Bitcoin community faces major crisis

The bitcoin community is confronted with one of the most historic decisions. The problem at hand is that the bitcoin network is running out of spare capacity, which has created two increasingly divided camps with one favouring raising the limit and the other opposing it.

When bitcoin was created in 2009, the original bitcoin software limited each block size (which records bitcoin transaction, created about every 10 minutes) to one megabyte in order to prevent malicious entities from jamming the system with spam. Back then, it left plenty of room for growth.

But bitcoin usage has been rapidly growing and the network is inching closer to its maximum capacity day by day. The network is about 30 to 40 percent full on average at present, but sometimes high demand leads to congestion causing delays for users. If the current rate of growth sustains, the network would get even closer to full capacity soon which would make things a lot worse.

The "limit" that is being spoken about is actually just a number in the bitcoin software. If that number is increased, the network would have more capacity. But, this would be fruitful only if everyone agrees to raise the limit as the network has been built on consensus. If some parts of the network raise the limit and others don't, the network would be divided into two parts, which would destroy confidence in the bitcoin network, as users could never be sure which transactions were official.

Bitcoin developers, Mike Hearn and Gavin Andresen, lead the group that favours raising the capacity of the network. They argue that in order to become a mainstream technology, bitcoin needs to grow and the current limit doesn't provide much scope.

However, those who oppose raising the limit argue that increasing the capacity of the network will lead to centralization of the bitcoin system.

The network is designed in a such a way that no one can single-handedly control how it works, as long as no one controls a majority of the it's computing power. But with the rise in the volume of transactions, the number of computers participating in this transaction-processing job has fallen. According to some critics, raising network's capacity will make it more expensive to participate in the process, which will bring down the number of computers that take part even more. That, in turn, could make the network more susceptible to attempts by governments or other entities who want to get it under their control.