Bitcoin slid by 10 per cent on Friday after one of its lead developers, Mike Hearn, said in a blogpost that he was ending his involvement with the cryptocurrency and selling all of his remaining holdings because it had “failed”, the Sydney Morning Herald reports.
Hearn, one of five senior developers who has spent more than five years working on the web-based currency, said he would no longer be taking part in development.
“Despite knowing that bitcoin could fail all along, the now inescapable conclusion that it has failed still saddens me greatly,” Hearn said in his post on blog-publishing platform Medium.
Along with Gavin Andresen, who was chosen by bitcoin’s elusive creator Satoshi Nakamoto as his successor when he stepped aside in 2011, Hearn has been locked for months in a battle with the other lead developers over whether the “blocks” in which bitcoin transactions are processed should be enlarged.
Each block currently has a capacity of one megabyte, which Hearn says is “an entirely artificial capacity cap”, and allows a maximum of just three payments to be processed per second.
In August, Hearn and Andresen released a rival version of the current software, called Bitcoin XT, which would increase the block size to 8 megabytes, allowing up to 24 transactions to be processed every second. While that is still a fraction of the 20,000 or so that Visa can process, it would increase every year, so that bitcoin could continue to grow.
But the new software has not been adopted by the “mining” computers that secure the network, the majority of which are in China, according to Hearn.
Hearn says the bitcoin network is about to run out of capacity as the volume of transactions increases. And when that happens, the network will become unreliable, with payments unable to be processed and vulnerable to fraud.
“If an IT system runs out of capacity like that then all kinds of things go wrong – all hell breaks loose,” he said in an interview with Reuters in late December.
Hearn reckons the bitcoin community has “failed” in its governance of the crytocurrency’s code.
“What was meant to be a new, decentralised form of money that lacked ‘systemically important institutions’ and ‘too big to fail’ has become something even worse: a system completely controlled by just a handful of people,” he wrote.