In the world of Bitcoin, Mike Hearn is a big deal. He developed the code that made it possible to use Bitcoin on smartphones. A couple of years back, he quit a cushy engineering job at Google to focus on Bitcoin full time because he was convinced of its potential to change the world. But now he's quitting the digital currency and declaring Bitcoin a failed experiment.
"The fundamentals are broken and whatever happens to the price in the short term, the long term trend should probably be downwards," he writes on Medium. "I will no longer be taking part in Bitcoin development and have sold all my coins."
In a long screed, Hearn says that Bitcoin's community has grown toxic, and that the system is now controlled by too small a group of people. His primary complaint concerns the "Bitcoin XT constitutional crisis" that emerged last year, during which two groups of people within Bitcoin had different ideas about how to deal with a change that needed to be made to the digital coin's code. It led to a flame war, Reddit censorship, and a schism in the community that left Hearn's camp on the losing, censored side.
The result, says Hearn, whose post is flavored by the sour grapes of losing that battle, is that "the network is on the brink of technical collapse." He says that because the block size capacity, which is the cap on how many digital money movements can be processed at a time, wasn't increased as proposed by his crew, transactions are now slow to go through and the system is vulnerable to attacks that consist of flooding the network with transactions. In order to ensure your transaction goes through, says Hearn, you sometimes have to pay Bitcoin miners a transaction fee that's higher than what merchants pay for credit cards, which undermines one of Bitcoin's primary appeals. If the blockchain cap doesn't get bigger, those transaction fees will continue to grow.
Hearn blames Bitcoin's demise on "Chinese miners, just two of whom control more than 50% of the hash power." By that he means the people who control or run a majority of the powerful computers that process the network's transactions. He complains both that the Great-Firewall-hampered Internet in China is slowing down the network and that these miners, who get to make decisions about changes to the Bitcoin protocol because of the degree to which they power it, are afraid of making necessary changes to the code because it will panic Bitcoin investors.
Imagine an entire country connected to the rest of the world by cheap hotel wifi, and you’ve got the picture. Right now, the Chinese miners are able to — just about — maintain their connection to the global internet and claim the 25 BTC reward ($11,000) that each block they create gives them. But if the Bitcoin network got more popular, they fear taking part would get too difficult and they’d lose their income stream. This gives them a perverse financial incentive to actually try and stop Bitcoin becoming popular.
Most of Hearn's concerns about the future of Bitcoin were first raised last year when the Bitcoin XT debate was in full swing. During that time last summer, Nick Szabo, a technologist who created e-gold and is one of the many suspected of being Bitcoin creator Satoshi Nakamoto, told me that this was Bitcoin's "biggest political issue" and the most likely thing to destroy Bitcoin after an attacker destroying billions of dollars worth of Bitcoin or all governments banning it.
Hearn's post ends on a kind-of-uplifting note, as he mentions two other Bitcoin projects that seek to fix the blockchain cap issue—Bitcoin Classic and Bitcoin Unlimited—but he says the real problem with Bitcoin isn't its code but the people involved. He, moving forward, will not be one of those people.