Bitcoin Is Splitting Once Again - Are You Ready?
We will witness another Bitcoin hard fork in three months. This time it will be backed by the technical team that proposed Segwit2x.
Whether you’re ready for it or not, it’s going to happen. We will witness another Bitcoin hard fork in three months. This time it will be backed by the technical team that proposed Segwit2x.
According to Jeff Garzik, Bloq founder and Segwit2x developer, the proposal has received ‘general approval’ from Segwit2x members.
On the other hand we have Bitcoin Core developers who remain adamant in opposition to SegWit2x and have already said that the upcoming Bitcoin Core client 0.15.0 will automatically disconnect nodes supporting the SegWit2x fork.
New York agreement
May 23, 2017 marked the day when the Bitcoin scaling debate “supposedly” ended. Digital Currency Group released a statement declaring that 58 signatories from both camps -- SegWit supporters (aka Bitcoin Core) and those who prefered to increase the block size (aka Bitcoin miners) - agreed to increase the block size to 2 MB.
The agreement was termed as the New York Agreement (NYA). The idea was to activate SegWit using BIP 91 and then 90 days later hard fork the base block size to 2 MB.
According to the Digital Currency Group, SegWit2x is supported by:
- 58 companies located in 22 countries
- 83.28 percent of hashing power
- 5.1 bln USD monthly on chain transaction volume
- 20.5 mln Bitcoin wallets
Clearly, NYA didn’t go as planned. Now that SegWit has already been locked-in and we have Bitcoin Cash as a result of the Aug. 1 hard fork, many are left wondering what was the point of the New York Agreement.
Bitcoin2x is going ahead full steam
The Segwit2x working group has announced the roadmap for the next three months. The team plans to let Bitcoin miners choose to run new software at block 494,784 on the blockchain. This block is expected to occur sometime in November.
The announcement, called “Bitcoin Upgrade at Block 494,784,” states:
“During the month of November 2017, approximately 90 days after the activation of Segregated Witnesses in the Bitcoin blockchain, a block between 1 MB and 2 MB in size will be generated by Bitcoin miners in a move to increase network capacity. At this point it is expected that more than 90 percent of the computational capacity that secures the Bitcoin network will carry on mining on top of this large block.”
If this proposal goes through as planned, SegWit2x could lead to another Bitcoin hard fork, potentially creating yet another version of Bitcoin.
The SegWit2x plan could also drastically fail if the team is unable to get miners’ support. It remains to be seen how many miners are willing to dedicate their computational power to yet another Blockchain.
Is SegWit2x necessary?
Bitcoin Core developers got what they wanted. With the help of SegWit they’d be able to build the ultimate scaling solution: the lightning network. Core recently announced that the next Bitcoin Core client 0.15.0, due to release before November, would no longer connect to nodes running SegWit2x.
Bitcoin’s very nature is to have a decentralized system and be governed by consensus as opposed to a more traditional top-down hierarchy in which few people are in charge of decision making.
One could argue that Core developers are somehow controlling Bitcoin’s decision-making and consensus is merely there for the sake of it.
Here’s how it works: Miners are actually the ones that write blocks on the blockchain. User-run nodes maintain an up-to-date ledger across the network. When miners create new blocks, the nodes on Bitcoin’s network propagate those blocks to all clients.
That being said, Core’s announcement could have serious repercussions. Bitcoin Core nodes will no longer talk to nodes that run the SegWit2x code. So the miners will still broadcast their blocks to the network, but nodes running the Bitcoin Core client will only relay blocks to other nodes running the same client.
This decreases the level of decentralization and this is why even though we already have Bitcoin Cash, Segwit2x supporters are keen on splitting the chain once again.
Showdown in November
November could get as dramatic as August for Bitcoin, and the prices may become more volatile as we get closer the “date”.
If the claimed 83.28 percent of hashing power remains committed to the SegWit2x plan, the hard fork in November is inevitable.
It is important to understand 17 percent of the hash power didn’t sign the NYA. Signatories of NYA are under no obligation to exclusively mine the ‘2x chain’.
If they don’t see Segwit2x mining as being profitable, they could easily change their mind and keep mining for the main Bitcoin or Bitcoin Cash for that matter.