Due to the influence of social media, information about Bitcoin is often distorted. Honest inquiries are not welcomed online, and if someone curiously asks the wrong question or expresses an incorrect opinion, they may face a wave of angry comments that attack their intelligence, reputation, and even their career. Bitcoin extremists (Bitcoin Maximalists) are notorious for this strategy. They insist that BTC is the only legitimate cryptocurrency, listing a long series of reasons to claim that other projects (like BCH) are scams, asserting that the relevant debates have long been settled, and questioning the sanity of any dissenters. Most people do not have the time to investigate the truth of these claims and do not want to become targets of online trolls, so they ultimately accept the so-called mainstream narrative.
To see through these narratives and truly understand the differences between Bitcoin Core and Bitcoin Cash, we first need to understand Bitcoin's original design. History can help us, as Bitcoin's creator Satoshi has publicly communicated his invention multiple times and explained his design philosophy. Some of the prominent engineers and thinkers who followed him, such as Gavin Andresen and Mike Hearn, have also clearly articulated Bitcoin's core ideas. This book references their works, which are crucial for anyone trying to gain a deeper understanding of Bitcoin. Before diving in, it's essential to familiarize yourself with the following three key concepts: blockchain, miners, and full nodes.
Blockchain
The core of Bitcoin is the 'blockchain' technology. Simply put, a blockchain is a public ledger used to record all Bitcoin balances and is updated approximately every ten minutes. These new transactions are packaged into 'blocks' and then 'linked' together one after the other, forming the 'blockchain.' The uniqueness of the blockchain is that it is not maintained by a central authority. There is no single entity that handles all transactions or decides the contents of the ledger. Instead, it is maintained and updated by computers in a globally distributed network, so there is no central control point or single point of failure.
Blocks themselves are at the core of understanding the different ideologies of Bitcoin, which can be roughly divided into two factions: 'big blockers' and 'small blockers.' Big blockers want the blocks to be as large as possible. The larger the blocks, the higher the network's transaction throughput, but the resources required to process each block also increase. Small blockers want the blocks to be small enough for anyone to handle them. We will explore this distinction in detail in the following sections.
Miners
Not just anyone can add blocks to the blockchain. This work is limited to miners. Miners update the ledger by packaging transactions into blocks and adding a special proof. This proof is a solution to a mathematical puzzle that is very complex and requires a lot of computational power to solve. There are many warehouses around the world specifically set up with specialized machines to solve these puzzles. These machines require power, so becoming a Bitcoin miner comes at a cost!
Miners earn economic rewards through two mechanisms: transaction fees and block rewards. Transaction fees are the fees users pay to have their transactions added to a block. Block rewards are the way new Bitcoins are generated. Whenever a miner adds a block to the chain, they receive a small amount of newly created Bitcoins. This reward is halved approximately every four years. Initially, miners could earn a reward of 50 Bitcoins per block, while at the time of writing, the block reward has dropped to 6.25 Bitcoins. Eventually, this reward will become negligible, at which point transaction fees will become the sole source of income for miners.
The big block faction believes that miners provide a crucial service in the Bitcoin ecosystem; they protect the network from attacks, maintain the ledger, and process all transactions. Miners often invest millions, even tens of millions, to upgrade to more powerful rigs. For example, in 2018, Bitmain announced plans to build the world's largest mining farm in Texas, with an expected investment of over $500 million. Bitcoin mining has high investment and maintenance costs, so the big block faction believes miners should have the most say in Bitcoin's development. Depending on the success of their mining, their capital investments could be completely lost or yield substantial returns. Thus, they have a strong incentive to ensure that Bitcoin remains useful and valuable.
The small block faction holds a more skeptical or even hostile attitude towards miners. Since miners are the only ones who can add blocks to the network, they wield considerable power, and if mining activities become too centralized, it could pose a systemic threat. If only a few major players dominate the market, Bitcoin itself could become too centralized. Large mining farms can also introduce political risks to the system. If the government decides to attack, regulate, or control the largest miners, they could undermine or control Bitcoin. The role of miners is a core point of contention that led to the Bitcoin Cash split.
Full Node
Fortunately, if you want to use Bitcoin, you don't need to be a miner or run complex software. Ordinary users can access the network in simpler ways. Satoshi described a method called Simplified Payment Verification (SPV), which users can use to easily send, receive, and verify their transactions. For most of Bitcoin's history, most wallets have used SPV or other similar methods to access the blockchain. Although this trend is reversing in the BTC network due to the popularity of custodial wallets, it remains the mainstream method in BCH.
Another way to access the Bitcoin network is by running 'full node' software. A full node downloads the entire blockchain and verifies every transaction that has ever occurred. The complete BTC blockchain contains about 800 million transactions and is currently around 450GB in size. For users running full node software for the first time, syncing with the network may take several hours. Moreover, if a full node loses its connection to the network, it needs to download and verify all the latest blocks to use Bitcoin again. This is where SPV's invention becomes particularly important. It requires almost no time or effort while still providing excellent security. SPV allows users to verify their own transactions, while full nodes can verify all transactions on the blockchain.
Regarding the role of full nodes, there is a significant difference between the ideologies of the big block and small block factions. The big block faction believes that most activity on the network should be an interaction between miners and lightweight wallets using SPV or similar technologies. They argue that full nodes are only useful in certain special cases, such as when you need to verify a large number of transactions in a short time, like running a crypto exchange or payment processor. Since the network does not provide economic incentives for full node operators, and most people do not need to verify strangers' transactions, ordinary users have no motivation to run such heavy software. As Satoshi clearly pointed out, “the design supports letting users just be users.”
On the other hand, the small block faction believes that full nodes are crucial for the network. They argue that users should run their own nodes, which is why smaller blocks are necessary, as the cost of running a node increases with block size. In fact, the small block faction claims that the main reason Bitcoin can't scale is that large blocks are too costly for node operators. They didn't conclude that regular users shouldn't run full nodes; rather, they believe Bitcoin can't scale. From my perspective, this is one of the biggest misunderstandings about Bitcoin, and we will delve deeper into this in the following sections.
Five Fundamental Principles
There has been a lot of discussion about Satoshi's original vision for Bitcoin. Supporters like myself and other early adopters believe that Satoshi designed an excellent system and demonstrated its feasibility in the real world. For this reason, we see no reason for fundamental changes. Critics of the original vision argue that Satoshi was wrong in certain key areas and wish to modify the protocol accordingly. Bitcoin Core developers are precisely such critics, even though they ultimately control the governance of the project.
Bitcoin maximalists often liken their adherence to the original vision to a blind faith, believing that any deviation from the founding principles is unacceptable. But such criticism is unfounded. Sticking to Satoshi's design is by no means dogmatic. Bitcoin is a complex system with many interacting parts. Besides software and computer networks, it is a complete economic system that needs to be understood through economic analysis. When you observe both its software components and economic components simultaneously, you'll find that Bitcoin is a finely tuned system that shouldn't be changed lightly.
The developers of Bitcoin Core decided not to scale Bitcoin by increasing block sizes to allow for more transaction throughput but rather to scale Bitcoin by using a multi-layer structure. Their view is that the first layer should consist of 'on-chain' transactions, on which additional layers can be built. These additional layers are 'off-chain', meaning transactions are not recorded on the blockchain, thus avoiding the need for base layer scaling. The widely publicized 'Lightning Network' is one of these second layers, but it has a series of fundamental issues that will be discussed in detail in Chapter 9. A significant issue is that it requires on-chain transactions to use. Simply connecting to the Lightning Network requires at least one transaction on the base layer, and if the BTC network is busy, this transaction can cost upwards of $100. While this is a critical flaw, no solutions have been proposed yet.
Bitcoin Core is fully betting on the feasibility of these additional layers. They disrupted the original system, making transactions on the base layer slow and costly, but they haven't provided a simple, reliable payment alternative. The current version of the Lightning Network is neither reliable nor secure (which is why the most popular Lightning wallets are now custodial). Thus, any hope for BTC to be the currency that enhances freedom in the future entirely depends on technologies that have yet to be developed.
At a conference in July 2021, Elon Musk also mentioned that BTC's transaction throughput might be an issue and defended the idea of scaling cryptocurrencies by expanding the size of the base layer:
“It makes sense to consider a system with a higher maximum transaction rate and lower transaction costs, and to see how far a single-layer network can advance... I think this could be more feasible than people imagine.”
Elon Musk is a well-known supporter of Bitcoin, but his engineering intuition aligns with the idea of Bitcoin Cash. Scaling the base layer is the right idea and has always been part of the original design.
Satoshi wasn't perfect, but as explained in the following chapters, his ideas are very compelling, well thought out, and worthy of honest examination. His design doesn't require the complexity of additional layers, yet remains compatible with them. Rather than blindly following any individual, developer team, or code symbol, it's better to judge based on the merits of these ideas themselves. Listen to how Satoshi designed Bitcoin, consider the perspectives of Bitcoin Core developers, and then form your own judgment.
The differences between the original design and the new design of Bitcoin Core can be summarized into the following five key ideas:
Bitcoin was designed as digital cash for making payments over the internet.
Bitcoin was designed to have extremely low transaction fees.
Bitcoin was designed to scale through increasing block sizes.
The design of Bitcoin does not intend for ordinary users to run their own nodes.
The economic design of Bitcoin is as important as its software design.
Each of the following points is core content of the original vision of Bitcoin, recognized by Satoshi and other early pioneers. However, today's mainstream narratives contradict almost every point. If you listen to commentators on TV networks and popular podcasts, you might believe:
Bitcoin was designed as a store of value; it doesn't matter if it can't be used as a medium of exchange.
Bitcoin should have high transaction fees.
Bitcoin can't scale just by increasing the block size.
The security of Bitcoin relies on ordinary users running their own nodes.
The economic design of Bitcoin has flaws that need to be fixed by software engineers.
All of the above viewpoints are wrong. Even if you agree with the changes made by Bitcoin Core, the historical record clearly shows that these changes are fundamentally different from Bitcoin's original design. The upcoming chapters will explore these claims in detail.
Excerpt from <Hijacking Bitcoin>
Original Author: Roger Ver
