> At the core of the debate is whether the Bitcoin blockchain should be a settlement layer that supports a number of new blockchains that can be scaled to achieve various goals or whether the Bitcoin blockchain itself should evolve in a way that it can scale to achieve those various goals.

No, among the developers actually working on Bitcoin that is not what the debate is about at all.

Bitcoin is a decentralized ledger, and indeed it can be argued that this is the only property about Bitcoin which is interesting/useful. Why? Because all properties we care about (availability, uncensorability, unseizability, etc.) derive from decentralization[0]. And at the end of the day we can do everything Bitcoin does faster, better, and cheaper on some alternative consensus system (see: Stellar, Open-Transactions, Liquid) that does not have this decentralization property. Decentralization is expensive. It requires a dynamic membership, multi-party block signing algorithm, which at the moment means proof of work. And proof of work costs hundreds of millions of dollars per year to maintain, and throttles the available bandwidth due to the adversarial assumption and the existence of selfish mining[1].

The question is not whether Bitcoin should be a store of value or a medium of exchange. That implies we have some choice in the matter. The question is what level of on-chain utility does Bitcoin actually support under untrusted, adversarial conditions, without losing all properties derived from decentralization. This is an empirical question. The available bandwidth is something that can be determined from the performance of the code in the real world extrapolated to various adversarial simulations.

We had two Scaling Bitcoin workshops last year that gave us a data-driven answer: 3-4MB per block, tops. There are potentially ways that this number can be improved (see: weak blocks), and those are being worked on but are still some time from showing results. There are also some assumptions underlying this number, e.g. that we change the validation cost metric, which none of the existing proposals do in a smart way. But the scientific process is telling us right now that with the tools available to us we can increase the worst-case block size to 3-4MB with a better metric without the decentralization story becoming unacceptably worse off.

That is the plan of Bitcoin Core. The deployment of segregated witness will allow up to 2MB blocks under typical conditions, and 3-4MB under worst-case adversarial conditions. It will exhaust the available capacity for growth in the Bitcoin network at this time. Meanwhile, work progresses on IBLT, weak blocks, Bitcoin-NG, fraud proofs and probabilistic validation, and other related technologies that might provide an answer for the next increase a year or two later. I'm hopeful we may even be able to get an order of magnitude improvement from that one, but we'll see.

No one I'm aware of is pushing for smaller blocks because Bitcoin should be a store of value and a settlement layer. If I had magic pixie dust I'd want 1GB blocks and everything on-chain too. But we live in the real world and are stuck in a situation where Bitcoin loses all of its unique properties if we scale much further than where we are at now. And so we must ask the question: what will Bitcoin become, since it can't scale on-chain? How can we live with that outcome? The idea of a settlement layer and off-chain but trustless payment networks like Lightning naturally arise from that thinking. The Lightning Network[2] is a way that we can have our cake and eat it too: Bitcoin remains small and decentralized, but everyone still has access to bitcoin payments. Lightning can potentially scale to global usage with a small-block chain as the settlement layer.

[0]: http://bluematt.bitcoin.ninja/2015/01/14/decentralization/

[1]: http://hackingdistributed.com/2013/11/04/bitcoin-is-broken/

[2]: http://lightning.network/