Bitcoin is facing the situation that the 1M block size limit is about to become insufficient; a major upgrade is needed. But how should it be upgraded? Different people propose different schemes. If a backward-incompatible scheme is rolled out without reaching consensus, then some people choose the new scheme while others do not update or choose yet another scheme, and the result is what is called a “hard fork.”
There was XT a while ago, and more recently there was classic, but in the end a hard fork seems to have been avoided. Many people were probably relieved, but I, for one, feel a certain regret. In my view, a hard fork is not frightening; on the contrary, it is a necessary cost of decentralization. The test of a hard fork will recur at any time, and learning to adapt to this situation sooner may not be a bad thing for the development of the Bitcoin community.
What is a hard fork, and why is it inevitable? Let me start from the beginning.
First, Bitcoin can be upgraded. It is not the work of God, something that from the outset can solve everything once and for all; like all great software, it is constantly being updated.
Second, Bitcoin is open-source software. Anyone can obtain its code, anyone can improve it, and anyone can share their own improvements.
Then, the spirit of Bitcoin is decentralization. That is to say, it has no single authority in control. Satoshi Nakamoto developed the early versions of Bitcoin; later, more and more programmers joined in. After Satoshi faded from view, the “official” version was provided by the Bitcoin Foundation, but this is by no means inevitable. The Foundation may split, and other associations may at any time take its place. The upgraded Bitcoin version offered by the existing Foundation is not necessarily always widely accepted; communities and miners may refuse the new upgrade. Something like this already happened during the move from 0.7 to 0.8.
Of course, the hard fork that occurred during the 0.7 to 0.8 upgrade was more the result of mistakes than of differences in ideology or struggles over direction, and at that time Bitcoin’s influence was also relatively small. The more recent fork crisis, by contrast, arose from disagreement over the development path, and it was deliberately planned. Although the recent fork did not succeed, whether a fork occurs by accident or because of disagreement, the possibility of a fork can never be ruled out.
The reasoning is very simple: unless Bitcoin will never be upgraded again, if it is to be upgraded, then according to the spirit of decentralization, there is no compulsory authority that can ensure that an updated version released by some person or institution must be accepted by everyone. In theory, you and I both have the right to cause Bitcoin to fork. The new version I release may be used by only three people, while the new version released by the Bitcoin Foundation may be used by three million people, but that is only a quantitative difference. Three people are, of course, nothing before three million; yet what if it is three hundred thousand versus three million? What if it is three million versus three million three hundred thousand?
In any case, we must be clear that what makes some version of Bitcoin become the so-called official version or authoritative version does not depend on the judgment of some “official” body or some “authority,” but on each of our own choices. Do you choose to join those 3 people, or to join those 300,000, or to join those 3 million? There is no objectively existing thing called “consensus.” If you join the group of 300,000 people, then you and those 300,000 people have “consensus” with one another; if you join the group of 3 million, then you and those 3 million people have “consensus” with one another.
This is also not quite the same as electing a president. After a presidential election, the side with fewer votes naturally loses. But a Bitcoin fork does not necessarily need to have one side that fails; after a split, it is entirely possible for multiple branches to coexist. There is no absolutely neutral standard by which to judge which branch has prevailed more. Maybe this side has more people, while that side has more hash power; this side has more funds, while that side has stronger technology…
In a sense, the countless “altcoins” are also a kind of “fork” of Bitcoin. In fact, the difference between altcoins and a Bitcoin hard fork lies only in redistribution. Most altcoins no longer recognize Bitcoin’s blockchain; that is to say, the Bitcoin originally held has nothing to do with the newly issued altcoin. But if an altcoin preserves the original Bitcoin ledger, then it can also be regarded as a hard fork.
For example, the purpose of Litecoin is to change Bitcoin’s mining algorithm and shorten verification time, and these changes are things Bitcoin itself could also do. If, when Litecoin was released, it inherited Bitcoin’s ledger and was named Bitcoin XT or Bitcoin Classic, then that would be a hard fork.
Therefore, when XT and Classic were proposed recently, people denounced them as altcoins, and that is indeed not wrong. Whether you choose the consensus of 300,000 people or the consensus of 3 million people, if you regard your own side as the orthodox one, then naturally you will view the others as altcoins.
If a new version dies unborn, you can regard it as an unaccepted update of official software, or as an altcoin that failed to be issued successfully; this depends on your personal attitude. If a new version is successfully issued, you can regard it as a successful update of official software, or as an altcoin that has set up its own separate banner; this also depends on your choice. If a successfully issued new version dies out, you can regard it as a “rollback” of the official version, or as the “reset to zero” of a new coin.
The key point is that the one making the judgment is yourself, not Satoshi Nakamoto, or the Bitcoin Foundation, or some mining farm owner. They will each make their own choices as well, but no one can replace your own choice.
The greater the freedom, the greater the responsibility. The aim of Bitcoin is the freedom of decentralized money: it liberates control over money from the central bank and returns it to the hands of every coin holder. Yet along with freedom comes responsibility too—the responsibility to keep one’s own money properly safeguarded, the responsibility to think and judge independently. There is no freedom that comes without a cost. The possibility of forks, and the mission of having to make choices in the face of forks, is precisely the necessary price of decentralization.
Up to now, disagreements over Bitcoin’s development path have basically still remained within the traditional Bitcoin ecosystem, specifically as a disagreement between developers and miners. But as Bitcoin develops further, larger forces may join in. For example, many banks have already begun studying the so-called blockchain technology recently, and even the Chinese central bank is going to issue its own digital currency. Right now they still have not directly challenged Bitcoin, but who knows? Perhaps someone is already quietly at work. For example, that Mike Hearn who recently threw out the thesis that Bitcoin is doomed to fail seems to have the shadow of the banking industry behind him. If in the future banks discover that the digital currency they have created cannot ultimately eliminate Bitcoin, then covert infiltration and peaceful evolution may become common strategies.
Back when I was on Yangyang Interviews, I already said that Bitcoin is not afraid of being suppressed. Like drugs, the more it is suppressed, the more valuable it becomes; at worst it goes underground. But Bitcoin is afraid of being “overpraised to death.” Suppose the central bank were to say: Bitcoin is a good thing, but it has no backing, so I will back it; I guarantee that one Bitcoin can be exchanged for at least X yuan. Wouldn’t many coin holders raise both hands in welcome? If the central bank were even kinder and provided computing resources to maintain the Bitcoin network, and technical resources to maintain Bitcoin’s upgrades, then wouldn’t many people be grateful beyond words? Wouldn’t then a large number of stock investors and little old ladies who had never believed in Bitcoin come join in? In this way, peaceful evolution would begin, and the central bank might dutifully and diligently provide all kinds of “patches” and “upgrades” for Bitcoin.
The central bank might then bring Bitcoin another thirty million supporters, and win over a large majority of the original three million supporters, leaving perhaps only 300,000 people who feel that Bitcoin’s philosophy is incompatible with the central bank and persist in resisting the central bank’s “kindness.”
“Escaping freedom” is a deep-rooted trait of the masses, and this can be seen very clearly from Chinese stock investors today. They would rather be abused body and soul by the managers countless times than think of personally shouldering responsibility. It is easy to imagine that if the central bank really were to issue a digital currency—whether an altcoin or a fork of Bitcoin, either could gain a much larger “consensus”—there are over a hundred million Chinese stock investors, but perhaps Bitcoin enthusiasts number fewer than 300,000. Compared with the central bank suppressing Bitcoin, if the central bank suddenly incited those lambs in the stock market to join Bitcoin, that would be a disaster indeed. Of course, I have already said before that the choice of 3 million people may not necessarily be superior to the consensus of 300,000 people; similarly, the consensus of 30 million people may not necessarily be better than that of 3 million. I believe that even if the central bank’s digital currency had the support of one billion people, it still could not compare with Bitcoin.
Finally, let me talk about a practical issue: when a fork crisis occurs in the Bitcoin community, what should ordinary individual coin holders do? Very simply, there is no need to panic. We need to make our own choice, but there is no rush. For mining-farm owners and developers, choosing a camp is more urgent. For example, a certain version might render all mining rigs useless; then mining-farm owners of course must resolutely avoid it. If a certain version might increase mining-farm owners’ costs but at the same time help raise the coin price, then mining-farm owners must weigh it carefully. But for ordinary coin holders, there is no need to rack your brains too much, because generally speaking, coins held before the hard fork can be used on both branches, and “spending the same coin twice” is not a dream. So if you have confidence in Bitcoin, just hold on to it and do nothing. On the contrary, if you sold before the fork and later want to buy back in, then you will need to pay attention to whether you are buying this Bitcoin or that Bitcoin.
What is more problematic is coins kept on platforms, because coins kept on platforms are, in essence, not your own coins; what you have is nothing more than a custodial certificate. With this certificate, you can at any time withdraw coins from the platform under the rules established by the platform. But at present, it seems that none of the various platforms has spelled out detailed withdrawal rules for when the coin forks. So after the fork, if you go to withdraw coins from the platform, whether you receive this coin or that coin will probably depend on the platform’s mood. Perhaps because it backed the wrong side, or because of a run, the platform will simply go under, and then neither this coin nor that coin will amount to anything. So for ordinary coin holders, those with bold nerves can of course take the opportunity to trade the spread on the platform, but if you want stability, then honestly just keep the coins in your own hands.
I am not lightly saying that a hard fork is no big deal. On the contrary, I want to emphasize that every coin holder who cherishes freedom has the responsibility to pay attention to Bitcoin’s development, rather than caring only about the “market.”
Translated from the Chinese original with AI assistance. The original text is authoritative.
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