The battle over the future of bitcoin

Its unclear if Wright declaring himself to be bitcoins mythical creator, Satoshi Nakamoto, will help resolve that process. Wright is on the side of people like Blockchains Smith, a former financial services consultant whose firm raised more than $30m in venture capital, has offices in London and New York, and counts Virgins Sir Richard Branson as an investor.

Smith wont give his age, though his biography suggests he is in his early or mid-30s. Hes youthful, and his voice occasionally cracks when explaining the intricacies of virtual currency. On his Twitter page he describes himself as a capitalist, explorer and coder.

Naturally, Smith wants bitcoin to grow quickly preferably very quickly, handling lots of transactions at the same time so its faster and more convenient for users to spend money, and so that his investors make a bigger, faster return on their investment.

Along with other bitcoin companies, Smith is trying to improve the process to handle more consecutive transactions to reduce delays and boost volume. This isnt as simple as flipping a switch. Unlike Visa, bitcoin doesnt have a central clearinghouse to process all transactions. Instead, each purchase and transfer is verified by one of thousands of computers on a volunteer network and bundled into a digital block. Each block of transactions is then recorded on a central ledger called the blockchain the inspiration for the name of Smiths firm.

Bitcoins mainstream popularity has grown in fits and starts in recent years. For all its technological brilliance, there still isnt an easy way to use it at major stores, and spending a coin can appear to be more trouble than its worth. For consumers, paying a merchant in person with bitcoin is similar to using PayPal or Venmo. They would need to open an app, pull up the store owners bitcoin address and than transfer the funds, which can take several minutes to clear.

Big blocks, little blocks

Smith, Wright and some other key bitcoin developers want the blocks to be larger so more transactions can clear at the same time. Their argument is both financial and philosophical. Sure, they could make more money, but bitcoin could also become more democratic and less a pet currency of techies.

To them, this is the whole point of the bitcoin project. On command, Smith can quote bitcoins originating documents like a supreme court justice combing over Americas founders early writings. An early email sent by Satoshi or maybe Wright spoke of Bitcoin becoming larger than Visa and relying on massive blocks.

But for the blocks to get bigger, the people who run the computers that make blocks so-called Bitcoin miners need to switch to a different software designed by the advocates of bigger blocks. And a lot of the miners arent prepared to switch, partly because some key Bitcoin developers have convinced miners that blocks for now should stay small.

If blocks become increasingly larger, miners will need more computing power to produce blocks, which means theyll need more money for more computers. Eventually, they warn, only professional mining operations will be able to produce blocks of transactions.

This all cuts against one of the key premises of bitcoin that the currency is decentralized and not influenced or controlled by a central bank or corporation like Visa. If bitcoin blocks get too large, it could become a system controlled by a few powerful groups of miners, the small blockers warn.

Yet there are also business interests at play. In 2014, before bitcoins current identity crisis, bitcoin developerGregory Maxwell and several encryption enthusiasts co-founded Blockstream, a bitcoin startup that tries to develop new ways to use the currencys main technology, the blockchain. Banks and insurance companies, for instance, could automatically enforce contracts through their own, walled-off blockchains. They could also help add more capacity to the broader bitcoin network by adding more side chains to the system to help the main chain handle more blocks.

In short, Maxwell and his team have a business interest in blocks staying small, because more people would need side chains. To Smith, the big-block proponent, Blockstreams position does seem like a conflict of interest.

Maxwell and other Blockstream employees didnt respond to interview requests. Rather, Blockstream president Adam Back referred the Guardian to Lombrozo, the co-founder of Ciphrex and a small-block proponent.Lombrozo countered that Blockstream is trying to improve the foundation of bitcoin in a more gradual and secure way.

Rather, he said consumer-facing bitcoin companies that help people spend the currency on everyday goods in popular stores are overeager to grow the currency too quickly to meet revenue targets.

Lombrozo said the group of developers in favour of keeping the small-block system want bitcoins foundation to improve before trying to grow it. Everyone would like to see this expand and become very global, he said.

Bitcoin, meanwhile, may have bigger problems. After White on Monday announced that he was the real Satoshi, security researchers and encryption experts began to question his public proof of his secret identity.