Why it matters: It’s an ideological battle over what Bitcoin should be used for, with a growing number of operators working to keep it just about money.
Zoom in: As Bitcoin node operators decide which software implementation to use to validate the cryptocurrency’s transactions, they’re staking a position on policy differences that dictate which rules to enforce on the blockchain.
* One choice, Bitcoin Core’s latest version, opens the chain to storing a lot more data in a transaction.
* The other choice, known as Knots, keeps things basically as they are. These nodes won’t accept more than a little bit of data in a given block.
Core has always been the most widely used implementation. It’s written by the Bitcoin core developers, who are the closest thing the network has to a board, though its authority is much looser than that.
* Knots is growing quickly in popularity. About a quarter of the network is running it now, according to the team’s reckoning.
Between the lines: In effect, there’s a vote underway.
The tension began in April, with the filing of a pull request on Bitcoin Core’s Github page.
* The proposer and supporters of the change want to remove what they see as arbitrary data caps in transactions.
* This, they say, will help the network remain policy neutral. For example, some Bitcoin privacy tools need more block space in transactions to function.
* Crucially, though, the Core team argues that the data limitation is pointless because users are finding workarounds anyway.
Friction point: The change could also open up more use cases running on Bitcoin, like other blockchain networks enjoy. Not just NFTs but also layer-2s and perhaps moderate smart contract-like functions.
* That’s exactly what the Knots proponents are afraid of.
* Advocates for Knots seriously dislike other blockchain networks. The only use for blockchain technology, in their view, is to make unstoppable money.
The most eye-catching argument in the debate is the topic of Child Sexual Abuse Material: Knots proponents contend that by opening Bitcoin up to easily store more data, CSAM purveyors will use the network more for distribution, potentially exposing node operators to prosecution.
* In fact, research in 2018 found a tiny amount of content on chain that was likely illegal material.
* Indeed, some paranoid folks believe the update is a way to create a legal vulnerability for Bitcoin.
Threat level: Bitcoin has seen a fight like this before, and it caused the first and really only major hard fork of the network.
* In early 2018, the blockchain split into Bitcoin and Bitcoin Cash, because a certain number of Bitcoiners believed that the network should process more transactions with each block, thus making the blockchain more usable for day-to-day payments.
* Paying for something in bitcoin back then was quite expensive, because there was so much demand for block space at the time.
* This time is known as the Blocksize War now, and the advocates for bigger block size lost, but the battle and resulting fork was an unsettling time for Bitcoin believers.
What we’re watching: Threats of another major fork.
* Right now, people are splitting off by choosing what kind of software they run. If enough people run Knots, it will be harder for a transaction with lots of data in it to get through.
The bottom line: On a theoretical level, the whole idea of Bitcoin was to give people a way to exit from politically governed money.
