What is the 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. If one version dies, then the other version will be ‘bitcoin’, and we will go back to having the one bitcoin network.

How did we get here?

Just over 5 months ago a much anticipated bitcoin upgrade known as SegWit was finally activated after a very long period of debate and controversy. Bitcoin miners were holding back the activation of SegWit for a long time, and finally agreed to moving forward with SegWit after signing the “New York Agreement” (NYA).

The reason they were holding back was because they wanted a block size increase, not SegWit. The bitcoin blocks were full, and transactions were getting very expensive. The majority of bitcoin users wanted SegWit, and the majority of the miners wanted bigger blocks.

The “New York agreement” was signed in May 2017 by 58 Companies which account for more than 80% of the hashing power of the bitcoin network. The agreement was that the companies would move forward to get the SegWit update, and stipulates that Within 6 months of SegWit activating, the block size would also be doubled to 2MB.

Now that SegWit has been activated, it is coming up to the point in time where the 2x part of the agreement needs to be implemented. The 2x update is Scheduled for sometime in November, approximately, November 18th. The companies who signed the agreement will leverage hash power from their mining pools to increase the block size limit with a 2x hard fork.

Why do companies want SegWit2x?

The main argument for the SegWit2x update is for scaling bitcoin. When the block size is bigger there will be less competition for transactions to be included in the next block. This means that transaction fees go down, and at the same time there is more throughput on the network, as more transactions are processes in each block. This should make bitcoin faster and cheaper to use for everyone, and some people believe this faster cheaper bitcoin will help with mainstream adoption, and more people using bitcoin on a day to day basis.

So why are people against the SegWit2x update?

Now that SegWit is already enabled a few months ago, people believe the SegWit2x update is not really necessary right now, and is certainly not urgent. While there are still transaction fees of a few dollars to send bitcoin, this has been coming down, and previously full blocks have come down in size drastically already. The SegWit update has already enabled more throughput, more transactions per block, and much cheaper transactions, and it is only at around 17% so far. As more companies and wallets start to use SegWit, this will continue to improve. So then the question is why do you even need the SegWit2x update, and why the urgency? Since SegWit has been activated, it is ironically some of the main companies in bitcoin, the ones who signed the NYA, who still have not all implemented SegWit. This inaction has obviously slowed down the increase in SegWit transactions, and bitcoin users have been left wondering why these companies appear to be waiting, while wanting to still push for 2x version? What is the agenda?

SegWit transactions 17%

SegWit transactions @ 17% (22/10/2017)

Many end users of bitcoin believe that this hard fork being forced on them by signers and miners of the NYA is not what it seems. These companies do not appear to be listening to the users of bitcoin and their customers, but are wanting to go ahead with what many believe is an attempted hostile or corporate takeover of bitcoin.

nob2x.orgThere are many other companies involved in the bitcoin space that have not signed the NYA, and who publicly oppose it. There is even a website with a list of companies and organizations that did not sign, or dropped out of the NYA called Nob2x.org

One of the most important issues many users have, is who will be in charge of the development of bitcoin, if the SegWit2x succeeds, and becomes ‘THE’ bitcoin.

The SegWit2x update will replace the current and much beloved bitcoin core team, who have been so successful in getting bitcoin to where it is today.

The 2x fork of bitcoin being pushed by the NYA signers will instead have its own (smaller) team of engineers, and currently no members of the bitcoin core team are not on the 2x development team.

The current bitcoin core team are trusted in the community, while the replacement team does not hold that same level of trust. Bitcoin is open source and has around 500 active developers from around the world, the 2x version will not be part of this.

We don’t believe in trying to force a change bitcoin’s core developers don’t feel safe with. The technical background of the team that currently collaborates on the core bitcoin project has an unprecedented level, we believe them to be, at least as a group, unbiased experts who deserve at least a voice on the subject.

The 2x update will mean giving control of bitcoin over to corporations, the businesses that signed the agreement would be in control and bitcoin will no longer be as decentralized. That could meant that in the future other changes that are wanted by these companies or even governments could be easily changed. After the hard fork, if 2X succeeds, the development would be in the hands of only few individuals and corporations.

The Segwit 2x update lacks strong 2-way replay protection, which means that the 2x fork version of bitcoin will be claiming to be “THE” bitcoin going forward. The problem is that both the original version, and the 2x version both want to be “THE” bitcoin, which is likely to cause some confusion and problems going forward. Some exchanges will list the two versions as BTC and B2X to make things easier.

Some mobile wallets will display whichever blockchain has more hash power attributed to it. This means that the balance on your screen could be a BTC balance or a B2X balance, and there will be no way to tell the difference.

With two versions of bitcoin both claiming to be the only bitcoin, things could get messy. The issue with not having replay protection is that once the split has happened, if you do a transaction on one chain, those transactions that are broadcast can be replayed on the other chain.The SegWit2x camp who are doing the hard fork are refusing to implement strong 2-way replay protection onto the SegWit2x version of bitcoin.

Strong 2-way replay protection means that the transactions from one chain, are never valid on the other chain after the hard fork, and vice-versa. All transactions will only work on the chain that they are supposed to work on.

By refusing to add this strong 2-way replay protection, while knowing exactly the problems it can bring, the 2x camp is knowingly endangering the bitcoin balances of many users. This irresponsible position by the SegWit2x camp has caused many people to deflect and withdraw their support for the fork.

Some of the original 58 companies have already started to drop out of the agreement because of this. Currently the NYA dropout rate is sitting at 27%. A large portion of the day to day bitcoin users have begun boycotting and leaving the services of companies that continue to support the agreement. The bitcoin core team have even published a blog post shaming the companies that are going ahead with the fork, so that users can know if their service provider is risking their bitcoins.

Some companies are officially still supporting the hard fork, while their own staff are opposed to it in their personal capacity.

bitgo segwit

How can you protect your bitcoin during the 2x hard fork?

On or around the time of the 2x fork (estimated to be November 18th), you should play it safe, and not be doing any bitcoin transaction or moving your bitcoin at all. If at all possible, leave it where it is for a few days and wait for the dust to settle, to see which chain becomes the dominant chain.

The most important step to protecting your bitcoin, including during a hard fork, is to make sure you are in control of the private keys of your bitcoin. This is the first rule of bitcoin, and if you have not done this already, you should!

We recommend that you store your bitcoin on a bitcoin hardware wallet such as a Trezor, or Ledger Nano S, which are both very secure, and really easy to use.

It is never a good idea to store your bitcoin on a bitcoin exchange, but….If you are storing them on one, (like Ice Cubed, Luno, bitstamp or Xapo etc.), or on any other type of service that holds your private keys for you, you may or may not eventually receive both chain tokens if there is a split. Some exchanges are not splitting coins for their users, and will only run one version of bitcoin. If there are two versions running, the core version and the 2x version, you will be forced to go with the version your exchange uses, and might lose your coins on the other chain completely.

The best position for you to be in is to be in control of the private keys so that you can redeem the coins of whichever chain you choose to follow, and don’t need to rely on a 3rd party. You will probably be able to move the coins from each chain faster than if you wait for an exchange to split them for you when they decide what they will do, and which bitcoin is “THE” bitcoin. Only after a dominant chain has been established, will things get back to normal.

What will happen after the fork?

Some bitcoin services will follow the bitcoin blockchain with the most hashing power, which might be the 2x version. Other services will follow the longest valid chain, valid referring to the consensus rules as defined in version 0.15 of Bitcoin Core. If both chains have enough support, there will be a core version and a 2x version of bitcoin forever going forward.

The majority of the bitcoin community is in support of the bitcoin core team of developers, and is against the SegWit2x hard fork, while its the majority of miners and companies that are in favour of the split.

If both chains survive, and you own bitcoin before the split, you will have the same balance on both chains.

  • Yes exactly. If both chains survive, you will have a 1 bitcoin, and 1 b2x coin. The value of the 2x coin is hard to predict, but it will not be anywhere near the value of bitcoin when it starts. It could also bottom out quickly if lots of people dump their 2x coins for bitcoin.

  • Yes, although that is only really an option for long term storage

  • Peter Blyth

    Morning, what is your view on the value of BTC in and around the Fork? At today’s value around R113k, could it devalue substantiallycloser to mid Nov due to the uncertainty of the Fork?

    • The fork has been cancelled for now, support from companies and miners was going down once they started listening to users.