Future Outlook: Splitting (Forking) The Chain Is Not The Best, But The ONLY Possibility That Bitcoin Can Survive Long-Term – The Vision For The Inevitable Future


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I am following Bitcoin since 2011 (although my personal "financial participation" started much later, if you know what I mean), and I have changed my mind twice during this time when it comes to the question of best scaling strategy, because I continuously gathered new information in the process and got new insights through discussions and deep self-reflection. Since I never identified my own personality with one way or the other, I could afford adapting my opinion to my own evolving convictions without losing my face in front of myself!

Today I think that the best way for Bitcoin would be a step-wise "scaling and use-case-enabling by feature-adding" strategy that comprises both on- and off-chain scaling as well as cautious protocol enhancements that enable proper use of layer 2 technologies, which serve different scaling uses-cases than the on-chain scaling, and neither on- nor off-chain scaling can do it alone.

At the same time, I observe the discussions in the community, and while there are many reasonable participants (maybe even the majority, if I assume that the silent majority is in "read-only" mode), I also see a lot of extreme views and fallacies on both sides of the discussion, which is not surprising, as everything in nature is a Gaussian curve, including the distribution of opinions. This includes the following (in my conviction wrong) views, for example:

List of a few wrong statements (I could write many more):

  • "on-chain scaling can do it all, we do not need any 2nd layer solutions."

  • "layer 2 solutions (like e.g. side-chains and LN) can do it all, we never need a block size increase ever."

  • "Bitcoin as it is today is good for eternity, we do not need any protocol change whatsoever, at any time. Bitcoin is invincible and cannot become <<crypto's Myspace>> by definition"

  • "If we have LN, we can achieve true mainstream adoption with 1 or 2 MB blocksize (less than 10 on-chain tx per second) for the whole world population."

  • "Bitcoin must be accessible by every person on earth ON-chain in daily usage, because it is written in the whitepaper that it is an electronic PEER-to-PEER cash system (and not a settlement system), and so we must scale up block size even if it reduces decentralization of securing the blockchain. Using LN or sidechains for peer-to-peer transactions over a Bitcoin backbone is against Satoshi's vision. For Satoshi, the peer-to-peer aspect is stronger than the aspect of decentralization of securing the chain, so in case of doubt, the peer-to-peer aspect should be weighted stronger."

  • "Lightning is for its usage the same as a normal ON-chain transaction, because the transaction is signed by means of on-chain signatures. So more capacity through LN is use-case wise equivalent to more capacity through bigger blocks, just that the decentralization is better with LN and smaller blocks."

  • "Lightning is for its usage the same as an OFF-chain solution, because transactions do not immediately hit the blockchain, and most signed LN transactions never do."

  • "Lightning means more centralization."

  • "Lightning is vaporware."

  • "Lightning works without SegWit just as good as with SegWit."

  • "SegWit is vaporware."

  • "Sidechains are vaporware."

  • "The fact that we once had a time with cheap Bitcoin transactions for everyone in the world who wanted to participate means that it has to remain so forever, despite technological and physical constraints. In case of doubt the block sizes must be increased to achieve this, and we will find good reasons why this does not hurt decentralization. A Bitcoin with TX fees higher than 1 USD violates Satoshi's ideal of a peer-to-peer cash system, much more than a system of large blocks and centralized miners violates Satoshi's ideal of a decentralized money system."

  • "Lightning usage bears no additional risks for its user compared to today's on-chain solutions."

  • "Lightning use-cases bear some additional risks compared to today's on-chain usage and hence it should not be used or enabled at all, it should not be an option facilitated by core protocol enhancements, it would only harm Bitcoin."

  • "Bitcoin is good the way it is, so we should not add more features but just scale up the block limit, then everything else remains the same, also the decentralization does not get harmed by that."

  • "Low cost on-chain transactions can be maintained forever by increasing block limit with adoption – network decentralization will not suffer from that."

  • "The fact that the memory pool is full means that Bitcoin is in overload, irrespective of the fees and kind of transactions that occupy the mem pool."

  • "A healthy state of operation is reached when the memory pool is empty or almost empty most of the time."

  • "There are no spam transactions in the memory pool at all."

  • "It is easy to tell which transactions are spam transactions in the mem pool."

  • "All transactions exceeding 1 MB/block are spam transactions."

  • "If the ticket price for a seat on a bus increases, the number of seats on the bus increase automatically, magically, somehow."

  • "All transactions we see today in the blocks are really necessary transactions, and this includes my own frequent test-transactions from my wallet A to my wallet B."

  • "Despite the fact that witness data causes less costs than core blockchain data for the network nodes, the fee discount for witness transactions in the SegWit proposal is unjustifiable and "unfair" – unfair not against a particular person or market participant, but unfair against the other data – all data have the human right to be treated equally, and any computer protocol that violates this principle is evil."

  • "Miners have all the power, because only the longest chain (more accurate "most POW chain") counts – if the longest chain is BU, then b-core is dead."

  • "Miners have no power at all, the power is amongst the users only (incl. the full nodes), so if a majority of miners mines on a new longest chain that is not accepted by "the users", then this has no relevance at all, and this is so because "the users" (incl. "the full nodes") is a homogeneous group that is either >90{88c91daedd271a990a10650c05d769cae2765e0603edf30ca95f18704e5748e8} for or >90{88c91daedd271a990a10650c05d769cae2765e0603edf30ca95f18704e5748e8} against the miners' new longest chain, and it is completely inconceivable that also "the users" are split and some may want to accept the miners' new longest chain while others will reject it and stay with the shorter original chain."

  • "Increasing block size is no problem for decentralization. Other factors like small fees and peer-to-peer payments for everybody worldwide directly on-chain is more important. Hence no need to make a cautious trade-off."

  • "Increasing block size is a problem for decentralization, but market forces will take care that centralization does not happen because it is not in the interest of the market, even though most miners are centralized."

  • "Everybody who is of another opinion than myself is a bad actor (conspiracy!) with bad intentions, or is just stupid."

  • "There are only actors with good intentions in the Bitcoin space, infiltration of bad actors for anti-Bitcoin purposes does not exist, because conspiracies as such do not exist. The notion that conspiracies exist is just a conspiracy."

  • "I am against a certain technical solution because I do not like some of the people's personalities amongst the people working for that solution, so I am acting against that solution although I am technically not against it. I try to find reasons that justify my support for a solution that is against these people's vision. My personal revenge is more important than the success of the Bitcoin project as a whole, but I won't admit myself this to be true."

So given this natural Gaussian distribution of opinions, I consider it extremely unlikely (actually "completely impossible"!) that SegWit (or any other scaling solution or important protocol update) [of course I know that SegWit is more than just scaling] will EVER get a 95{88c91daedd271a990a10650c05d769cae2765e0603edf30ca95f18704e5748e8} majority for activation. Unfortunately, this is completely independent of how good that solution is. Every solution has trade-offs against any other alternative solution, and different people will weigh the pros and cons differently, due to individual judgement.

Just think of any question of human or political life: Think of some aspect that you, yourself, consider "completely and obviously true". And now think about how many percent of the population (which includes people in other parts of society outside your circle of friends) is of different opinion than you on this aspect! Probably more than 5{88c91daedd271a990a10650c05d769cae2765e0603edf30ca95f18704e5748e8}, unless you picked a VERY obvious example like "I should not push another person out of the window in the 10th floor".

Now, taking this Gaussian distribution problem (and the tails of this distribution), combined with the fact that many people are not able to compromise and some are too "proud" or too unflexible to admit own former mistakes, you have inevitably a deadlock in Bitcoin. In addition, bad actors may misuse these circumstances for their own purposes and create extra propaganda to divide the community even further – from the outside observer it is hard to tell who is the malicious actor and who is the "useful idiot" – after all you may be the useful idiot yourself and think the others are…

So, what I see is this:

  • SegWit will never EVER have enough (95{88c91daedd271a990a10650c05d769cae2765e0603edf30ca95f18704e5748e8}) majority to activate (I wish it had, but I don't see how it can become possible, given the above).

  • BU will never have enough majority either to take over the eco-system.

  • There are plenty of personal mutual ambivalences against each other between these camps, also for historical reasons.

  • Bad (anti-bitcoin/anti-crypto) actors may join this game in disguise. Human history proves that manipulation through propaganda and psychology is as powerful as through money, and they know it.

  • As a result, we'll see a complete Bitcoin scaling deadlock, not temporarily, but really(!) forever (until/unless…: see below).

In the meantime, certain altcoins do activate SegWit (maybe Litecoin first, or Vertcoin [a decentralized "honest" CPU mining bitcoin/litecoin-clone of small market cap]) and thereby enable L2 technologies. In the meantime, also global Bitcoin adoption and crypto adoption keeps on growing, TX fees keep on rising in Bitcoin, and as Bitcoin contains to stall, the ECO-SYSTEM will increasingly look for new opportunities to offer its services. As a first step, as Bitcoin transactions become as expensive as 1 or 2 USD and more, people may divert to Litecoin (whose blocks today are almost empty and whose capacity with SegWit is 8 times Bitcoin's capacity). In a next step (or in parallel), L2-solutions will evolve on top of Litecoin (Bitcoin leaves the eco-system no other choice) and/or others.

In the meantime, the scaling and feature debate in the Bitcoin community will intensify, but without coming any closer to a common consensus. On the contrary: The fronts will rather solidify on the b-core and the BU camp, and mutual accusations will intensify the more the situation degrades.

Later-on, the decentralized crypto-eco-system will move more and more to those solutions that do offer those scaling solutions, both on-chain and "semi-off-chain" (like LN), that Bitcoin does not offer. Bitcoin market cap share decreases dramatically as a result, maybe from 90{88c91daedd271a990a10650c05d769cae2765e0603edf30ca95f18704e5748e8} to 70{88c91daedd271a990a10650c05d769cae2765e0603edf30ca95f18704e5748e8} to 50{88c91daedd271a990a10650c05d769cae2765e0603edf30ca95f18704e5748e8} and below. But this will just lead to an even deeper divide in the toxic community, where each side will accuse the other side of blocking the "right" solution and thereby being responsible for Bitcoin's decay.

At this moment, at least everyone acknowledges and realizes that "doing nothing" is not the right solution, and Bitcoin will eventually split (fork) into two chains:

  • One project will realize its dream of a SegWit-free unconstrained on-chain scaling Bitcoin variant.

  • The other project, now that it has got rid of the "blockers", can achieve a viable majority (by that time they will probably consider 75-80{88c91daedd271a990a10650c05d769cae2765e0603edf30ca95f18704e5748e8} enough, 95{88c91daedd271a990a10650c05d769cae2765e0603edf30ca95f18704e5748e8} will still be infeasible even then) to activate SegWit.

After this split, the Bitcoin eco-system may face particular problems (unless they haven't been sonsidered pre-fork):

  • Naming – which coin is called "Bitcoin"?

  • How to avoid replay attacks or (a separate issue) overlap of Bitcoin addresses, both of which may cause frustration due to confusion by (casual) users.

If these problems have been sorted out (hopefully having been taken care of before the fork), both sub-Bitcoins can realize their vision.

Maybe both "sub-Bitcoins" will find their place and their justification and can peacefully coexist from that point onwards, because all the ideologists and pragmatists from both camps can now live their dreams according to their likings, and have no reason any more to fight the "other side" for standing in their way.

The later this split (=fork) happens, the more difficult it will be to gain back market share from other competing altcoins. At one point the point of no return might be reached and Bitcoin becomes obsolete.

Bottom Line:

  • The best would be that >95{88c91daedd271a990a10650c05d769cae2765e0603edf30ca95f18704e5748e8} would agree on SegWit and Bitcoin could continue its growing path with a subsequent roadmap of on- and off-chain scaling, incl. LN, sidechains, etc.
    But this is only MY opinion, and I might be wrong.

  • The 95{88c91daedd271a990a10650c05d769cae2765e0603edf30ca95f18704e5748e8} won't be reached EVER, due to the human nature of Gaussian distribution of opinions with a considerable >5{88c91daedd271a990a10650c05d769cae2765e0603edf30ca95f18704e5748e8} quantile for any non-trivial issues.

  • Likewise, the eco-system won't agree on moving completely to BU.

  • During phase of stagnation, crypto eco-system keeps on growing and other altcoins provide what Bitcoin cannot.

  • Hence the split (fork) of Bitcoin blockchains is inevitable (assuming that decentralized crypto-blockchains have a future and keep on growing, which I strongly assume they do)

  • After the split the SegWit-camp that is most concerned by decentralization of the network securing nodes can continue building an infrastructure acc. to their vision, with cautiously thought-through steps, while the BU-camp can live its dream of a hands-on peer-to-peer cash system with "free lunch" (low TX fees) for all the world and hopefully still sufficient decentralization thanks to overall growth.

  • Both camps do their thing and don't block each other any more.

  • The eco-system of stakeholders (private investors, startups, …) picks that Bitcoin realization that suits its needs best.

  • Only time will tell who survives. Probably at least one of the two chains (possibly/likely both) will survive and will, in the end, be stronger than ever, and history of the two Bitcoin dialects having the same ancestor reminds us of the Finnish and Hungerian people both originating from the same Uralic tribe.

  • Alternative outcome with non-zero probability: If the split fails, Bitcoin loses its leading position to another crypto-currency permanently.

submitted by /u/Amichateur
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1 BTC = $19098.03 USD  (via Coinbase)
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