XT takes Bitcoin and modifies some of its core consensus rules. Right now, it happens to be compatible with Bitcoin in most cases. But because it uses different rules, it can (depending on what miners do) split into a totally separate currency. Therefore, XT is not Bitcoin. A similar sort of thing was done with Feathercoin, which split off from Litecoin.
Some sort of block-size limit is necessary because if miners make blocks too large for a long period of time, then this makes it difficult for people to run full nodes. (In other words, block size is a negative externality suffered by full nodes due to the actions of miners and transaction-makers.) If not enough of the economy is backed by independent full nodes, then Bitcoin is totally insecure for everyone (see
here and
here). And there's no reason to think that miners would voluntarily keep blocks small enough -- they don't have the right incentives. So the network needs to enforce some limit. In the long-run the limit can't stay at 1 MB forever (and Satoshi acknowledged this), but this works well enough for now.
People often think that Bitcoin is ruled by miners, but this is wrong. Miners are merely employees of the network. Even if every miner decided to make 2 MB blocks right now, everyone running a Bitcoin full node would simply ignore their blocks. Bitcoin is composed of immutable rules (called "consensus rules") that all full nodes enforce
no matter what. Modifying these rules requires creating a separate currency and having everyone else move to this separate currency. If pretty much everyone agrees in advance that it's OK to do this, then this is a consensus hardfork, and the result is still Bitcoin. If there is significant controversy, then the new currency is not Bitcoin.
See this diagram.And to me it seems that the block size limit would be a problem right? Wont it either dramatically increase fees and/or causr transaction favoritism/selection? Bitcoin is special because all transactions are treated equally?
If blocks sometimes get full, then paying a too-low fee might significantly delay your transaction. If blocks are consistently full, then if you don't pay a sufficient fee, your transaction might never confirm. The exact fee required will depend on how many other transactions are being created and how much block space is left. Increasing the max block size will allow for lower fees.
Bitcoin is special because it is decentralized and to a very large extent incorruptible by humans, not because it might in some cases allow cheap transactions. If it can be done safely, the max block size should be increased if fees become a significant problem. But if the max block size is at the maximum safe size, then we shouldn't abandon the decentralization, security, etc. of the base Bitcoin system in order to achieve lower fees. We should instead look for some other solution. And there are in fact a variety of solutions in the works, both to make max block size increases safer (eg. IBLT and/or weak blocks) and to reduce the number of on-blockchain transactions that people need to perform (eg. Lightning). And if these "perfect" solutions are insufficient, there are various
imperfect solutions which increase scalability at some security cost for its users. There might be some hiccups along the way, but I am very confident that the Bitcoin currency/ecosystem can both remain secure+decentralized and eventually scale to encompass all world transactions if necessary.
The max block size is planned to be effectively increased to about 2 MB sometime this year with the SegWit softfork. See:
https://bitcoin.org/en/bitcoin-core/capacity-increases . An increase to much more than this is not viewed as safe by many experts.
