Bitcoin vs Bitcoin: The Civil War Starts August 1st

Due to the events that are about to occur with Bitcoin, it is necessary that everyone be aware of what is about to happen, regardless if you are invested in bitcoin or not.

The Issue

For several years now scaling has been a major issue with bitcoin. There are two ways to scale. One is increasing the block size, which would require a hard fork. The other is Segwit which can be done by soft fork.

An Overview of Hard forks and Soft Forks

Think of hard and soft forks as ways to deploy updates to the network or protocol.

A soft fork is considered safer than a hard fork, because a soft fork isn’t supposed to require nodes, exchanges, or users to upgrade. With a soft fork, all blocks considered valid by the newer version are also valid in the old version.

With a hard fork, all users and miners must switch to the new version or the chain will split in two the way Ethereum and Ethereum Classic did.

The Bitcoin Improvement Proposals (BIP)

BIP141 Segwit
BIP141 (Segwit) requires 95% of the miners to signal they are ready. Since November of 2016, developers have been trying to reach the 95% threshold, but a lot of the miners don’t like the segwit, and would prefer a hard fork to a 2mb block size.

BIP1478 UASF
BIP148 UASF (User Actived Soft Fork) is another proposal trying to get segwit activated. BIP148 has the built-in capability to reject blocks of miners that don’t accept it, and that could split the Bitcoin network in two. The idea of this is that it will force 100% adoption of segwit. BIP148 is already built into the software of miners that are supporting segwit. BIP148’s goal is to get enough mining power to overtake the other fork, and wipe it out. The other fork in this case, is the non-segwit fork.

Should this scenario occur, all of the transactions in the blocks that didn’t support segwit would be nullified. This could be really bad, because it could cause a double spending problem. An example of double spending is if you sell somebody a good or service on the chain that loses then that transaction becomes like it never happened and the buy still has the good or service you provided.

Segwit2X
The ideal outcome is that segwit is adopted by over 95% of the miners by August 1. In a move to reach a compromise with miners, Segwit2x was created. With Segwit2x the miners get their 2mb blocks and segwit gets activated. They are trying to get Segwit2x pushed out in July to beat the August 1st deadline. In the worst-case scenario, Segwit2x could yet again split the bitcoin chain.

Play It Safe

There is such a significant risk of Bitcoin forking into 2 different coins during the first week in August, that I am taking all my crypto off of exchanges, and putting it in cold storage. If the worst-case scenario happens, exchanges will likely have technical difficulties, and the price of BTC (and probably other coins) will move wildly. Exchanges could take huge losses, and no one knows how they will be able to handle them.

What You Can Expect if bitcoin forks into two chains....

1. Exchanges will be unpredictable.
2. Stop losses on trades not being honored.
3. Exchanges taking huge losses due to the volatility which is why you don’t want your crypto in their possession.
4. It is very likely that other altcoins will be subject to price swings due to these events.

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