peer-to-peer cash in tact. It was an effort to protect Bitcoin.
Small blockers on the other hand opposed this aggressive increase in the blocksize limit. They argued that a small blocksize limit and full blocks weren’t a problem.
The small blocksize limit made sure regular users could run Bitcoin nodes and not just miners. The fear on the side of the small blockers was that increasing the blocksize limit would lead to centralization and most nodes running on a few large server farms.
At the same time, small blockers criticized that Bitcoin XT was not compatible with older versions of Bitcoin. This meant, a majority of miners and node operators needed to update to the new client. Otherwise, there was a risk of a chain split, leading to two alternative blockchains and coins.
Performing such an incompatible update put the entire Bitcoin ecosystem at risk. For the small blockers, Bitcoin’s safety and robustness was one of its main traits.
Small blockers didn’t just view Bitcoin as a new payment network but as a new form of money that was out of the control of governments, central banks and other centralized institutions. The fact that nobody could change the rules of Bitcoin and increase the total supply of coins is what made Bitcoin valuable in the first place.
Radical changes such as an increase in the blocksize limit to 8 MB threatened to destabilize Bitcoin’s security and robustness. The small blockers also disliked the way large blockers proposed these blocksize limit increases.
To them, it seemed like a small number of Bitcoin developers were trying to gain control over Bitcoin’s protocol rules in a top-down manner. Mike and Gavin attempted to rally the industry and get large players behind them. Lobbying investors, miners and influential companies to change Bitcoin seemed dangerous.
Bitcoin started as a bottom-up, grassroots movement. What made it valuable was the fact that no large companies, investors, banks or governments could control it.
If two developers and a few of the largest investors, miners and companies could change Bitcoin’s protocol rules, this missed the whole point of Bitcoin. Small blockers were open to improving Bitcoin. But they wanted to do it slowly and cautiously.
In order to improve Bitcon’s scalability as payment network, developers from the small blocker camp proposed an alternative solution to increasing the blocksize limit.
Instead of rolling out a new client that was incompatible, or in other words, a hard fork, they suggested a soft fork.
They named the soft fork Segregated Witness (SegWit). SegWit increased the blocksize limit to 2 MB, but in a way that didn’t make it incompatible with older versions of Bitcoin. Bier, Jonathan: The Blocksize War. The Battle For Control Over Bitcoin’s Protocol Rules (2021), pp. 59ff.
However, to many large blockers this increase from 1 MB to 2MB was not enough. They also believed activating SegWit would cause other problems. To the surprise of many small blockers, large blockers did not respond positively to the proposal of the SegWit soft fork.
It’s important to understand that SegWit was a highly-technical update. This made it both hard to understand and hard to explain. There seemed to be some confusion as to how SegWit worked even in the small blocker camp.
This confusion and the inability to reach consensus about the protocol rules of Bitcoin only intensified the blocksize war.
The proposed SegWit update made it possible to build a second layer called the lightning network on top of Bitcoin.
Small blockers argued that building a second layer on top of Bitcoin made more sense in terms of scalability. Bitcoin’s blockchain could serve as the settlement layer.
This meant, large payments and final settlement of transactions could take place on Bitcoin. Small and frequent daily transactions could happen on the lightning network.
To small blockers, this maintained the security and robustness of Bitcoin. Bitcoin’s blocksize limit wouldn’t have to increase drastically. The base layer would serve as a safe, decentralized and robust settlement network.
On top of this base money, scalable, fast and cheap payments were possible using the second-layer lightning technology.
Large blockers were skeptical of this proposal for several reasons. Even if SegWit activation went smooth, which wasn’t guaranteed, it would take years to develop and build out the lightning network.
To large blockers, the blocksize and scalability issue needed attention now. It was an urgent matter. If it wasn’t dealt with quickly, merchants would stop accepting Bitcoin. Other altcoins with larger blocksize limits and more scalable solutions would gain market share and eventually make Bitcoin obsolete.
They also argued Satoshi’s original vision was for Bitcoin to act as digital, peer-to-peer cash. To large blockers, using Bitcoin as a base layer and transacting on a secondary chain was against Satoshi’s vision.
Several other proposals were made by the large blockers to increase the blocksize limit. The initial idea of increasing the blocksize limit to 8 MB and eventually to 8,000 MB seemed overly aggressive even to some large blockers.
After Bitcoin XT failed to gain enough traction, the large blockers suggested a new client called Bitcoin Classic. Bitcoin Classic would only increase the blocksize from 1 MB to 2 MB. Bier, Jonathan: The Blocksize War. The Battle For Control Over Bitcoin’s Protocol Rules (2021), pp. 81. This was a more modest proposal.
However, despite the less aggressive blocksize increase, Bitcoin Classic failed to gain enough traction long-term. In the late summer of 2016, large blockers shifted to a new proposal called Bitcoin Unlimited.
Bitcoin Unlimited, unlike the name implies, didn’t completely remove the blocksize limit. It was a complex, and as small blockers would argue, technologically flawed, proposal to update Bitcoin.
Similar to Bitcoin XT and Bitcoin Classic, Bitcoin Unlimited eventually failed. However, unlike these other clients, Bitcoin Unlimited activated and traded on exchanges. The first block bigger than 1 MB was mined in January 2017. Bier, Jonathan: The Blocksize War. The Battle For Control Over Bitcoin’s Protocol Rules (2021), pp. 129.
However, exchanges expressed that they wouldn’t regard Bitcoin Unlimited as Bitcoin, even if the hashrate of Bitcoin Unlimited would surpass that of Bitcoin. This had multiple reasons. But the implication was that exchanges would regard Bitcoin Unlimited as an alternative coin.
By the end of 2017, the Bitcoin Unlimited token expired worthless. At the same time, activation of Bitcoin Unlimited was a major headache for exchanges. It wasn’t something they were necessarily eager to repeat.
This provided a major blow to the large blockers. Bitcoin Unlimited was gone, and the experience was burdensome and complicated for exchanges.
Eventually, the blocksize war concluded when a complex and confusing agreement was made between small blockers and large blockers to activate SegWit and later perform a hard fork with a blocksize limit increase.
The consensus that was met, somewhat reluctantly on both sides, gave the small blockers and large blockers what they wanted, at least partially and with certain compromises.
SegWit was eventually activated. In July 2017, a new bitcoin client was released by the large blockers. The coin this client produced got the name Bitcoin Cash. At first, the ticker symbol was BCC but it later changed to BCH.
On August 1st, 2017, the first Bitcoin Cash block was mined. Bier, Jonathan: The Blocksize War. The Battle For Control Over Bitcoin’s Protocol Rules (2021), pp. 190. Finally, the large blockers had their own coin which was free of the blocksize limit of Bitcoin Core.
At the same time, the small blockers had activated SegWit on Bitcoin, increasing the blocksize limit to 2 MB and making the second-layer lightning network possible. However, the blocksize war still raged on for a while, mostly regarding a controversial update called SegWit2x.
The SegWit2x update, unlike SegWit, was incompatible with Bitcoin Core and could have resulted in a new coin. A new breed of large blockers mostly supported SegWit2x. Many of the original large blockers had shifted to promoting and focusing on Bitcoin Cash.
Beginning of November 2017, as the SegWit2x activation seemed likely to lead to the creation of a new coin, support for the update ceased to exist.
SegWit2x never activated. With some large blockers entirely focusing their efforts on Bitcoin Cash, any efforts of the remaining large blockers to update Bitcoin seemed fruitless. The blocksize war concluded.
If the goal of large blockers was to update Bitcoin, rather than creating an alternative coin, the small blockers clearly won the blocksize war.
However, while large blockers weren’t able to change Bitcoin’s protocol rules, they ended up with an alternative that was more aligned with their vision of what Bitcoin should be. With Bitcoin Cash, large blockers had an alternative coin that didn’t have Bitcoin’s scalability and blocksize restraints.
Some large blockers may have also become disillusioned with Bitcoin during the blocksize war. As a result, some went on to support other altcoins that appeared to be more promising and aligned with their vision of what digital, peer-to-peer cash should look like.
|↑1||Bier, Jonathan: The Blocksize War. The Battle For Control Over Bitcoin’s Protocol Rules (2021), pp. 1.|
|↑2||Bier, Jonathan: The Blocksize War. The Battle For Control Over Bitcoin’s Protocol Rules (2021), pp. 1ff.|
|↑3||Bitcoin. “Bitcoin: A Peer-to-Peer Electronic Cash System” Accessed May 6, 2022.|
|↑4||Bier, Jonathan: The Blocksize War. The Battle For Control Over Bitcoin’s Protocol Rules (2021), pp. 59ff.|
|↑5||Bier, Jonathan: The Blocksize War. The Battle For Control Over Bitcoin’s Protocol Rules (2021), pp. 81.|
|↑6||Bier, Jonathan: The Blocksize War. The Battle For Control Over Bitcoin’s Protocol Rules (2021), pp. 129.|
|↑7||Bier, Jonathan: The Blocksize War. The Battle For Control Over Bitcoin’s Protocol Rules (2021), pp. 190.|