Debates, Divides, and Dumps: a Hectic Week for Bitcoin

If you are at least somewhat involved in the Bitcoin community, you are aware of the immense drama that has unfolded in the past few days. Primarily, the infamous blocksize debate has escalated to an intensity that has not been previously seen.

For those out of the loop, a debate over increasing the size of blocks from 1MB to 8MB has been ongoing between the core developers and the community for a considerable amount of time now. One group advocates for a hard fork to an alternative version of Bitcoin known as Bitcoin-XT that will increase the maximum blocksize to 8MB, as well as scale automatically in the future. The other side of the spectrum believes in maintaining the 1MB block limits imposed with Bitcoin Core, and instead using off-chain parties to process daily transactions, should the need arise in the future.

Although many of those in favor of 1MB understand the need to increase blocksize limits down the road, they do not believe that XT is the way to go. Some advocates on either side of the debate have been willing to compromise, however the majorities in both groups can best be described as stubborn. Theymos, operator of the two largest Bitcoin forums (Bitcointalk.org and reddit.com/r/bitcoin), has been under the heaviest criticism for his stubbornness, after he banned discussion of Bitcoin-XT in /r/bitcoin, as well as censoring the subreddit to filter out all posts in support of XT.

This decision has led to heightened tensions throughout the Bitcoin community, creating a divide more evident than what has been seen before. In fact, the announcement by Theymos even sparked a migration away from his subreddit. This is the first instance of major censorship on either of the main Bitcoin forums.

Taking advantage of the panic and uncertainty, one trader attempt to manipulate the markets, selling 10,000 Bitcoins on Bitfinex. This order dropped the price below $170 per coin. Speculators believe the trader attempted to manipulate the market in order to purchase back the coins at a lower price. Regardless of the success, the prices rebounded within minute to what they were before the sale. However, the “flash crash” has since created a downwards trend in Bitcoin prices, as many wary investors have sold their coins, cautious of the volatility caused by the dump.