Bitcoin May Have Just Solved Its Scaling Problem

Okay, WTF is BIP 91 and what does it mean for bitcoin?

Bitcoin may have just pulled itself back from a dangerous ledge Thursday night after users overwhelmingly voted in favor of implementing a code improvement.

Bitcoiners hope that the vote will prevent the cryptocurrency from splitting in two on August 1 while also allowing bitcoin to scale up to worldwide adoption. The changes were largely technical and fraught with in-fighting, so strap in for some blockchain politics and light cryptomath.

Thursday's milestone was a response to what may be bitcoin's biggest problem: it's slow as hell. The bitcoin network simply wasn't designed to be able to handle the kind of volume it is experiencing as more people are beginning to use the currency, and the 1 megabyte "blocks" of transaction data that get uploaded to the blockchain are full.

This has created a massive backlog of unconfirmed bitcoin transactions that might take hours or even days before they're confirmed on the blockchain (this normally takes 10 minutes), unless a user wants to pay a higher fee to push their transaction through faster.

Bitcoin developers have been aware of this problem for years. But implementing a solution has been an acrimonious debate that some describe as a "civil war" among bitcoin developers and users. This war may finally have come to an end Thursday night, however, with the adoption of a solution to bitcoin's scaling woes known as "Bitcoin Improvement Plan 91," or BIP 91.

For BIPs to be adopted, enough miners—the people who process blocks of bitcoin transaction data—have to "signal" their intent to go along with the plan by adding special signal data to mined blocks. On Thursday night, over 90 percent of the network's hash power had signalled in favour of the proposal.

BIP 91 is a way to encourage the activation of a code change called Segregated Witness, or segwit, which promises to speed up the bitcoin network. In addition to implementing segwit, BIP 91 also incorporates a doubling of the block size from one to two megabytes, known as "segwit2x." However, the main goal of BIP 91 was to sidestep the very real threat of splitting the currency into two versions come August 1.

A chain split would occur on this date if another leading proposal called BIP 148, which would forcibly implement segwit whether or not everybody has agreed on it, were adopted without BIP 91. Bitcoiners who advocate for BIP148 have taken to calling August 1 their "independence day."