Bitcoin XT was one of the first notable Bitcoin scaling solutions. It also has the distinction of igniting the Blocksize wars which, in some ways, still persist today.
So, how did Bitcoin XT propose to solve scalability on Bitcoin? And why did it cause so much controversy upon its release?
The Problem of Scalability on Bitcoin
Bitcoin opened a whole new world of digital currency. But as soon as people started realizing how important it truly was, they also realized one of Bitcoin’s biggest problems — scalability.
Scalability generally refers to a network's ability to handle a growing number of transactions efficiently and without exorbitant expense. Many blockchains since Bitcoin have attempted to solve scalability issues using various methods. But the original blockchain could never compromise security and decentralization.
Key principles of Bitcoin’s protocol laid out by Satoshi Nakamoto mean its block size has remained limited to 1 MB. As a result, the time it takes to confirm transactions quickly became a roadblock for the speed and capacity necessary for mainstream use.
Bitcoin XT aimed to address these scalability issues. While it ultimately didn’t take off and solve the problem, Bitcoin XT did have a profound impact on the Bitcoin ecosystem because it pushed to address an issue that is still very much relevant to Bitcoin today.
The Birth of the Proposed Bitcoin XT Hard Fork
Mike Hearn, a former Google engineer, and Gavin Andresen, who was a Bitcoin core developer after Satoshi Nakamoto's departure, decided to tackle Bitcoin's scalability issues. The result of their collaboration was Bitcoin XT, a proposed Bitcoin upgrade.
Mike Hearn was a respected software engineer who had been contributing to the Bitcoin codebase for several years. He was known for his work on Bitcoinj, a popular Java library for Bitcoin applications.
Gavin Andresen was one of the most influential figures in Bitcoin's early history. Satoshi Nakamoto handed over the reins to Gavin before disappearing from the public eye. Andresen was renowned for his contributions to the Bitcoin codebase and his efforts to foster open collaboration in the Bitcoin community.
Their project, Bitcoin XT, proposed a simple yet powerful solution to Bitcoin's scalability issues. Its main feature was to increase the maximum block size limit from 1 MB to 8 MB. The goal of this block size increase was to accommodate more transactions within each block. This would make the network faster and more efficient.
There was a problem for Bitcoin XT, however. For a change to be implemented on the Bitcoin network, a majority of miners and nodes needed to agree on the new rules. Bitcoin XT sought to achieve this through a process called a "hard fork." This would result in two separate Bitcoin blockchains with one following the original Bitcoin protocol and another following Bitcoin XT with an 8 MB block size.
Andresen published BIP 101 in June 2015, which proposed an increase in Bitcoin's block size over time. The BIP was incorporated into the Bitcoin XT codebase on August 6, 2015, but without community support.
Blocksize Wars
XT’s proposal was the spark that ignited the bonfire known as the Bitcoin Blocksize War. Some saw a block size increase as a necessary step to make Bitcoin viable as a global payment system. But others feared such a drastic change would only centralize the network and compromise its security.
Reactions to the Bitcoin XT proposal were divided and often passionate. Big Blockers, who advocated for increased block size, approved of Bitcoin XT. They argued that it was an inevitable response to the growing demand for Bitcoin, and especially for making daily transactions feasible.
On the other hand, Small Blockers were critical of changing something so fundamental to Bitcoin’s security like the block size. They argued it would lead to centralization because it would become too resource-intensive for ordinary users to run full nodes. They believed the long-term health and security of Bitcoin required different scaling solutions.
Bitcoin XT’s introduction created a schism within the Bitcoin community, and discussions quickly escalated into heated debates. The battle over Bitcoin's block size ultimately led to the emergence of alternative solutions, including Bitcoin Classic (increasing the block size limit to 2MB), Bitcoin Cash and Segregated Witness (SegWit).
SegWit
SegWit was a proposal that would increase transaction capacity on Bitcoin without raising the block size. It did this by separating transaction data from signature data, reducing the space transactions took up in each block.
The intense debate around the block size, sparked by Bitcoin XT, had indirectly forced the community to explore innovative ways to scale Bitcoin safely. SegWit, a product of this exploration, became a key part of the scaling roadmap for Bitcoin.
XT’s Impact on the Bitcoin Community
Bitcoin XT left a lasting impact on the community, despite its eventual rejection. Some miners and nodes did adopt Bitcoin XT, but the majority of stakeholders needed for consensus for a hard fork ultimately sealed Bitcoin XT’s fate.
While it earned support from a faction of miners and nodes, XT couldn’t win over the overwhelming majority needed to initiate a hard fork. Small Blockers who opposed the 8 MB block size increase eventually won this battle in the Blocksize War.
The story of Bitcoin XT offers several valuable lessons for the broader cryptocurrency community:
- Consensus is vital: Achieving consensus is essential in the development of blockchain projects. Without it, proposed changes can lead to divisive hard forks, resulting in a fragmented community and potentially weakening the network's security.
- Decentralization matters: The importance of maintaining decentralization and security should not be underestimated. While scaling is essential, it must be done in a way that doesn't compromise these fundamental principles.
Solutions that followed XT
As a result of Bitcoin XT, the Bitcoin community started taking scalability solutions seriously, developing more new ideas. And after XT, several pivotal solutions emerged.
- Segregated Witness (SegWit): SegWit was activated in August 2017, offering a new approach to scale Bitcoin by separating transaction data from signature data. This increased the transaction capacity of each block without raising the block size.
- The Lightning Network: The Lightning Network is a layer-2 scaling solution that allows for faster and cheaper transactions off-chain. It reduced congestion on the main Bitcoin blockchain and kicked off the growth of many more L2 solutions.
- Schnorr Signatures and Taproot: These are upgrades that further improve Bitcoin's efficiency and scalability. They allow for more complex transactions while reducing the data size. This makes transactions more private and cost-effective.
Making Bitcoin Scalable
Bitcoin XT holds a significant place in Bitcoin's history as one of the first major scaling solution concepts. Even though it didn't gain widespread consensus, it ignited important discussions and led to the development of innovative alternatives like Segregated Witness and the Lightning Network.
The lessons learned from Bitcoin XT's journey emphasize the importance of consensus and decentralization in the Bitcoin community. Today, the community is more optimistic than ever about developing real scalability solutions. Bitcoin XT's pioneering spirit continues to inspire the new developments in the Bitcoin ecosystem.
