Business & Tech

Bitcoin price surges after agreement on software update

NEW YORK — The price of bitcoin has rocketed to new highs after a long battle over the rules of the software was resolved, at least temporarily.

The price of a bitcoin has risen nearly 50 percent since the beginning of the month, raising the total value of all bitcoins to more than $70 billion. On Monday afternoon, bitcoin was trading above $4,290, an increase of about 7 percent.

Advertisement

The price of bitcoin, the virtual currency, has been climbing steadily for the past year as investors around the world have shown an interest in the unusual characteristics of its technology, which allows money to be held and moved on a network of computers without any central authority or bank involved.

But the latest price increase occurred after the most important backers of the bitcoin network agreed on a long-disputed update to the network’s software and rules.

Get Talking Points in your inbox:
An afternoon recap of the day’s most important business news, delivered weekdays.
Thank you for signing up! Sign up for more newsletters here

As bitcoin has grown more popular, internal factions have been warring over the best way to update the software and allow more transactions to move through the system.

A rule in the original software, released in 2009, limited the number of transactions that could move through the system to about five a second. In the past two years, an outspoken group of bitcoin aficionados wanted to see the currency expand quickly to compete with Visa and PayPal.

But that camp faced opposition from the core developers, a few dozen programmers who maintain the basic bitcoin software, generally on a volunteer basis.

Advertisement

At the end of July, some of the people who wanted bitcoin to expand quickly broke off and created a rival digital money, known as Bitcoin Cash, that can handle more frequent transactions. That new currency has attracted a small following, and retained a relatively stable value around $300.

Most bitcoin investors and companies, however, have stayed with the original bitcoin network and the core developers who are working on it.

The core developers have come up with their own solution to increase the number of transactions running through the system, known as Segregated Witness, or SegWit.

While SegWit does not expand the network as quickly as Bitcoin Cash, it makes it easier to build services on top of the bitcoin network, such as the Lightning Network, that will allow for faster transactions.

The biggest backers of the network agreed last week to proceed with SegWit, and it is that agreement, on scaling the network, that is the most obvious reason for the recent surge.

“Scaling has been the major catalyst for the price rally,” said Charles Hayter, founder of data company CryptoCompare. “The scaling debate has certainly been holding the bitcoin price back.”

Loading comments...
Real journalists. Real journalism. Subscribe to The Boston Globe today.