A disappointed Mike Hearn, one of five senior developers of cryptocurrency Bitcoin, revealed in a post on Medium that ‘I will no longer be taking part in Bitcoin development and have sold all my coins’. This article led to an immediate drop of 10% of the Bitcoin worth.
After spending more than 5 years as a Bitcoin developer, writing software that has been used by millions of users and hundreds of developers, and helping with the creation of several startups, Hearn comes to the conclusion that Bitcoin has failed.
In his blogpost on Medium, as an answer to the question ‘Why has Bitcoin failed?’ Hearn responds:
‘Think about it. If you had never heard about Bitcoin before, would you care about a payments network that:
- Couldn’t move your existing money
- Had wildly unpredictable fees that were high and rising fast
- Allowed buyers to take back payments they’d made after walking out of shops, by simply pressing a button
- Is suffering large backlogs and flaky payments
- … which is controlled by China
- … and in which the companies and people building it were in open civil war?
I’m going to hazard a guess that the answer is no.’
Hearn and Gavin Andresen, who was chosen by Bitcoin’s creator Satoshi Nakamoto as his successor, have been struggling for months with the “blocks”, in which transaction data is permanently recorded, which are controlled by Chinese miners. Just two of these miners control more than 50% of the hash power. Hearn: ‘At a recent conference over 95% of hashing power was controlled by a handful of guys sitting on a single stage. The miners are not allowing the block chain to grow.’
The capacity of each block is just one megabyte, which allows only three payments per second to be processed. In August, Hearn and released a fork of Bitcoin, named Bitcoin XT. Bitcoin XT would increase the size of each block to 8 megabytes, making the number of processable payments per second 24, which is a step in the right direction. This number would increase every year, making it possible for Bitcoin to continue growing.
However, this new software has not been adopted by the Chinese miners. Hearn says: ‘The miners refuse to switch to any competing product, as they perceive doing so as “disloyalty” – and they’re terrified of doing anything that might make the news as a “split” and cause investor panic. They have chosen instead to ignore the problem and hope it goes away.’
In an interview in December, Hearn said that the price of Bitcoin would fall as soon as people realised the Bitcoin network was at the hour of decision, since the current price of Bitcoin is supported for the biggest part by investors comtemplating on its future. According to him, a lot of people would back out as soon as they realised they might have made a miscalculation.