The Blocksize War – Chapter 11 – Scaling III – Milan

Chapter 11 of the book The Blocksize War is published below. The full book is available on Amazon. As a reminder, 50% of any profits from physical book sales will be donated to Médecins Sans Frontières, a charity that provides medical assistance to people affected by conflict, epidemics, disasters, or exclusion from healthcare.*

* Note: Applies to sales up until the earlier of i. the death of the author and ii. January 2031

The Blocksize War – Chapter 11 – Scaling III – Milan

The excitement in Ethereum had calmed things down a bit for Bitcoin. To the small blockers, a blocksize hardfork was off the agenda. Scaling III took place in Milan on October 8 and 9, 2016. Small blockers were keen to put the blocksize debate behind them and move on; they wanted an end to the unproductive bike shedding and to move forwards. The focus of the conference was therefore designed to be about other scaling issues, such as lightning and Schnorr signatures. There were no presentations on blocksize limit proposals or frantic rushing around the conference venue looking for the key decision-makers or key showdown meetings. The event was dominated by small blockers this time, and there was little debate about the blocksize. The conference series had morphed, from one set up to resolve the blocksize crisis, to a technical Bitcoin conference.

There was, however, a small contingent of large blockers at the event. They included Roger Ver and a group of people supporting an alternative hardfork proposal, called Bitcoin Unlimited. With the failure of Bitcoin Classic, this new implementation was beginning to gain traction as the main client of choice for the larger blockers. This will be discussed in more detail in later chapters. Many of the large blockers wore a custom t-shirt they had recently produced, with the writing “Hard Fork Cafe” written on the front. This was part of their campaigning for a hardfork. I spoke to several of the large blockers at the conference, who were disappointed that they had not been allowed to give talks at the event. They talked about how the conference was biased and one sided.

Roger Ver, along with fellow large blockers Jerry Chan and Jake Smith, had arranged an alternative social event on the Saturday evening of the conference. The event was called “Free Speech Party” and would feature free food and drink, as well as free Hard Fork Cafe t-shirts. The event also included speeches on topics which were banned from the main conference. As far as I recall, all the Chinese miners at the Milan conference attend this free speech event, rather than the official social event. Perhaps this sounds unimportant and it seems inappropriate to focus on these social events. However, I think it illustrates the extreme sense of frustration felt by the larger blockers. They felt ignored and silenced in a community and space that was very important to them. They had lost their voice and lost a sense of ownership of Bitcoin. This social event felt like a cry for attention; the large blockers wanted to stay relevant. There was an emerging social divide in the community and it was clear which side of the split some of the Chinese miners were on, at least the ones associated with Jihan Wu.

The day after the conference, on the Monday, there was a smaller Bitcoin developer meet-up in Milan. That evening, a message reached the group from Jihan that he no longer intended to signal his support for SegWit, which he had apparently promised in July. Rumours then gradually started circulating about his reasoning. It was said that Jihan was disappointed by the lack of discussion of a hardfork at the conference, that he felt that this had been booted from the agenda, which is not at all what he had expected. It was also said that Jihan was disappointed that the developers didn’t send a car to pick him up from the airport at the meeting in the US in July, and that he felt this was disrespectful. I am not sure how accurate these rumours were, as I was hearing them second and third hand through a group of small blockers. I am sure the messaging was tainted a bit against Jihan, but there was probably a degree of truth to them.

It was not until months later that I learned more details about the events in the late summer of 2016, which may explain more about this decision from the miners. Jake Smith had gone on a tour of some of the largest miners in China that summer, including a meeting with Jihan Wu. In these meetings, he had supposedly convinced Jihan and some miners not to support SegWit. At this point, Jake was associated with Roger Ver’s company,, and a staunch supporter of larger blocks. Prior to this, he had worked at Bitmain and therefore had good links with the Chinese miners. He was well known inside the Chinese Bitcoin community, having resided in Beijing. He also spoke fluent Chinese. Based on an account of one of his meetings with a miner sympathetic to the smaller block cause, Jake informed them that Bitcoin Core should not be trusted and that SegWit was dangerous. Of course, one should take this account with a pinch of salt, given the source of the information. This event is just another example of parties to this conflict trying to lobby and engage with Chinese miners: from Gavin and Mike in the summer of 2015, to the Scaling conference in December 2015, to the Hong Kong agreement in February 2016, to the California meeting in July 2016 and now the Jake tour in August 2016.

After Milan, I returned back to Hong Kong and spoke to some local miners. It was clear that the view of the miners was evolving by this point. Prior to this, they were frustrated by the unclear and conflicting messages from the developers, and merely wanted an easy resolution to the conflict. By now, however, the so-called Chinese miners were becoming part of this war. They were starting to appreciate and understand the conflict and therefore started to take sides of their own. The clearest example of this was Jihan Wu, who was now establishing himself as the major player in the large block camp, while other players in the mining industry appeared to be taking a different stance, such as F2pool operator Wang Chun. The influence that Jihan Wu and Bitmain had over the industry was significant. Bitmain had mining farms, mining pools and a 75 percent market share in the production of mining equipment. Any mining farm operators who wanted to purchase miners in a timely manner were therefore keen to be on Jihan’s good side. This would mean supporting Jihan’s side in the blocksize war and potentially using Bitmain’s mining pools and flagging support for Bitcoin Unlimited. There were also rumours among the small blockers of Bitmain buying up unnecessarily large quantities of some of the components used in the mining machinery, such as capacitors, and asking for exclusivity agreements with suppliers. Bitmain was also using patents to protect its market dominance, even going as far as suing former employee Yang Zuoxing for starting a rival firm and allegedly violating one of Bitmain’s patents. Bitmain therefore appeared to be in an extremely strong position in the market, almost unstoppable. Whether one views these potentially anti-competitive business practices as unethical or totally legitimate, they did have an impact on the blocksize war, ensuring the miners were mostly in the large block camp. They also had an impact in solidifying the level of animosity among Bitmain’s growing number of enemies.

On November 1, 2016, a few weeks after the conference and after several delays, Bitcoin Core 0.13.1 was finally released. This release included the activation parameters for the SegWit softfork. Finally, miners could upgrade and signal their readiness. However, given the news from Jihan, the outlook was highly uncertain. After more than a year of fighting, and despite the very different battlefield and characters involved, as we approached the end of 2016, the blocksize war waged on.