Bitcoin slid by 10 percent on Friday after one of its lead developers,
Mike Hearn, said in a
blog post that he was ending his involvement with
the cryptocurrency and selling all of his remaining holdings because it
had "failed".
Hearn, one of five senior developers who has spent more
than five years working on the web-based currency, said he would no
longer be taking part in development.
"Despite knowing that
Bitcoin could fail all along, the now inescapable conclusion that it has
failed still saddens me greatly," Hearn said in his post on
blog-publishing platform Medium.
(Also see: Bitcoin: What's in Store for 2016)
Along with Gavin Andresen, who
was chosen by Bitcoin's elusive creator Satoshi Nakamoto as his
successor when he stepped aside in 2011, Hearn has been locked for
months in a battle with the other lead developers over whether the
"blocks" in which Bitcoin transactions are processed should be enlarged.
(Also see: The Long, Perplexing Search for the Creator of Bitcoin Just Took Another Weird Turn)
Each
block currently has a capacity of one megabyte, which Hearn says is "an
entirely artificial capacity cap", and allows a maximum of just three
payments to be processed per second.
In August, Hearn and Andresen
released a rival version of the current software, called Bitcoin XT,
which would increase the block size to 8 megabytes, allowing up to 24
transactions to be processed every second. While that is still a
fraction of the 20,000 or so that Visa can process, it would increase
every year, so that Bitcoin could continue to grow.
But the new
software has not been adopted by the "mining" computers that secure the
network, the majority of which are in China, according to Hearn.
Hearn
says the Bitcoin network is about to run out of capacity as the volume
of transactions increases. And when that happens, the network will
become unreliable, with payments unable to be processed and vulnerable
to fraud.
"If an IT system runs out of capacity like that then all
kinds of things go wrong - all hell breaks loose," he said in an
interview with Reuters in late December.
Hearn reckons the Bitcoin community has "failed" in its governance of the crytocurrency's code.
"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," he wrote.
Sudden departure
Just months ago, in
August, Hearn told Reuters that whether or not Bitcoin XT was adopted,
the crypocurrency would live on. "If we thought it might be the end of
Bitcoin, we wouldn't do it," he said then.
Bitcoin was trading at around $390 on the itBit exchange by 2000 GMT, down from $430 before Hearn's blog post was published.
In
his December interview, Hearn said that when people realised that the
Bitcoin network was at breaking point, the price would fall.
"The
current price of Bitcoin is supported almost entirely by people
speculating on its future, in the assumption that this could be the
money of tomorrow," he said. "So if the network starts to collapse, then
a lot of people are going to look at it and say: well maybe we've
miscalculated (its) future value."
Hearn is now working for the
R3CEV consortium of banks working on using the blockchain technology
that underpins Bitcoin in financial markets.
Stephan Tual, the
former chief operating officer of blockchain firm Ethereum, who now
works at blockchain-based app developer Slock.it, also reckons Bitcoin's
future looks shaky.
"Bitcoin is outdated technology - almost
prehistoric by crypto standards," he said. "It's because of petty
quarrels such as these that it hasn't been able to evolve in five
years."
Others were more upbeat.
"I'm not ready to declare that Bitcoin has failed," wrote U.S. venture capitalist Fred Wilson.
"Sometimes
it takes a crisis to get everyone in a room... So if we are going to
have a crisis, let's get on with it. No better time than the present."
© Thomson Reuters 2016
Crypto Price Today: Bitcoin Drops to $84,500 as Most Altcoins Decline21 March 2025
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