coindesk.com
This weekend, a pseudonymous developer known as Punk3700 made cryptocurrency history by launching what he calls the first smart contract written on Bitcoin. It’s the type of technical achievement – crafted in the bespoke programming language, Solidity – that lately has become more common on a blockchain known for its chelonian development speeds. Solidity, if you need reminding, is the crypto coding standard that Vitalik Buterin invented to run decentralized applications on the largest alternative blockchain, Ethereum.
Punk’s project is also an example of the type of change that’s been rankling many of Bitcoin’s oldest supporters: the Bitcoin maximalists who see other cryptocurrency efforts as a distraction at best, and a lead balloon at worst, capable of tanking even Bitcoin’s success. While Bitcoin essentially does one thing really well – mint and authenticate a currency without the backing of the state – Ethereum exists as a virtual computer capable of just about anything (including Ponzi-like monetary schemes that have soiled crypto’s reputation). Bitcoiners often want as little to do with Ethereum as possible.
But, about a year after Bitcoin’s latest upgrade called Taproot (which enabled new types of bitcoin transactions), developers have found they could build Ethereum-like programs and systems on Bitcoin. This started off with non-fungible tokens (NFTs), which bitcoiners relabelled “inscriptions,” and has lately grown into a whole corpus of tokens and meme coins. Last week, Punk3700 deployed a version of Uniswap (Ethereum’s largest decentralized crypto exchange) on Bitcoin.
Punk3700 calls himself a “New bitcoiner,” and together with his team at New Bitcoin City is planning a host of projects looking to reinvent what Bitcoin is used for. This includes a metaverse (Generative), artificial intelligence lab (Perceptrons Square) and an “Ethereum Virtual Machine” or EVM (Trustless Computer), for Bitcoin, which will power the “sub-projects” of his digital city.
“[W]e’re taking a different approach. We prefer to reuse battle-tested technologies (like the EVM), battle-tested programming languages with years of developer community forming (like Solidity), and battle-tested dapps (like Uniswap and MakerDAO),” Punk3700 told CoinDesk.
While Punk’s designs may be grander and more sweeping than others’, he is hardly alone, following the surprising success of ordinals, in wanting to zap life into the open-source project. There’s clearly demand for Bitcoin’s non-monetary uses, and a growing roster of bitcoiners wanting to build. At the same time, this unexpected demand for Bitcoin block space (the amount of data that can fit into a newly-mined block, which people pay for in transaction fees) has caught many flat-footed.
Although an influx in bitcoin users benefits the network by increasing its security budget (by increasing the amount BTC miners can earn by processing transactions), many take issue with how the network is being used. Some think meme-coins and NFTs are outright scams, while others think the network congestion is harming the type of adoption bitcoin needs most – that is, by pricing out people looking to send remittances payments or buy small amounts of BTC. Transaction fees spiked above $10 last week, three orders of magnitude larger than the sub $0.01 fees paid at the beginning of the month. That’s not good if you want people in developing countries to think of bitcoin as a payment system.
As Bitcoin’s in-fighting crescendos, some have predicted this relatively mundane debate could devolve into a civil war. It’s happened before. Known now as the “Blocksize Wars,” the period between 2015 and 2017 was marked by rancor and internal division. What started as an argument nominally about how the network should scale to handle periods of increased transactions was inflamed into a philosophical tête-à-tête over Bitcoin's ultimate purpose and political drama over how the open-source project should be managed.
The two sides, then, were known as Big Blockers and Small Blockers, and they were split over a rather small technical decision: how many megabytes of data a BTC block should handle. Big Blockers wanted to increase the block size to accompany more transactions, lowering fees and making everyday payments more viable. Small Blockers were more conservative, both in the way their name suggests, as well as in not wanting to make irreversible changes to Bitcoin’s source code. Big blocks would enable more people to use bitcoin, increasing throughput, but would also require a protocol update known as a hard fork (an irreversible, and non-backwards compatible code split).
Worse, the thinking went, bigger blocks would also likely concentrate control of Bitcoin, with someone ultimately having to pay for increased performance (if it was not users). While there is no CEO of Bitcoin, the network can be thought of as being managed by a distributed cast of users (who pay for transactions and induce demand), miners (who expend actual energy to build Bitcoin’s blockchain) and node operators (who validated this ledger of transactions to ensure everyone is on the same page). Because big blocks were more target="_blank">received death threats, Bitcoin forums became sites of propaganda and ostracization and, at one point, a sustained denial-of-service (DoS) attack waged against a Bitcoin fork brought down a major Internet Service Provider (ISP) on Long Island, New York. Ultimately, the small blockers won, a victory often described as a win for decentralization.
“I think small blockers won democratically. Of course, a lot of shenanigans happened on r/Bitcoin which affected public opinion, but at the end of the day, the rally cry behind favoring decentralization over TPS [transactions per second] was a real one and it won,” Eric Wall, an OG and chief investment officer of hedge fund Arcane Assets, told me.
Wall is something of a gadfly in Bitcoin circles, in part because of his support of non-monetary use cases for Bitcoin. While Wall has said he was an orthodox bitcoiner during the Civil War who ardently supported scaling the network through “layer 2s” rather than larger blocks, he has since become somewhat disillusioned with the results.
“The route chosen was a more conservative one. People who were inclined to try out riskier ideas were pushed out. Bitcoin ossified, with Taproot being the only new upgrade to reach the protocol in the following five years,” he said.
For years, Wall has been advocating for a spark of ingenuity in Bitcoin, and for its supporters to consider trialing tech developed on networks like Ethereum. He, like many bitcoiners willing to challenge the orthodoxy, has essentially been excommunicated, though he may not see himself as a casualty of war.
Today’s debate over transaction fees and Bitcoin development is different from the Blocksize War in one key regard: many of the questions over Bitcoin’s technical limitations have already been settled. In 2017, bitcoiners had a choice between Bitcoin and Bitcoin Cash, a hard fork that offered bigger blocks, which its founder Roger Ver said fulfilled the original mission of peer-to-peer digital cash. A later fork from Bitcoin Cash, called Bitcoin Satoshi's Vision, founded by the untrusted individual who calls himself Satoshi Nakamoto without evidence, Craig S. Wright, offered even larger blocks. Instead, market participants have clearly decided the canonical blockchain is the real Bitcoin. And that’s a vote of confidence in the Small Blockers' plan to scale Bitcoin using layer 2s, and sidechains like Liquid and Lightning.
While the high fees today paid to transact on-chain cause some concern, and perhaps provide impetus to build Bitcoin differently, as of yet no one prominent is suggesting a complete overhaul of the blockchain. However, adoption of Lightning, a payments-focused scaling option that settles on Bitcoin, has been slight (in part due to bitcoiner's proactive warnings that these systems are experimental). Liquid, built by major Bitcoin infrastructure company Blockstream, fairs even worse.
Like the problem of high fees during periods of sustained use, the current Bitcoin architecture is also possibly vulnerable in the long-term if it cannot generate a "fee economy" needed to pay miners after the 21 million bitcoins are paid out as a pre-determined subsidy – or if most fee-generating activity migrates to layer 2s.
"In hindsight, it is obvious why the small blockers needed to win, and it is their principles which I have become more aligned with, expanding the reach of sound money while maintaining decentralization," popular Bitcoin podcaster, and British football club and bar owner, Peter McCormack said in an email. Bitcoiners today generally accept open markets will work out some of these nebulous questions about Bitcoin's long-term security and current scaling limitations. Because block space, not unlike BTC itself, is a scarce asset with a highly-dedicated user base it is expected to be become increasingly valuable.
In a recent op-ed, CoinDesk columnist and co-founder of investment firm Castle Island Ventures, Nic Carter wrote about the absurdity of some bitcoiners today rejecting the use of the network for novel assets like ordinal NFTs and the BRC-20 token standard. Given the crypto-libertarian unpinning of the Bitcoin movement, which traces its lineage to economic philosopher Murray Rothbard and the 1990s cypherpunk culture, it is unaccountable to call for these non-economic use cases to be censored, Carter said.
But Bitcoin culture has been imbued with willing or unnoticed hypocrisies since the beginning. Carter, too, has rejected and been rejected by contemporary "toxic maximalists," which is likely a small but vocal contingent of the network's user base. This is a group defined often less by its radical economic beliefs than by a certain lifestyle brand that's coalesced on social media, which includes prodigious meat eating, a skepticism of authority (with pols who support bitcoin being an exception) and obsession with spreading bitcoin as a messianic cause. MicroStrategy CEO Michael Saylor won this group's favor after redirecting his dot-com era tech company into a publicly-traded bitcoin vacuum, and has called this self-described toxic element Bitcoin's antibodies or ultra-protective "killer hornets."
To the bitcoiner mind, the occasional purge of heterodox thinkers who violate some tenet of the Bitcoin Way and attacks of critics is a reflex developed during the 2015-17 civil war. "Maximalism was formed in the crucible of the Block Size War and introduced a dogmatic Dark Ages that we are only now escaping," Dr. Paul Dylan-Ennis, a crypto historian, CoinDesk columnist and associate professor at the University of Dublin College of Business, said. At the time, the scaling debate was often described as being between "populists" who supported big blocks and expanding Bitcoin’s commercial potential and "elitists" protecting its status against upstart cryptocurrencies. That language has mostly been shed from the contemporary historical understanding of the Blocksize Wars, in favor of the "democratic" ends of preserving the ability to run a node.
Because history is written by victors, it's now said Big Blockers were essentially a coterie of monied interests in Bitcoin, like industrial miners in China and major crypto payments providers. Whereas Small Blockers are often depicted as underdogs – the ragtag assemblage of bitcoiners who wanted the network to remain closer to its original code base, and were wary of a backwards incompatible upgrade. There's a degree of truth to this. Influential and well-heeled Big Blockers included Jihan Wu, the co-founder of Bitmain, the largest incumbent mining company at the time; Brian Armstrong, the Coinbase chief executive who backed an astroturf movement to “fire the developers" (as in Bitcoin Core) for their intransigence; and Roger Ver, who was once known as “Bitcoin Jesus” for his proselytizing media strategy that included maintaining the @bitcoin Twitter handle.
Further, the infamous New York Agreement exists in the public imagination (rightly or wrongly) as a closed door session at CoinDesk's Consensus conference in 2017, where dozens of corporate actors schemed under the direction of CoinDesk's parent company Digital Currency Group (DCG) to force through a protocol update. The topic of conversation that day was SegWit2x, a sort of hybrid plan between big and small blockers that would double the Bitcoin block size to 2MB and activate the Segregated Witness (SegWit) upgrade proposed by Bitcoin Core developers, which would improve network throughput by separating the data of who signed what transaction from the transaction itself.
If you don't already know, SegWit2x died in the water. SegWit itself was implemented on Aug. 1, 2017, a date celebrated as Bitcoin Independence Day, through a "user-activated soft fork" (UASF) symbolizing the Bitcoin community's bonhomie and power over monied miners. Thus ended Bitcoin's "first of many civil wars," Luxor's Colin Harper wrote in an excellent Bitcoin Magazine retrospective. The UASF was a feat of technical and social engineering, combining ideas from disparate sources to avoid a hard fork while improving the network substantially. The event "permeates" Bitcoin culture, Arcane's Eric Wall said, and imbues the act of running a full node with significance. "It changed the discussion climate in Bitcoin forever."
Adding to SegWit's charm and legacy is that many miners and crypto companies dallied on implementing the change. It took Coinbase until February of 2018 to upgrade, for instance, and payments processor BitPay until July of 2020. Today, "no true bitcoiner" would be caught dead using BitPay, which is now known mostly as the impetus for Bitcoin Core contributor Nicolas Dorier to launch an open-source alternative called BTCPay Server in 2017, after he found out the company signed the New York Agreement. Stories like this are carried by word of mouth, and brought up time and again on social media, because they speak to a certain self-conception among bitcoiners as punks interested in economics and tech.
It’s hard to say whether that spirit is dead. Bitcoin as a social technology has certainly changed over the years, especially with an influx of users during the meteoric bull run under COVID. And now it seems to be teetering on the edge of an even bigger shift. But the battle scars of the previous civil war are real, and it's unlikely the changes this time around will be technical. All tech is "path dependent" and bitcoiners chose their course long ago. Whatever curiosities like ordinals are unlocked next, we need to contend with a blockchain designed to be constrained. Ultimately, the market will decide whether buyers of Taproot Wizard NFTs overpaid for blockspace.
But I'll leave you with one last bit of history to mull: SegWit was written long before it was ever implemented, and found its way into Bitcoin's source code well before there was complete consensus between users and miners, with arguably just a slight quorum Bitcoin Core developers in favor. There's good that came from the resulting debate – including, as former Blockstream CTO Samson Mow noted, a concerted drive to reduce the concentrated power of miners (Blockstream was early on the trend of building mining facilities in North America). But SegWit was a change that made it into a Core release, which could have passed unnoticed had miners not boycotted the change. Is there not some version of the story where the rarefied circles of Bitcoin puritans are in the wrong? Where miners, wanting a vote, kickstarted a debate that changed how Bitcoin is governed for the better?
In a game driven entirely by economic incentives, you can drive yourself insane moralizing about actors and motivations. Bitcoin is for everyone – including your enemies.