SegWit Versus Segwit2x: Get Ready, Bitcoin Civil War Starts Now
- Next Month Timeline
- Bitcoin Civil War Can Split the Currency in Two
- SegWit Versus Segwit2x
- So, What’s Next?
With plenty of uncertainty in recent months over the heavily anticipated Bitcoin Fork event, we have seen cryptocurrency valuations recover from June and early July’s volatility, as miners, businesses and the development community show more alignment on support for BIP91.
The cryptocurrency market saw sheer panic over the prospects of a possible hard fork event and a Bitcoin blockchain split, resulting in two Bitcoins with separate blockchains and a possible loss of Bitcoin value on one of the two blockchains.
Calmness has been restored for now, with the Bitcoin exchanges playing a more active role in driving support in favor of what is considered to be the best outcome for Bitcoin and stability within the cryptocurrency world.
Support for the coding of SegWit2x has eased in recent weeks, with the general consensus being that the timing is wrong for the activation, production and implementation of the code, the community believe that there had been inadequate testing coupled with an unrealistic timeline for implementation.
The shift in sentiment has led to James Hilliard’s BIP91 finding support, the view being that BIP91 is the best outcome for Bitcoin for now.
BIPs, which are also referred to as Reduced threshold SegWit MASF, is not too dissimilar to the SegWit BIP, the only difference being that an 80% majority is required for approval, while a SegWit BIP requires 95% hashpower support.
Good news for Bitcoin miners and coin holders is the fact that anti-SegWit miners, which included mining pools Antpool, Bitcoin and BTC have also shifted in favor of the BIP91 SegWit, the mining pools which have a large proportion of Bitcoin’s total hashpower, having previously been supportive of a hard fork, which would have likely created the feared blockchain split.
BIP91 has a hashrate of 97%, which is above the 80% threshold needed, with the break above the threshold achieved on 21st July. Unlike the BIP141 SegWit proposal, there is now drop dead date for BIP91, which suggests that the probability of 80% being reached is particularly high and even more so, when considering the fact that support for BIP91 had moved from negligible to over 60% in just a matter of days, before breaking above the 80% hashrate.
The close call and averted Bitcoin blockchain split, event has driven Bitcoin in excess of 40% gains in less than a week, with Bitcoin having rallied from as low as $1,910.74 on 17th July to $2,815.32 at the time of the report, hashrates for BIP148 falling away through the last week, as miners moved in favor of the less aggressive BIP91 proposal, which is expected to maintain Bitcoin’s single blockchain.
While the 80% hashrate threshold has been reached, the next step is for miners is to run the software to implement BIP91, the timeframe for running of the software hardcoded.
Should a simple hashrate majority not run the BIP91 software, BIP91 would fail, which would see Bitcoin uncertainty return to the market, the possibility of a return for support of the hard fork and possible blockchain split a negative for Bitcoin valuations.
We could see Bitcoin slide back to sub-$2,000 levels, with the possibility of bigger declines over the near-term. The Bitcoin world all too aware of what a hard fork blockchain split would mean for the integrity of Bitcoin and other Cryptocurrencies.
Disagreements between Bitcoin miners and Bitcoin’s core developers is the issue and, while a Bitcoin civil war may be averted in the coming days, until fundamental disagreements are addressed and the control of a few mining pools over Bitcoin abates, the war will likely continue, with a handful of miners holding most of the hashing power and ultimately control over the direction of Bitcoin and price stability.
Next Month Timeline
There’s plenty for the markets to consider in the weeks ahead, with a range of possible scenarios for the markets to grapple with, which include a UASF, SegWit2x and a possible UAHF.
For now the largest support is in favor of BIP91, which intends to activate SegWit. With support for BIP91 having exceeded the minimum 80%, the proposal requires continued support in excess of 80% over 336 blocks to lock in SegWit.
Some key dates through the end of August include:
23rd July: BIP91 anticipated to be activated, if the majority of miners enforce BIP91 for the next 2-weeks. Such an outcome nullifying BIP148.
29th July: For miners looking to avoid a blockchain and currency split, not to mention a sizeable pickup in volatility, this will be the next key date for miners. If BIP91 is not activated by this date, the probability of a blockchain split increases significantly, leaving holders of Bitcoin and miners 2-days to prepare for the split, with miners having until 1st August to decide on which blockchain to mine, the legacy blockchain or the BIP148 Chain.
31st July: For Bitcoin miners looking to avoid a blockchain and currency split off the back of activation of BIP148, this is the 2nd deadline for miners to avert a split.
31st July: This is also the very last date on which either BIP91 is activated or BIP141 locks in, which is considered a 2-week difficulty period in which 95% hash power is required to support SegWit.
1st August: The date on which BIP148 activates, which is ultimately the final deadline date on which miners can avert a blockchain split. Should BIP141 or BIP91 have locked and / or activated by 1st August, there will be no blockchain split. If neither BIP141 nor BIP91 have been successful, miners can support BIP148, which supports the longest valid chain according to current Bitcoin nodes, activating SegWit through BIP141.
If BIP 141, BIP91 nor BIP148 have sufficient hashpower support by 1st August and BIP148 gains some support, 1st August could deliver the blockchain and currency split.
As at 21st July, the fact that hashpower for BIP91 reached the 80% threshold, BIP148 should become obsolete, though this does require the necessary hashpower support to activate BIP91.
4th August: Possible introduction of Bitcoin ABC. Bitcoin ABC is considered a contingency plan in event that BIP91 is not activated ahead of 1st August and there is an increased level of interest for BIP148.
15th August: The activation of another type of Bitcoin may take place around this date, though the bigger issue on 15th August will be where support sits for BIP148. If miner support for BIP148 continues to be on the lower side, a hard fork could be introduced to change the proof-of-work algorithm, which could leave BIP148 miners with obsolete mining hardware, relieving Bitcoin from the Cartel’s grips.
15th – 31st August: If a blockchain split is averted through BIP141, BIP91 or BIP148, SegWit is forecasted to lock-in during the final 2 weeks of August. If a blockchain split has been avoided until now, there are more dire consequences for Bitcoin, which could see the creation of multiple Bitcoins, which include the legacy, 148, ABC and possibly a 4th, depending on support levels for the various forks.
Not only is it a confusing set of possible scenarios and outcomes, timelines are ever changing, which could leave holders of Bitcoins out in the cold, if the blockchain split happens early. Vigilance is needed and volatility will be the story of the day, the worse possible outcome for now being any hint of a blockchain split, now or months down the road.
Bitcoin Civil War Can Split the Currency in Two
A meteoric rise in popularity for cryptocurrencies and Bitcoin in particular, has led to an ongoing debate and increasing level of disagreement between miners and core developers on how Bitcoin should move forward.
Core developers have been looking at how Bitcoin software can be adapted to accommodate for the ever increasing number of transactions and also meet the rising demand for Bitcoins, the unprecedented returns continuing to drive demand, fears of a Bitcoin bubble having eased in recent months.
The debate has ultimately created a lot of hype and the threat of derailing Bitcoin and other cryptocurrencies, with Bitcoin prices in recent months reflective of how the debate heated up and progressed through to the current support for BIP91.
In fact, the debate became so intense that the chances of a Bitcoin fork split had become almost probably just a week ago, the prospect of two Bitcoin blockchains expected to, not only lead to issues as a result of the co-existence of two ledgers, but also the possibility of Bitcoins actually disappearing, leaving holders of the coins with empty wallets, all of which would be a prelude to an even more heated debate over which blockchain would be considered the real Bitcoin going forward, for those left standing.
On one side of the intense disagreement is the Bitcoin Cartel and on the other are Bitcoin’s core developers, the disagreement being over how to address the issues faced with the ever increasing number of transactions and demand for Bitcoins.
As things stand, Bitcoin blocks have a storage capacity of 1MB. The increased level of congestion has led to lengthening transaction verification timeframes and rising transaction fees.
Both sides proposed solutions on how to resolve the issues faced, with neither side being able to come to an agreement on a preferred solution going forward, leading to the great divide.
The decentralized nature of Bitcoin has made the disagreement public and not behind the closed doors of a boardroom that would be common within the corporate world.
Solutions proposed in the run up to BIP91 included BIP148, SegWit2x and Bitcoin unlimited, though there were others that had less support, thus garnering less debate.
The more contentious proposals include:
BIP148: BIP148 is scheduled to be triggered on 1st August and is classified as a User Activated Soft Fork (“UASF”). BIP148 requires that miners signal for SegWit readiness, which is achieved by miners setting the version of blocks mined, essentially affirming miner support for the rules of SegWit. Bitcoin’s core development team are against BIP148.
Segwit2x: Segwit2x involves the activation of Segregated Witness at the required 80% threshold and the activation of a 2 MB hard fork within 6-months of the SegWit activation.
Bitcoin Unlimited: As the name suggests, the solution is to deliver miners the freedom to increase blockchain size, which would remove the congestion issues and transaction times and fees faced by miners today.
SegWit Versus Segwit2x
With all the talk of SegWit and Segwit2x, it’s becoming ever more important for miners and holders of Bitcoin to have a far greater understanding of the mechanics that dictate valuations beyond hashrates and the standard supply and demand equation.
Segregated Witness, referred to as SegWit, is the process of addressing the limit of an increase in the block size limit by removing signature data from the transactions, which eases capacity issues enabling more transactions and increasing verification speeds.
Multiple systems across Bitcoin blockchain’s peer-to-peer network, referred to as nodes, are the administrators of Bitcoin transactions. Transaction inputs and outputs are duplicated across the nodes, the input being the public address of the sender, with the output being the public address of the recipient.
The input data leads to the biggest capacity issues, with input data including signatures, which forms part of the verification process on the sender having the required funds to make payment, the information being included in the active block and then the general ledger. The signature content of the input accounts for more than 60% of the space taken by a given transaction.
As more transactions occur and more blocks are created, the 1MB maximum size of each block limits the number of transactions per block.
SegWit looks to shift the signature component from the input phase to the end of the transaction, which is estimated to increase the 1MB block size limit to slightly below 4MB.
SegWit2x is a combination of SegWit and a 2MB hard fork, to be activated 3-months after the activation of SegWit.
SegWit has been in the making for some time and has led to various BIPs as a result, these being BIP141; BIP148 and BIP149., with the developers having tested each extensively, quite unlike SegWit2x, which is viewed by many to have been untested and not ready for implementation.
The issues facing Bitcoin boil down to the possibility of both a soft and hard fork, which has raised the alarm bells amongst some holders of Bitcoin over the safety and valuation of holdings on various exchanges.
There has been a lot of talk and speculation of what is likely to take place on 1st August, with news of increased support for two proposals in particular, raising the possibility of a Bitcoin blockchain split, leading to two versions of Bitcoin running on separate blockchains.
For SegWit to occur, there will need to be 80% of Bitcoin miners in support, which appears to have already been reached, where SegWit2x will deliver the SegWit, with a 2MB block size increase then scheduled for November.
The issue of a split comes as there remains disagreement on a proposed increase to the block size and with SwgWit2x and the user-activated soft fork, commonly referred to as BIP148, inter-connected, SegWit2 supporters looking to push through the 2MB increase to the blockchain by way of a user-activated hard fork (UAHF”) may result in the much talked about split, though it’s not just the hard fork that can cause the split, the “UASF” also capable of creating a split should there be sufficient support for their version of the blockchain to continue, whilst others push for the hard fork, ultimately resulting in a Bitcoin split.
The difference between a UASF and UAHF is that a soft fork is a temporary divergence in the blockchain create by non-upgraded nodes not following new consensus rules, whilst a hard fork is a permanent divergence in the blockchain.
So, What’s Next?
While a blockchain split may be averted, the reality remains that the positives of establishing cryptocurrencies and a decentralized virtual currency have been lost to a certain extent, with a handful of mining pools garnering such sizeable hashrates that has led to what some will refer to as the Bitcoin Cartel, in stark contrast to the ethos of a decentralized virtual currency and more akin to the push and pull seen between central banks and governments, independence continuously being questioned.
We’ve seen OPEC’s influence on oil price stability and in recent months, the influence of the Bitcoin Cartel is certainly evident, support for a particular SegWit dictating the direction of, not only Bitcoin, but price stability across the Crypto world.
Until miners entering the fray embrace the entire concept of decentralization and support the smaller mining pools and cloud mining service providers, the Cartel will continue to influence and ultimate control will reside with a few.
Price volatility will likely persist, the Cartel unlikely to loosen their grip, the income from the control too high for a more decentralized environment, the value of Bitcoin needing to see a sizeable fall to really hurt the Cartel and mining appetite that has contributed to the Cartel’s tightening grip on the Bitcoin world.
The days ahead are certainly of particular importance to the direction of Bitcoin and cryptocurrencies in general, over the short-term, but in reality there is only one event that needs to be averted and that is a blockchain split, other coding changes unlikely to have a material impact on valuations for now.
Over the longer-term, as the market becomes more educated on the likely influences that a Bitcoin Cartel may have, not only on Bitcoin, but also other Cryptocurrencies, the effects may be considered as a negative for market and any hopes of Bitcoin’s value making its move towards $10,000, a value that has been thrown around in recent weeks, optimism over the eventual outcome having brought out the cryptocurrency optimists that have supported the exponential rise in valuations seen through the first half of the.