BIG CHANGES Coming to Bitcoin! (...and why you may want to hold on to your coins)

simsem (25)in #bitcoin • 7 years ago

As mentioned above, Bitcoin is headed for some interesting weeks and months ahead. Segwit2x is the proposal that appears to have the most support right now and is planned to activate first in late July. BIP148 is the other proposal due to activate August 1st. Both proposals intend to bring an upgrade called Segregated Witness (Segwit) to the network and greater transaction capacity. How they do so differs somewhat, however....

Segwit2X intends to activate Segwit first and then hardfork Bitcoin in November to double "regular" transaction capacity. If Segwit2X fails to activate in late July then BIP148 will go into effect where some full nodes will begin to ignore blocks that don't signal for Segwit. Because we can expect some miners not to follow BIP148, we can therefore expect that a split in the network will occur, creating two different Bitcoin branches.

Two, Three, Four "Bitcoins"??

If (or perhaps when) Bitcoin forks, one side may end up getting the majority of mining power (hashrate) and end up becoming THE "Bitcoin" that the majority of users will follow. Even in this scenario, however, there may be a period when two or more "Bitcoin" blockchains exist and spending or receiving bitcoin under those conditions may be dangerous. With two (or more) forks, a sender doesn't really know which blockchain the transaction will appear on or which one the receiver is watching to be paid.

On the other hand, it could be the case that two (or more) Bitcoin forks persist and serve different user bases for much longer. Ethereum Classic, for example, famously split from Ethereum over The DAO incident and has remained a viable independent cryptocurrency for nearly a year now. Bitcoin could undergo a similar split where the 1MB chain (+Segwit) and the 2MB chain (+Segwit) go their own separate ways. If this happens and is sustained, then it will be good for Bitcoin users overall.

Double Your Money?

If Bitcoin forks and for however long each fork persists, you will have the same quantity of bitcoin across each chain. For example: If you have 100 mBTC (~$250) right now and Bitcoin splits in two, you will have 100 mBTC on Bitcoin1 and 100 mBTC on Bitcoin2 at the time of the split. In a sense, you will have "doubled your money", however you should keep in mind that the value of bitcoin on each side is likely to plummet probably more than 50% due to all the uncertainty. Only in time, if both chains persist, would your holdings across both possibly end up being worth more (in dollar terms) than what you had before the split. Likewise, if bitcoin splits again you may end up with three "100 mBTC" balances, but the value of all would be highly volatile.

Choose Your Path

The preceding paragraph is only true if you store your private keys in a non-custodial wallet (see the "Are my Bitcoins at Risk?!?" section farther above). Once you have control of your private keys you will have the means to use your coins across any or all forks that come along when tools are developed to safely do so. We would advise most users to wait for further guidance from your wallet developers and from your payees for how to use your coins safely and on what chain.

Expect chaos, uncertainty, and big price swings if/when Bitcoin does eventually fork, but this crypto experiment is resilient and we should all become stronger in the end.

BIG CHANGES Coming to Bitcoin! (...and why you may want to hold on to your coins)

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