- Vitalik explains bitcoin’s lack of increasing its block size has a worse impact than MtGox hack incident
- The scalability issues of bitcoin cause excessive transaction fees
Vitalik Buterin, the Russian-Canadian co-founder of smart contracts platform Ethereum, firmly believes that the decisions generated from bitcoin’s failure of increasing its block size have caused crypto enthusiasts more harm than the 2014 aftermath of MtGox hack.
Through his Medium post, Vitalik explained how bitcoin’s “unnecessary” small blocks accumulate the transaction fees charged to bitcoin users.
The ethereum Co-founder started by giving his point of view on small-c conservative social philosophy stating that although change can be good, there are also ways how the same change could prove to be bad. That’s when Vitalik went on and highlighted the mishap of bitcoin’s scalability to be horrendous than the losses of MtGox hack:
“Now I personally can see that it’s not axiomatically true that doing nothing is safest, especially in the context of a changing environment (for example I continue to believe that Bitcoin’s *failure* to raise its block size by a significant amount in 2016–17 was a travesty and a great violation of many people’s expectations of the protocol, and one that led to more total losses due to excess tx fees than the amount lost in the MtGox hack), but this is the argument that you need to be arguing against.”
Consequences of Bitcoin’s Scalability Problem
At the height of the transaction cost crisis, users had to pay average transaction fees upwards of $55 USD with the average not decreasing below $10 USD for a few months just to get a transaction through in a semi-reasonable time period. Buterin considers this amount that the users are bound to lose is significant and higher than what was lost in the MtGox hack.
Many top crypto developers and influencers had pointed out the scaling issue and agreed to introduce a SegWit upgrade of 1mb SegWit to 2mbs (SegWit2x). However, the plan was nixed, and the bitcoin community was upset fearing the prolonged bear market showed the same signs as MtGox incident.
The MtGox hack
Before the hack, the Tokyo based bitcoin exchange, Mt. Gox, was the largest BTC exchange on the planet.
In 2014, MtGox was handling over 70% of all BTC transactions around the world. After the massive hack that saw MtGox lose 740,000 bitcoins (equivalent to €460 million at the time), it was declared bankrupt.