Bitcoin is preparing for what could be the most important (and least understood) change to its software so far.
Often called simply "digital currency", bitcoin is best seen as a protocol (a set of code) that delivers data (in this case bitcoins) in defined quantities (called blocks) that are then stored in a sequence ( called a blockchain). Bitcoin is decentralized – in that many people help run the network, and by choosing to run its software, users all agree to follow the same rules to keep it operational.
It is these qualities that make the proposed change particularly conflictual.
Called Segwit2x, the plan calls for a very specific fork (or a modification of the bitcoin rules), which would make some valid rules that were not valid before. Specifically, Segwit2x would change the size of the blocks passed regularly around the network and stored in the blockchain from 1 MB to 2 MB.
Some users think it's a good idea, others do not.
But to begin, it's important to note how different this fork is from the others. In the wake of bitcoin money and bitcoin gold forks, bitcoin users may be used to certain results – those that might not be guaranteed in the case of Segwit2x.
With Bitcoin Cash and Bitcoin Gold, for example, Bitcoin users could have paid little or no attention and this would not have had an impact on their transactions. If you held bitcoin on certain exchanges (or your own wallet), you received a new cryptocurrency. The process was simple, if you had 1 bitcoin, you received 1 bitcoin or 1 bitcoin gold.
This harmonious result is however not guaranteed with Segwit2x. To complicate things, Segwit2x sounds (and is) similar to other bitcoin forks in many ways.
Like other recent forks, Segwit2x is:
- An alternative software – A modification of the bitcoin software managed by the participants of the network and which applies the rules of the protocol. In this case, the Segwit2x code is called BTC1.
- An attempt to increase block size – Most forks focus on a specific network rule (block size), despite other possible optimizations that could lead to increases of capacity.
- A hard fork – Anyone whose software is not updated according to the new rules will no longer be part of the network.
These are the differences, however, that emerge this time.
First, while the bitcoin money developers seemed content to create a new blockchain (with new rules), the goal of Segwit2x is to keep all existing bitcoin users on a blockchain
In this way, Segwit2x could have different results.
- The rules of Bitcoin change. Most (or all) minors improve their software. The bitcoin blockchain continues to work but has larger blocks. The rules of Segwit2x become the rules of bitcoin.
- Two bitcoins are created. Only a few miners update their software. This creates two blockchains – a bitcoin called "inherited", and a bitcoin "Segwit2x", both with different rules and unique cryptocurrencies.
- The rules of Bitcoin do not change. No significant minor runs the new software, and the network continues to run the current rules.
For or against?
However, it is the second result that could most worry users, since it seems possible.
The reason is that those who support change, and those who do not, both seem to have the support of different parts of the community. In short, we can not say that all developers, miners and companies (stock exchanges and portfolios) only support one side.
Segwit2x gets the most support from:
- Miners – Network users who run the hardware necessary to secure the blockchain and benefit from bitcoin block rewards.
- Startups – Companies that benefit by providing a service to bitcoin users, allowing them to spend, store or buy cryptocurrencies.
- Bitcoin should be digital money. It should compete with the US dollar or other fiduciary currencies and, therefore, priority should be given to its use as a means of exchange.
- Competitors win because of the inaction of Bitcoin. They believe that protocols other than Bitcoin have continued to gain ground because they are useful for payments; these protocols currently capture the value that would otherwise have been bitcoin.
- Existing updates are not enough. They say that adding code to the blockchain in August did not result in promised capacity increases.
Other groups opposed this thought.
- Developers – The voluntary group that maintains the bitcoin code; this group includes a number of people who have worked the longest on the bitcoin protocol.
- Node Operators – Bitcoin users who store copies of the complete transaction history of the blockchain (with larger blocks, they will see increasing storage costs).
- Bitcoin is a value shop, not a payment network. However, they seem to think that the latter is possible in the future as technology advances.
- Segwit2x is risky. If bitcoin breaks or fails to deliver transactions, they think it could hurt the project as a whole.
- Segwit2x gives too much power to miners and businesses. They argue that this effectively centralizes decision-making for a decentralized network, undermining Bitcoin's strongest value proposition.
What is the probability of a split?
For now, it may be too early to say for sure. But keeping that in mind, we have some clues as to how Segwit2x was coded.
This is because:
- Segwit2x uses BIP 9 activation. This means that the rule change depends on the percentage of minors running the new code.
- The miners mainly support Segwit2x. 1Hash, Bitfury, Bitmain, Bixin, BTC.com, BTCC, BTC.Top and ViaBTC have all signed the original agreement, reached in May.
Still, that does not mean that all these miners will eventually execute the code.
Although more complex, the reasons include:
- Lots of money back. The China-based Bitcoin community tends to be more invested in this bitcoin alternative, which is already increasing the block size to 8 MB. Miners continue to tell CoinDesk that they intend to promote this blockchain over others.
- Minors can not act unilaterally. Signatories such as ViaBTC and BTC.Top are mining pools that primarily sell software subscriptions to other minors. This means that they will probably give users the ability to exploit Segwit2x, but not all of their users are likely to switch automatically.
- Some minors do not support. This includes F2pool (which governs 5.6% of the network) and Slushpool (responsible for 7.3%), both of whom have said (with varying degrees of certainty) that they will not launch the code .
The ultimate value of a Segwit2x cryptocurrency will also be important here.
Already, cryptocurrency trading is experimenting by listing a version of the coin – one that only lives on their order books – as a way to test the value.
At the time of going to press, the value of the new version of bitcoin was estimated at just over $ 1,000, double the price of bitcoin money ($ 450) and many more high than gold bitcoin ($ 130).
When will all this happen?
From now on, it appears that the spur will occur on or about November 16th.
However, an exact date can not be fixed. This is because the change will be made to a specific block (number 494 784), by the time the miners will be able to run the new software.
Nevertheless, the people involved in the project are adamant that the project is moving forward, with the project's senior developer stating last week that the updated code will be released based on the mid-November plan.
Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which participated in the organization of the Segwit2x agreement.
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