Vinny Lingham and Charlie Lee go head to head about Satoshi’s vision for Bitcoin

If you discuss Bitcoin without touching on scaling, did that discussion really happen?

That, at least, seems to be a general theme in prevailing Bitcoin community following the hard fork that set Bitcoin and Bitcoin Cash apart. With both blockchains, hearts, and minds split across the spectrum, Twitter and Reddit have been staging grounds for wars of belief and ideology.

For the uninitiated, the story first begins in 2009 with the emergence of Satoshi Nakamoto’s Bitcoin white paper, which first outlined a peer to peer money that is not controlled by any central authority. Rather than have a middleman verify the legitimacy of transactions, Bitcoin relies on a blockchain – a distributed and decentralized ledger in which transactions are recorded and verified through cryptography.

While Satoshi Nakamoto has been revered for their work on the white paper and network that birthed the wider cryptocurrency market, the concept behind Bitcoin is – according to some – not without flaw. The Bitcoin network is capable of processing a maximum of seven transactions per second, which – while this is an amazing achievement given the novelty of blockchain technology – sets up an early problem.

Fundamentally, developers need to find a method to ‘scale’ Bitcoin to ensure it can be used as a means of transaction by participants all over the world. This is a major key in ensuring that Bitcoin can fulfill its vision as a worldwide peer-to-peer payment network.

While Bitcoin itself was first detailed in Satoshi Nakamoto’s white paper, the cryptocurrency’s development community are in charge of building on the concept that first outlined the Bitcoin network. For years, the development of the Bitcoin network has been under the stewardship of Bitcoin Core; a foundation of developers and programmers committed to making Satoshi Nakamoto’s dream a reality.

Over time, however, key disagreements in Bitcoin Core’s community have prompted frictions and intense debates over which direction the cryptocurrency should head in.

A key roster of Bitcoin developers became concerned over time that Bitcoin Core’s leadership had not taken active steps to rapidly scale the cryptocurrency, and had become frustrated with the project’s apparent pace of development. These frictions were compounded by proposals that would introduce ‘second layer’ mechanics – put simply, networks that would run atop the Bitcoin network itself – that could potentially distance Bitcoin from Satoshi Nakamoto’s initial proposal and lead to the ‘centralization’ of Bitcoin.

Two of these proposals have drawn ire. SegWit2x – named Segregated Witness – would be a planned network upgrade that would restructure the composition of a block and reposition ‘signature’ data within a block to accommodate more room for transactions. The proposal draws the ‘2x’ in its name from its intent to double Bitcoin’s block size from one to two megabytes.

Secondly, development of the Lightning Network – a channelized peer-to-peer payments network built atop the Bitcoin network – would seek to create a distributed web of payment channels between users.

Angered developers argued that neither of these proposals meaningfully remedied the scaling difficulties experienced by the Bitcoin network, and did not inherently resolve the network’s limitations without resorting to third-party improvements or modifications that fell outside the scope of Satoshi Nakamoto’s white paper. Further, fears arose that the development of SegWit2x and the introduction of the Lightning Network may render the ‘centralization’ of the Bitcoin network possible.

On August 1st of 2017, these tensions came to fruition as Bitcoin underwent a hard fork – a process wherein its blockchain split into two variants. While Bitcoin Core’s blockchain remained unmodified, a new blockchain for a network called Bitcoin Cash was created.

Since that day, many of Bitcoin’s earliest supporters have either redoubled their efforts in supporting the pre-eminent cryptocurrency, or have lost faith with the vision the cryptocurrency represented in their eyes.

Principally, where Bitcoin Cash supporters have advocated for ‘onchain’ scaling – solutions that do not introduce a ‘second layer’ and instead expand the ambit of a base blockchain, Bitcoin supporters have remained resolute that ‘offchain’ solutions such as the Lightning Network will be key in expanding peer-to-peer payments to the world at large.

One such figure is none other than Vinny Lingham – an early Bitcoin advocate and the founder of decentralized identity startup Civic. During an interview with CoinInsider on our podcast, Coin Dive, Lingham went on to opine that ‘ cryptocurrencies could change the world – in a way that Bitcoin could have’.

Enter the Twitter debate

Responding to a tweet from @BitcoinGuruInfo describing Expedia’s decision to cease Bitcoin payments, Lingham went on to opine that “Don’t worry…they’re just waiting for Lightning to strike so they can put it on their corporate roadmap. It only took us 7 years to get them to implement Bitcoin, so we should get Lightning done by maybe 2025…”

Lingham’s comments come after he revealed his distaste for the introduction of SegWit and Bitcoin Core’s scaling plans to CoinInsider earlier this year – the businessman had commented that “I was very against the UASF – that just represented a fundamental change in the way Bitcoin was designed”.

As one of the earliest Bitcoin proponents – having supported Bitcoin payments through Gyft, his online gift card venture – Lingham expressed his view that Bitcoin ultimately should have transactional utility before serving as a store of value – noting that “I think Bitcoin should have been and would be a store of value eventually, but I think it needs to have utility first”.

The debate is central to the friction that grates between Bitcoin and Bitcoin Cash – supporters of the latter hard fork have expressed their belief that Bitcoin should ultimately be structured to support transactional throughput first to achieve its goals of serving as a peer-to-peer currency. Controversial Bitcoin Cash advocate Craig Wright went so far as to encourage Bitcoin Cash miners to process 0 sat transactions earlier this year in a bid to spur adoption.

Ultimately, while the Bitcoin network introduced reduced transaction fees thanks to the introduction of SegWit, research earlier this year revealed that the cryptocurrency’s transaction volume had gone on to touch a two-year low.

With an enduring bear market, numerous businesses had made the decision to suspend or cease accepting Bitcoin payments. Speaking to CoinInsider, Lingham had noted that “The bottom line is most of the businesses have already left Bitcoin… It’s kind of sad for someone who spent a lot of time building up Bitcoin and through Gyft and using it for many years…”

Responding to Lingham on Twitter, Litecoin founder Charlie Lee entered the fray – questioning Lingham’s view that Bitcoin’s payment network had been dismantled and noting his view that the Bitcoin network’s processing efficiency decreased as the result of the cryptocurrency gaining traction in the worldwide market far more quickly than anticipated.

Vinny, you are becoming a Bitcoin hater lately. What gives?

— Charlie Lee [LTC⚡] (@SatoshiLite) July 9, 2018

Lee’s view aligns with the belief that Bitcoin requires ‘offchain’ scaling in order to process enough transactions to serve as a worldwide payments network.

Offchain and onchain scaling

The Lightning Network is one such idea, and has rapidly gained prevalence as the solution that could expand Bitcoin to millions of consumers, merchants, and institutions. While Bitcoin works by broadcasting all transactions on its publicly distributed ledger, the central idea behind the Lightning Network is that not all money issued on digital transactions necessarily need to be broadcasted – and by broadcasting fewer transactions, the Bitcoin blockchain is essentially ‘freed up’ wherein processing seven transactions per second can feasibly serve greater amounts of people.

Essentially, this would see the Bitcoin blockchain move to handle ‘macro’ transactions (large scale, conclusive transfers), with the Lightning Network would instead cater for ‘micro’ transactions ‘offchain’.

Micro-transactions are created on the Lightning Network by way of ‘channels’ – direct lines of transfer between two parties. Each transacting party would place a deposit of Bitcoin to open a channel, and could feasibly transact in denominations of Bitcoin – for example, a user could open a channel with their favorite coffee shop, and pay in Bitcoin through that channel for each cup of coffee. Once the channel has been expended – or the agreement behind its creation fulfilled – all microtransactions in one channel in the Lightning Network are written to the Bitcoin blockchain as a ‘macro’-transaction.

Through the Lightning Network, experts and researchers estimate that parties transacting in Bitcoin would add just two transactions a year to the Bitcoin blockchain – slashing present fees to just a few millionths of a cent.

Lingham, however, has previously expressed his disbelief in the proposal – and noted that the solution may require far more time to implement and see adoption than the Bitcoin network itself.

“The Lightning Network is so experimental”, Lingham previously said, “there’s less than 100k sitting in the Lightning Network right now, and we’re talking about a 150 million market cap for Bitcoin, so that’s how much people are willing to put into it. Very experimental, very early stage, and we’ll be lucky if there’s something really functional in mass-market adoption in the next year or so.”

I just published “My Vision For SegWit And Lightning Networks On Litecoin And Bitcoin” https://t.co/lGOzDCxSrd

— Charlie Lee [LTC⚡] (@SatoshiLite) January 6, 2017

Lee’s advocacy for the Lightning Network has stretched into Litecoin – the cryptocurrency, as a fork of Bitcoin, could feasibly work with the concept in the future. Notably, Litecoin itself has seen adoption across web services thanks to the fact that it is capable of processing transactions at a fraction of the time the Bitcoin network might require.

The general view from the technical Bitcoin community is that Satoshi was wrong & Bitcoin needs Lightning to scale. That’s what all the bickering is about. I don’t hate Bitcoin. I just fell in love with what Satoshi wrote. If Satoshi was wrong, I’m happy to be wrong with him! https://t.co/YBz1O6lZ8b

— Vinny Lingham (@VinnyLingham) July 9, 2018

Frustrations have run rampant, however, that the Lightning Network’s development has run aground and that the slow pace of its introduction and refinement might well compromise the ability of businesses and transacting parties around the world to use Bitcoin as a means of exchange

People are hard at work on LN to help Bitcoin scale for payments RIGHT NOW. People are just not willing to take shortcuts that sacrifices decentralization. That doesn’t fit suit well for companies that have broken business models that rely on Bitcoin being a certain way.

— Charlie Lee [LTC⚡] (@SatoshiLite) July 9, 2018

While Lee noted that the Lightning Network’s labored development should continue – noting that ‘people are just not willing to take shortcuts that sacrifices decentralization’ – Lingham dryly expressed that ‘Well, clearly I’m not on the Lightning Foundation board – I’m advocating for on chain transactions, i.e. not some untested L2 network.’

Well, clearly I’m not on the Lightning Foundation board – I’m advocating for on chain transactions, i.e. not some untested L2 network.

— Vinny Lingham (@VinnyLingham) July 9, 2018

The test of time

Ultimately, while Lingham and Lee’s disagreements might be an acute representation of the friction in the Bitcoin community as a whole, only time might tell which approach could see Bitcoin scale to reach a global, transactional community.

What remains clear is that the original Bitcoin white paper ultimately fails to address how the network as a whole should scale – and with Satoshi Nakamoto’s enduring absence, debates may rage on forever.

In a purported email sent from Satoshi Nakamoto to software developer Mike Hearn, the pseudonymous Bitcoin founder apparently states that Bitcoin should only require one global chain, and that Moore’s Law would dictate that available processing power should be sufficient to process Bitcoin transactions without sizeable delay.

What remains clear, regardless, is that either the approach espoused by onchain or offchain scaling solutions requires some form of divergence from Satoshi Nakamoto’s white paper.

While Lingham has expressed his view that Bitcoin has emerged as a new ‘store of value’ thanks to scaling concerns and its popularity, Lee remained optimistic – quipping that the Bitcoin community will ‘make a huge rush for payments’ once the Lightning Network has been sufficiently adopted.

It’s not quite ready yet. LN still needs a bit more time to develop. Still need better UI/UX and easy for people to use. Once that’s ready, I’m sure the community will make a huge push for payments.

— Charlie Lee [LTC⚡] (@SatoshiLite) July 9, 2018

In the meantime, a wintery bear market might give both divergent views some time to formulate further – and only the resumption of a bullish market might tell how, whether, and when transacting parties around the world use Bitcoin (or Bitcoin Cash) to exchange value.