Bitcoin update

Mike Hearn was a Bitcoin developer for 5 years. He’s given up

So yes, it turns out that organizations, community and culture are important. I expected Bitcoin to be taken over by a corporate interest, but what’s happened instead is that a handful of people, mostly in China, have taken control and steered it into the ground.

Transaction capacity was identified as a major problem for Bitcoin a long time ago. Congestion is now so bad that it usually takes minutes, and sometimes hours, for a transaction to be finalized. To try and solve the problem, coders have added a feature which allows you to take back a transaction and resubmit it, offering a larger transaction fee to try to persuade someone to process the transaction more quickly. Unfortunately this has the side effect that if a vendor doesn’t wait for the blockchain to update after every transaction, people can simply spend money with a low fee offered, and then unspend it an hour later. Needless to say, this isn’t a great feature for a currency. Meanwhile, the fees you have to spend to get a Bitcoin transaction processed are now often larger than credit card processing fees, taking away another of Bitcoin’s supposed advantages.

So now previously enthusiastic Bitcoiners are starting to see Bitcoin as it is in 2016: a digital payment system which can take hours to make a transaction, is open to fraud if you don’t wait that long, costs more than accepting credit cards, is controlled by China, isn’t anonymous the way cash usually is, is user-unfriendly… and regularly results in users losing all their money to heists and bankrupt wallet companies, like this week’s Cryptsy bankruptcy.

So as Mark Hearn comments, the Bitcoin community has started to turn on itself. People are attempting to fork the code as Bitcoin XT and Bitcoin Classic, and other people are DDoSing them in retaliation…

More coverage on Hearn’s crisis of faith at the NYT.

The Bitcoin series:

  1. Explaining Bitcoin
  2. The future of Bitcoin
  3. Bitcoin and Quantitative Easing
  4. Other dissenting voices
  5. Bitcoin: where the impossible takes slightly longer
  6. Bitcoin update for 2016