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Markets data delayed by at least 15 minutes. THE FINANCIAL TIMES LTD 2018. Financial Times’ are trademarks of The Financial Times Ltd. Bitcoin, the cryptocurrency that has earned legions of fans and has often been touted as the future of money, is in danger of having no future at all if a rift within the peer-to-peer network that keeps the bitcoin system running cannot be resolved. Log out of your CBC account.
Bitcoin is no longer the shadowy currency used only by criminals and computer geeks. Several cities around the world, including Bucharest, above, have automated teller machines that process bitcoin transactions. Bitcoin, the cryptocurrency that has earned legions of fans and has often been touted as the future of money, is in danger of having no future at all. What was meant to be a new, decentralised form of money that lacked ‘systemically important institutions’ and ‘too big to fail’ has become something even worse: a system completely controlled by just a handful of people. A 1 MB cap on the size of the blocks is hardwired into the bitcoin protocol that was created in 2009. Allowing fewer transactions per second keeps the system safer, but it limits its overall capacity and, critics say, leads to congestion, transaction delays and cancellations as the network runs out of capacity and gets unreliable.
In August 2015, Hearn and another senior developer, Gavin Andresen, proposed an alternative version of bitcoin called Bitcoin XT that allows more transactions per second. Since then, other versions have sprung up, including Bitcoin Classic and Bitcoin Unlimited. Switching to Bitcoin XT would require the approval of 75 per cent of the network’s so-called miners, the superusers who run the computing hardware that generates bitcoin and keeps track of transactions. Some of those users fear that increasing transaction volume would threaten bitcoin’s decentralized model and result in only larger, possibly corporate, users being able to afford to mine bitcoins. But Hearn and other critics of the existing system allege that control of bitcoin is already centralized. Currently, Hearn says, more than half the processing power is controlled by just two miners in China, which gives them disproportionate control over the bitcoin ecosystem and a disproportionate share of the bitcoin payments that miners get for running the algorithms on which the system operates. Powerful, expensive hardware is needed in order to generate bitcoins and process transactions.