How Bitcoin Works

Just recently, rumors have been spreading around that the bitcoin community is slowly falling apart. It seems that the news is also supported by the fact that one of its founders, Mike Hearn, sold all of his shares and subsequently left bitcoin. According to Mike, the bitcoin system, which widely used all over the world, is now nearing technical collapse. Before leaving, Mike tried working on the software in order to prevent this imminent fail but a group of people who are supposedly controlling the system opposed his actions.

During his interview, Mike also revealed that the bitcoin company Coinabase was banned from the bitcoin website, a thing that seemed utterly absurd to him since the company helped in attracting people to use bitcoin. There were also supposedly death threats against some developers in Coinbase as well as service system attacks in the company. However, the other people who are also part of bitcoin claim that Coinbase is not being separated from bitcoin. Instead, the whole bitcoin company will be having an election regarding the proper actions that will be done to the company.

For some, it may seem that such statements were only made because the members of the system did not to admit that their company is failing. The CEO of bitcoin, Brian Armstrong, recently called for press to spread the news about the bitcoin’s upcoming election.

WHAT CAN HAPPEN AFTER THE ELECTION

If Armstrong does not win in the election, what can happen is that the bitcoin network, will in fact collapse. In relation to this is the size of what people call “blocks,” or those that are used in transaction labeling within the network. For Armstrong, it is a necessity that block size be increased so that the company will be able to accommodate larger number of transactions.

So basically, it is not impossible that bitcoin will really fall in the pits if block size remains just the same. Currently, bitcoin handles seven transactions per second, Paypal 100, and Visa 4,000. Obviously, bitcoin should aim to be able handle more transactions.

Though the election does not seem to be that important to a lot of people, its results will surely play a large role in digital currency in the near future. Hopefully, people will eventually be able to transfer money more easily.

At present, not a lot of people use bitcoin. However, it can be very important in making monetary transactions that are quite cheaper and more open to the public.

HOW DOES IT GO WITH THE MINES

Miners are the computers behind the management of the whole bitcoin system. The people who work in these mines are paid in bitcoins, so it is only logical that they strive to make the computers run as smoothly as they can be. With the upcoming elections, such factors will be considered by those people who run the miners.

Armstrong and his colleagues try to improve the software system of the miners so that they will be able to handle larger numbers of transactions. However, there are other people in the company who are opposed to this ideas because of their personal ideology and for some, because they want to protect their money. These opposing principles worry the people behind miners because at the end, it is very possible that they will receive lower salaries.

For the upcoming election, Armstrong and his team are proposing a new system, Bitcoin Classic which aims to handle transactions with not more than a 1-megabyte increase.

INCENTIVES ADJUSTMENT

After Bitcoin Classic was released, some networks of the bitcoin system like Coinbase used the code on their missions. It remains to be seen whether the other miners will follow suit. In order for it to be thoroughly effective, the Bitcoin Classic must be adopted by at least 75% all bitcoin miners. After that, the rest of the miners are required to adopt the system or face being cut from the network.

However, Armstrong firmly believes that split of any type can’t really happen. He thinks that other people will also see the benefits of having larger block size. And if such thing happens, the whole bitcoin network will readily accommodate the continuous increase in the number of transactions.

The only problem with this is the two Chinese operations which handle almost 50% of bitcoin’s total mining power. It seems that the people behind these operations are afraid to switch to using larger block size.

WHY WOULD THE CHINESE BE RELUCTANT IN ADOPTING LARGER BLOCK SIZE

For some people, there is a solid basis why the Chinese will become reluctant in using Bitcoin Classic. Chinese miners work with China’s Great Firewall, a system that filters the internet contents in accordance with the perimeters set by the Chinese government. The delay brought by this system means that Chinese miners aren’t as fast as the others when it comes to handling transactions so increasing the block size may mean that they will work on the transactions much slower than before. If that is the case, it is more probable that they will lose more bitcoins instead of earning them.