Cointelegraph recently reported that Bitwala will not “fork away from” the Bitcoin chain supported by the core development team. While this is newsworthy on its own, it actually forms part of a larger and more troubling story.
Yesterday Bitwala published a blog post indicating that they will not support the New York Agreement, of which they are signatories. The statement reads in part:
“We will not actively fork away from...the chain that is supported by the current Core dev team.”
While it’s theoretically possible that Bitcoin’s core team could change its mind, to date they have been vehement in their opposition to the SegWit2x blocksize increase. Therefore, Bitwala is effectively withdrawing from the New York Agreement.
What is SegWit2x?
SegWit2x is a bit more descriptive than “New York Agreement,” but both terms refer to the same thing. In May 2017, a meeting of major Bitcoin miners, exchanges, and wallet services met at the Consensus conference. This meeting happened at the urging of Barry Silbert, CEO of Digital Currency Group.
At the meeting, the overwhelming majority of industry participants agreed on a compromise to resolve Bitcoin’s three-year scaling debate. The agreement called for Segregated Witness to be implemented in August of this year. In November, the network was to follow up with a hard fork to increase the blocksize to 2 MB.
According to Digital Currency Group, the agreement was supported by:
“58 companies located in 22 countries
83.28% of hashing power
5.1 billion USD monthly on chain transaction volume
20.5 million bitcoin wallets.”
The agreement was signed by 56 companies, including Bitwala.
There had been some speculation that if push came to shove and a split appeared likely in November, some of the signatories might go back on their word. Bitwala has become the first to publicly announce that it is no longer supporting the agreement.
In their statement, Bitwala indicates that their withdrawal from the agreement comes for three reasons:
“We would like to honor the agreement that we subscribed to (as one of the first movers, unbeknownst to the fact that most developers would not enter the agreement). We also, however, are a service company that has and will always follow what our customers use and want to use. We partially rely on third-party payment processors and exchanges to convert our cryptocurrencies and must build our products on what they support.”
The last part of that comment comes as a surprise, given that most major exchanges and payment processors are either signatories of the New York Agreement or have openly supported it.
Agreement falling apart?
Bitwala’s withdrawal from the New York Agreement could be the beginning of its unraveling. A compromise is, by definition, an agreement in which neither side gets what they want. But in this case, something unusual happened: one side got what it wanted first. Since the “small block” camp has now seen SegWit activated, they have no incentive to follow through on the blocksize increase that they promised to the “big blockers.” The only thing binding them was their promise, and Bitwala’s withdrawal could give others the necessary cover to withdraw as well.
It’s not just Bitcoin companies that might withdraw their support for the agreement. According to Coin Dance, miners were split before the compromise, with 40% in favor of SegWit, 40% supporting bigger blocks, and 20% undecided. It’s logical to assume that some of the 40% of miners who supported SegWit (but not big blocks) might decide that they don’t want bigger blocks, either.
What it means
Either SegWit2x will not happen this November as originally planned, or it will happen but be far more contentious than expected. If the supermajority of miners who signed the New York Agreement keep to their word and begin mining bigger blocks, the hard fork will almost certainly be successful.
However, if Bitcoin’s core team and others in the “small block” camp decide to refuse the hard fork, a chain split will certainly occur. At that point, there will be much debate and confusion over who is entitled to use the name “Bitcoin.” After all, Bitcoin’s core development team are the official “maintainers” of Bitcoin’s Github repository. While anybody could write a different “implementation” of Satoshi’s whitepaper, whoever maintains Satoshi’s original code repository is likely to have significant influence in the marketplace.
While the fork will be successful on a technical level if the miners support it, from a marketing standpoint it could be catastrophic. How will new users, unversed in the years-long scalability controversy, know which Bitcoin is really Bitcoin?