We have a rare Saturday rally going on which is a bullish sign.

Bitcoin is at a decision point. Do we want to stick with the 1 MB block size limit and become merely a reserve currency or the equivalent of gold in the present day system? Or have we become used to the convenience of cheap, rapid, world-wide money transfers and would we prefer to become a commerce platform to supplant Visa, PayPal, etc.?

So far it seems we can't have both. Increase the block size to handle millions of transactions per hour and the hardware requirements to run the system will rapidly preclude anyone running the program from home and having a say in being their own bank.

On the other hand if we either hold the present cap or go with some scheme to only allow it to grow very slowly we'll soon start seeing the pinch on transactions. Eventually it may only make sense to send bitcoins in excess of $1000 or more due to fee levels. Commerce would be impossible except for using third party providers such as MTGOX codes that stay off the blockchain.

My proposal would allow us to have our cake and eat it too. It enables low cost world-wide decentralized transactions and store of value as we've come to expect with bitcoin. It also allows the network to expand to handle the massive volumes we'd like to see ourselves grow into.

Bitcoin 1 is what we have today. Quite convenient that the addresses start with a 1 actually. This chain would continue with the 1 MB per block hard cap. This is the store-of value chain that people can run nodes for on consumer hardware at home. It doesn't handle every satoshi for every losing bet on the entire internet. When someone wants to use this network for a transaction they can eventually expect to pay $5 or more in transaction fees.

Bitcoin 2 is the transactional blockchain. This one will quickly get to the point where it will require special hardware most likely in colocation centers to handle the deluge of transactions. Now what makes this different than an alt chain? The answer is how you get Bitcoin 2 coins. The way to get these coins is by proof of burn of your Bitcoin 1 coins. I propose setting minimum size limits for conversions between the two chains such as to go from Bitcoin 1 to Bitcoin 2 you have to send at least 1 coin. To go from Bitcoin 2 to Bitcoin 1 you have to send at least 50 coins.

Merged mining of both chains would obviously be simple for anyone capable of mining on the Bitcoin 2 network. One concern I have is if Bitcoin 2 could launch without a block subsidy existing solely on fees since we want to keep the original 21 million cap feature intrinsic to the bitcoin idea. Miners might also initially resist it as it would provide a lower fee area for users to transact. Another idea that could be pulled from previous alt chains would be setting a shorter block time. The prices would be identical between the chains avoiding any confusion on the part of users. Addresses starting with a 1 or a 2 would help differentiate which protocol was being used.

To be fair, there is a logic behind this.  I guess, in some perverted way, you can indeed solve any problem by printing some money.

Let's say you want to find the Higgs Boson  (random example).  How could it be possible that you can do such an extraordinary accomplishment by just printing money?

Well, it's easy.  First, you need brain power.  And this, you have.  Thousands of people all around the word are smart enough to imagine a way to detect a Higgs Boson.  The problem is that it's difficult for them to convince other people (workers, engineers,...) to build a machine capable of doing that.

The solution:  just print the money and give it to the smart people.  They will give it to workers in order to convince them to build the machine.  The workers don't know that this money has been freshly printed.  Or they don't care, as long as they can give it to someone who will not care either.   At the end, people accept to work for a money that has been devaluated, and I'm not sure they always realize that.  Basically, the whole thing is either a fraud if you disagree with it, or an illusion if you think it's just the magic of monetary policies.

To me, it's a fraud, nothing else than money counterfeiting.   It should be a crime, even when the FED does it, and even if it's smart, good intended people who benefit from it.

k folks, well judging by the sentiment a hard fork will probably be happening at some point... should be interesting times.

True, it doesn't require any protocol changes... but it does require miners to care.  At the moment they don't care, because they still use the full blockchain.  No one uses the UTXO set.

Is it feasible to get such an improvement into an official version during 2013?

Why use an online password manager when you can use http://keepass.info (Open source and free) and backup the encrypted password database on DropBox or GoogleDrive?

IMHO, the bitcoin network needs to be able to handle several orders of magnitude MORE transactions than the major credit card processors. That will open up new opportunities that just weren't possible before.

Ok, but is this being developed or is this just theory?

So far I haven't heard about any problem

In context, the sell off/correction/crash, whatever you want to call it, was minor.

Yes, the nay sayers frame it in a worst case scenario where bitcoin suddenly goes to zero.

Yes, but more precisely it means: do you presently hold bitcoins which have been purchased on credit.