Goodbye Bitcoin Cash? Microsoft: On-Chain Scaling ‘Degrades Decentralization’

Microsoft has concluded that so-called ‘layer 2’ solutions are necessary for Bitcoin to scale and is “collaborating” on the technology.

Microsoft: On-Chain Fails To Meet Capacity Needs

In a blog post on Monday, Director of Program Management at Microsoft’s Identity Division Alex Simons said that layer 2 scaling solutions, which principally involve the Lightning Network, are superior to on-chain scaling.

Simons writes:

While some blockchain communities have increased on-chain transaction capacity (e.g. blocksize increases), this approach generally degrades the decentralized state of the network and cannot reach the millions of transactions per second the system would generate at world-scale.

He later continues:

To overcome these technical barriers, we are collaborating on decentralized Layer 2 protocols that run atop these public blockchains to achieve global scale, while preserving the attributes of a world class DID (decentralized identity) system.

The post marks what is likely Microsoft’s most direct pledge yet on the future of public blockchains, including Bitcoin.

The computer giant’s description of on-chain scaling options as “degrading decentralization” in particular places it in opposition to Bitcoin hard forks offering bigger block sizes, specifically Bitcoin Cash.

The fork has long attracted criticism from some of Bitcoin’s earliest proponents, with computer scientist Nick Szabo calling the network “centralized sock puppetry” last year…

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