Bitcoin payments around the world are failing as the platform is overwhelmed
Bitcoin was created in 2008 by an anonymous figure known only as "Satoshi Nakamoto," who has since vanished. It aims to provide a radical alternative to traditional finance by doing away with any central authority for controlling cash, and replacing it with an encrypted, unhackable electronic currency that guarantees transactions. It is powered by the "blockchain" - a decentralised ledger of all transactions that allows quick and cheap transactions around the globe, no central bank or regulating institution is required.
However, there's a technical upper limit on how many transactions the blockchain can process per second - putting a limit on how much the digital currency can grow as a substitute for cash. This week problems materialised when the bitcoin network reached capacity, resulting in lengthy transaction times of 43 minutes, up from the usual 10 minutes, according to a thread on Reddit. Several of them failed completely.
A number of bitcoin experts have been warning that fundamental changes needed to be made to the core software of the system to avoid it being overwhelmed by the continued growth of bitcoin transactions. The bitcoin developer community is conflicted about how best to tackle the issue, and two sides have pushed forward with different, competing versions of the software.
Bitcoin users are reportedly confused and a number of retailers around the world have stopped accepting the digital currency, including Nottingham microbrewery The Barrel Drop.
"Unfortunately we are no longer able to accept Bitcoin while there is such a high probability that transactions will not confirm," wrote The Barrel Drop on Reddit. "Once the situation with full blocks is resolved we will be happy to start taking it again. We have no plans to accept any alternative coins at this time."
"Since we opened in Nottingham city centre in December 2014 we have accepted Bitcoin. Altogether it has worked flawlessly and the staff were able to cope fine accepting Bitcoin using a Mycelium wallet."
Larger companies, like Expedia, have a 10-minute expiry period on Bitcoin transactions because the price of Bitcoin changes so rapidly. If Bitcoin transactions cannot occur quickly, then those transactions will fail.
Mike Hearn, a former Googler who has been a prominent part of the digital currency's community for years, wrote a blog post on Medium in January saying Bitcoin has failed.
The digital currency is on the "brink of technical collapse," he wrote, and "as a result there's no longer much reason to think Bitcoin can actually be better than the existing financial system."