The Leftover Bits: 5/5/15: Bigger Blocks, GBTC Trading Is Slow, Hardware Wallet Gets Mainstream Attention

Bitcoin faces scaling constraints tied to block size. Each block holds a limited number of transactions, and miners produce blocks at a rate determined by total network hashing power. Bitcoin's adoption therefore cannot outpace the rate of block production. The 1MB limit creates that bottleneck. Developers have proposed multiple solutions to the scaling problem, and some argue the constraint poses less urgency than others claim. Andresen has committed to examining competing approaches in future blog posts, and three have appeared so far. He shows no signs of changing course, and the community would need significant coordination to reject a hardfork. Expect the upgrade sometime next year.

The Bitcoin Investment Trust launched public trading on over-the-counter markets. GBTC shares began trading, though the debut underwhelmed. Volume totaled just 76.5 bitcoins across 765 shares. The shares trade at $55 each, equivalent to $550 per bitcoin. That gap between the share price and the underlying bitcoin price creates room for arbitrage, but traders cannot exploit it. Moving money between GBTC, bitcoin, and fiat currency takes too long for profitable trading.

Still, the launch marks progress for bitcoin in mainstream finance. Existing Fidelity and USAA customers gained access to bitcoin investing through their established accounts. That development matters even if GBTC never becomes the price catalyst some hoped for.

A hardware wallet named Case drew attention at TechCrunch's Disrupt conference in New York. The device combines a fingerprint scanner, an embedded 3G GSM radio, and multisignature technology to secure funds. The designers aimed for something safer than online wallets but more convenient than keeping bitcoin offline. Case will cost $200 and the company is taking pre-orders. Whether the approach achieves its security goals will depend on actual user experience with the device.