A Bitcoin Scaling Upgrade: How It Could Finally Happen (And How It Could Fail)

Bitcoin, it seems, has one of two futures.

Either the $40bn economic network that still defies scientists is on the verge of the biggest change in the network's history, or the most advanced of its many long-theorized scaling compromises is headed toward its biggest political failure.

In recent weeks and months, the likely outcome has shifted quickly, often daily, as the varying stakeholders and competing proposals have jockeyed for position, media attention, and in some cases, actual headspace in the form of creative political attire.

What has been less visible, however, is that, in the midst of the chaos, bitcoin has been progressing, slowly and messily, to the point where some sort of action in the years-long effort to increase its transaction capacity seems likely to be taken.

This is partly because of a key proposal that emerged last month.

After convening in a meeting in May, a group of entrepreneurs and miners put forward Segwit2x, certainly not the first, but arguably the most advanced alternative to the roadmap long advocated by Bitcoin Core, the network's open-source developer group.

Armed with the commitments from the majority of bitcoin's mining pools, the group, comprising more than 50 startups and organized by investment conglomerate Digital Currency Group, now has enough influence to push through at least the first portion of the agreement, though it's not without its dissenters.

Come August, a number of outcomes are plausible. Some are more likely than others. Bitcoin could be upgraded smoothly, or not. But, the big conclusion could play out in many different ways.

The SegWit split

For the moment, the most important takeaway may be that every group is pushing for a change known as Segregated Witness. Bitcoin Core's original roadmap, the Segwit2x plan and users rallying around a change known as a 'user-activated soft fork' (UASF), all call for the upgrade.

Introduced already to no ill effect on the litecoin network, SegWit could provide a boost to bitcoin's transaction capacity among other enhancements. But it has yet to activate on its own. (Some mining pool operators and mining hardware companies have long pushed back against the proposal, though the motivations here are varied.)

But as all the proposals now ultimately support SegWit on different terms, many in the community see this as a sign that SegWit is finally going to activate this summer.

The question is whether it could ultimately lead to a split into two bitcoins, due to how the upgrades are set up.

For one, some mining pools are showing signs that they want to take aggressive measures to hard fork bitcoin to a 2MB block-size parameter. If that happens, it's possible that bitcoin could split into two competing assets later in the summer.

The tricky part is that the debate is constantly shifting.

But, to help understand the current state, here's a timeline of what could happen:

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