August 17, 2015

What Does Forking Mean for the Future of Bitcoin?

Eli Dourado

Former Senior Research Fellow

Andrea O'Sullivan

Feature Writer
Summary

As Bitcoin has grown, so has the debate about whether limiting the size of the blockchain – which records Bitcoin transactions – is truly sustainable. Recently, some Bitcoin developers have suggested creating a fork, meaning the underlying network would split and and create two incompatible blockchains. The Mercatus Center’s Eli Dourado and Andrea Castillo share their thoughts on this latest development.

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As Bitcoin has grown, so has the debate about whether limiting the size of the blockchain – which records Bitcoin transactions – is truly sustainable.  Recently, some Bitcoin developers have suggested creating a fork, meaning the underlying network would split and and create two incompatible blockchains.  The Mercatus Center’s Eli Dourado and Andrea Castillo share their thoughts on this latest development.

Eli Dourado, Director of the Technology Policy Program at the Mercatus Center at George Mason University:

The Bitcoin community has had lengthy discussions about the block size issue, and it is reasonable to wonder whether further discussion will be productive. Responsible forking is a legitimate way for cryptocurrencies to overcome intractable disagreement. A prohibition on forking would be tantamount to making the developers of the reference client permanent dictators of the Bitcoin protocol. While I neither support or oppose the Bitcoin XT attempted fork, the ability to fork Bitcoin is crucial to preserving the currency’s independence from anything but the demands of the market.

Andrea Castillo, Technology Policy Program Manager at the Mercatus Center at George Mason University:

The decision about whether or how to implement a hard fork of Bitcoin to address the block size limit will have significant implications for the technology’s future scalability, security, and most importantly, decentralization. This choice is made more difficult by the fact that any technical changes that could improve on one of these three qualities could simultaneously undermine the others – perhaps irreparably. Just as a hard fork can address and solve current scaling concerns, it can create path dependencies and precedents that limit Bitcoin’s security and decentralization. If these two qualities do not survive any hard fork, the spirit of the Bitcoin project will have been lost.