Bitcoin segwit2x hard fork explained
On Nov. With just four brief paragraphs, Mike Belshe cancelled a fork that would have dramatically impacted Bitcoin. However, he fails to clearly explain the causes and implications of the fork. Nonetheless, it is still important for Bitcoin supporters to better understand the situation to know how this will impact the future of Bitcoin. The SegWit2x fork would have originally activated around Nov. In addition, most major exchanges, including Bitfinex, ShapeShift, and CoinBase announced that they will support both versions of Bitcoin.
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Content:
- A History of Bitcoin Hard Forks
- [Update: Cancelled] TREZOR Statement on SegWit2X Hard Fork
- The SegWit2x hard fork explained
- Guide to Bitcoin Hard Forks: Bitcoin Cash, Bitcoin Gold, Segwit2X & Bitcoin ABC
- Segwit2x: A beginner’s guide to the bitcoin fork
- 2x or NO2X: Why Some Want to Hard Fork Bitcoin — and Why Others Do Not
- A new digital currency is about to be created as the bitcoin blockchain is forced to split in two
- Mapping the Major Bitcoin Forks
A History of Bitcoin Hard Forks
You may have come across these terms in the past few months or weeks, but still don't understand what's happening? We'll explain in this post. If you're new to the cryptocurrency space, we recommend you read our newbie-friendly intro to blockchain to absorb the necessary terminology. Every blockchain has the same weakness — scalability.
When a blockchain reaches the saturation point at which there's more pending transactions than the network can process, the speed of executing those transactions decreases.
The transaction fee increases because miners will process transactions with higher fees first, so you can either have slow but cheap transactions, or fast but expensive ones. The second problem is mining hardware optimization called ASICBoost which allows for a greater mining efficiency in the electricity spent versus hashes per second produced.
In finding the solutions to both the ASICBoost problem and the scalability issue, we have two opposing camps:. Core devs prefer the Segregated Witness SegWit from this point on solution.
It's more complex, but has more long term perks. It also lays the foundation for the Lightning Network LN which will increase transaction throughput further by means of off-chain transactions. The LN technology is conceptually similar to Ethereum's solution called Raiden. In a nutshell, the LN uses smart contracts and payment channels to make transactions happen off-chain. These fee-less transactions and microtransactions happen off the main chain and are committed to the main chain as a group once every few days.
Only this main transaction has a fee then. This speeds things up significantly. The downside is the likely formation of bitbanks and centralized services through which these transactions will get processed before being sent to the main chain, which means the forming of a new banking sector in the crypto space. Likewise, LN takes the transaction fees away from miners, who had come to rely on them for rewards in the ever-decreasing block reward space of Bitcoin mining.
For advanced readers, this video might explain things a bit more succinctly. Like we explained in a previous post on how to read Bitcoin transaction data , a Bitcoin transaction contains information such as the transaction size, input and output addresses, amounts, fees, and more. The most important part of this is the fact that each transaction has to be signed with a private key. This signature takes up most of the space in a transaction, but without it we have no idea if the transaction is valid.
By segregating this witness data out of the transaction, the core developers effectively halved the transaction size. The nodes that want to make sure the transaction is valid need to request this data separately by having software which supports the SegWit approach installed, like Bitcoin Core. This also means that the whole system is now trust based, until manually checked for truth. Chinese miners with Jihan Wu at the forefront wanted to increase block size from 1mb to 8mb.
This is not a long term solution because as Bitcoin gains more and more mainstream adoption, the same capacity problem would arise in the near future. An additional reason why the miners complained against the SegWit solution was the fact that the SegWit upgrade disabled ASICBoost, which makes them lose quite a big edge.
Furthermore, if blocks increase in size the people running nodes voluntarily would have to upgrade their storage and possibly internet connections to accommodate for the new throughput. Initial node synchronization would also take much longer that's the process of downloading and validating the entire blockchain after installing the Bitcoin software of choice. It would become a little more expensive to run nodes, and nodes are just validators — they don't get anything for their participation in the network.
It's possible that this would cause a bit of a centralization in the Bitcoin space due to only big data centers and corporations being able to afford to run nodes. Those who control the nodes control the Bitcoin network, and thus it's important that the ability to run nodes remain accessible to all. Like we said in the post about Bitcoin's false finality , if node centralization occurs, those who control the majority can change the 21 million limit, reject valid transactions, change protocol rules, etc.
This is very dangerous not only for Bitcoin but the the crypto ecosystem at large. Because the Bitcoin protocol is based on trustlessness, it is extremely important that the ability to verify transactions remains with the people. Despite the above reasons for each solution being suboptimal, it's more worrying to see who's actually behind Segwit2x. The plan was to activate SegWit first this already happened , and to double block size 90 days later.
These two improvements would increase the theoretical capacity limit to around 8MB worth of transactions. The development of SegWit2x is being spearheaded by Jeff Garzik, one of the original authors of the Bitcoin blockchain software.
This agreement was not attended by Bitcoin Core developers — in part out of principle because closed door deals aren't in the spirit of Bitcoin, in part because most of them weren't invited. This leaves us with 38 at the time of writing which still support the SegWit2x upgrade.
You can keep an eye on the list of supporters here. Bitcoin Cash has replay protection protection from a dangerous attack on Bitcoin users we described in this post and 8mb blocks.
Why they would still be concerned about SegWit2x if they got what they wanted in the form of Bitcoin Cash is anyone's guess. Neither the miners nor the Core developers are crucial for the Bitcoin ecosystem — it's the nodes. The beauty of Bitcoin is in the fact that it's a decentralized, democratic protocol in which anyone running a node at home can vote by applying some strict software rules.
If miners activate SegWit2x and start mining bigger blocks, the nodes will not accept those blocks because they aren't valid according to Bitcoin rules. The miners will automatically fork into another chain, whereas the miners who mine under the original rules will stay on the legacy chain. On the other hand, if nodes change their software in a way that lets them accept bigger blocks, then that chain becomes the main chain and the one with the smaller blocks dies off.
It's all in the hands of the users. Unfortunately, the misinformation lobby spearheaded by those who have the most to gain with these political battles is already very strong, and objective information is very hard to find.
The current Bitcoin situation with too expensive transactions is slowly improving and SegWit transactions are being used more and more. The fees are slowly dropping but they're still worryingly high. Despite these problems, the coming fork should not be taken lightly. This will cause chaos in the exchanges and among crypto newbies.
It also poses a risk of significant losses due to people accidentally sending funds to a Bitcoin2x address from a Bitcoin address, or vice versa, or another incompatible combo.
The community's consensus is that a hard fork should be planned long in advance, up to two years depending on complexity, especially considering we're dealing with a market cap value of over billion USD.
Take Ethereum for example — it recently had its hard fork for the Byzantium upgrade more about that in this post , but this all went smoothly since the upgrade had been planned from day one in In spite of the discussions and debates about Bitcoin scaling which had been happening for two years prior to NYA, SegWit2x was given only 3 months from the moment the agreement had been reached.
There's a post on Reddit which lays out some evidence that the enemies of cryptocurrencies the Digital Currency Group, MasterCard, and the world's most prominent bankers are in fact taking over Bitcoin from the inside by means of this SegWit2x scandal.
We highly recommend you give it a read — you'll no doubt be left wondering how much we can trust the parties behind the upgrades, and who those responsible are actually putting in place of the current developers. One this is certain — Bitcoin is under attack from multiple sides. Immediately after the fork, one coin will be sold to increase holdings in the other, or for promising altcoins. The winning Bitcoin might rise in value just like Bitcoin Cash did. It's important to note that if you're holding your coin on an exchange, it's up to them to give you the new coins.
They can, but they don't have to. It's up to them. That's why it's safest to store your cryptocurrency key privately, either on a Ledger wallet, or a piece of paper — and this advice applies to both during the fork and during stable times. Keeping money in an exchange is a bad idea. If for some reason you're not feeling overly confident in your ability to safeguard your coins, feel free to contact us about that.
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[Update: Cancelled] TREZOR Statement on SegWit2X Hard Fork
This is the highly controversial split of the bitcoin blockchain that miners are wanting to implement. Bitcoin miners will begin running the SegWit2x version of bitcoin which will increase the block size to 2MB, and the block weight to 8MB. This will cause the bitcoin blockchain to be split into two versions, both trying to be the authority bitcoin. The original one core , and the SegWit2x version of bitcoin will both be running if the miners go ahead with the Segwit2x hard fork. If you own bitcoin at the time of this blockchain split, you will have the same bitcoin balance on both the core version and the SegWit2x version of bitcoin after the fork. If both versions continue to succeed, then the split will be permanent.
The SegWit2x hard fork explained
So when will Bitcoin fork, and what does that mean for the future of the currency? The answer is a bit complicated. As more and more people buy in and adopt the cryptocurrency, seven transactions per second will become prohibitively slow. For reference, the system that powers Visa credit and debit cards usually sees about 1, transactions per second, and has the power to handle 56, per second if demand spikes. Sure, there are far more Visa users than bitcoin, but if the currency ever wants to compete with major financial networks it has to find a way to get faster. This is where things get controversial. The bitcoin community is divided on how to fix the problem, and if certain solutions go through, it could result in a fork in the currency. The blockchain is essentially a constantly-updating registry of every transaction that happens. Each of these solutions has big pros and cons for different groups of bitcoin users. The first way to solve the problem and make bitcoin faster is to change the way transactions are recorded to make them take up less data.
Guide to Bitcoin Hard Forks: Bitcoin Cash, Bitcoin Gold, Segwit2X & Bitcoin ABC
Forks are often a contentious topic for many in the crypto world. Some might see forks as a divisive force, while others view forks as a manifestation of diversity and innovation of the community. Either way, it is important to understand the underlying reasons for a hard fork and the major coins created from those forks. Master The Crypto presents the different major hard forks of the Bitcoin blockchain. Perhaps the most contentious fork in Bitcoin history is Bitcoin Cash.
Segwit2x: A beginner’s guide to the bitcoin fork
There are two forks that are currently being talked about on the Bitcoin network, and there are steps you can take to prepare for both of them. If splits happen between them, there could be up to four blockchains sharing the same transaction history, based on the original Bitcoin blockchain created by Satoshi Nakamoto. Some say this agreement pushed bitcoin miners to use their votes to implement the Segregated Witness Segwit protocol. Its block height will be , on around November 18 depending on hashrate. Before any fork, make sure your bitcoin is secure by leaving it in an exchange, or a non-custodial wallet. Another option for security is through private keys.
2x or NO2X: Why Some Want to Hard Fork Bitcoin — and Why Others Do Not
A cryptocurrency fork is an update to the software governing the distributed network that makes existing rules either valid or invalid — sometimes resulting in spinoff versions of Bitcoin. When it launched in , Bitcoin was the first cryptocurrency. It was the first digital currency to be built on a blockchain, which is a system that records transactions across a distributed network to make them more secure. Eventually, the technology it was built on, slowed down, and fees got more expensive. Users wanted to update the Bitcoin protocol without messing up the original. A Bitcoin fork creates new rules for the currency to follow, without eliminating the previous ones. Hard forks result in a new version of Bitcoin that is completely separate from the original. Bitcoin Cash, which, as of October , is number five on Coin Market Cap with respect to market capitalization — the total value of all coins in circulation , is the most successful hard fork of Bitcoin.
A new digital currency is about to be created as the bitcoin blockchain is forced to split in two
Forking happens because a set of miners, who create bitcoin, believe that there are more efficient options than the existing bitcoin. So far in bitcoin, two major forks have taken place, which have led to the birth of two cryptocurrencies—bitcoin cash and bitcoin gold. Yet another forking is expected next week.
Mapping the Major Bitcoin Forks
The new SegWit2x fork, which is scheduled for December 28th, was announced on December 16th. Despite sharing a name with the SegWit2x fork that was cancelled in November, none of the entities involved in the original SegWit2x fork have had anything to do with this reboot. Discover credible partners and premium clients at China's leading finance event! It seems that the new SegWit2x is an entirely separate project benefitting off of the name of the cancelled one. The new SegWit2x claims to have been redesigned with better replay protection in addition to a 4mb block size the original SegWit2x called for an upgrade to 2mb. Some of the futures markets for the upcoming fork are already live on certain exchanges ie HitBTC , trading for around 0.
During a hard fork, software implementing bitcoin and its mining procedures is upgraded; once a user upgrades their software, that version rejects all transactions from older software, effectively creating a new branch of the blockchain. Bitcoin Cash, the most prominent Bitcoin fork is set for yet another hard fork. Soft forks are a change to the bitcoin protocol, but the end product remains unchanged. This choice is similar to a fork in the road. The post mortem is in BIP In some cases, the community will be divided about the necessity and the impact of the changes that are being instigated by the fork. The last time a Bitcoin hard fork was attempted, it attracted vicious debate.
The decision came after months of acrimonious debate over following through with the execution of the second part of the plan called Segwit2x. The Segwit2x is explained in detail by Coindesk. Past bitcoin hard forks At the beginning of August, bitcoin experienced a hard fork that created bitcoin cash.
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