Brace for the SegWit2x contentious hard fork

Brace for the SegWit2x contentious hard fork

Bitcoin is about to fork again with the so-called SegWit2x activation happening sometime in mid-November 2017.

The first notable fork was on August 1st, 2017, when Bitcoin Cash forked off from “the” Bitcoin. Although the Cash fork was both a “contentious hard fork” in theory, and gave Bitcoin exchanges and other players only a few weeks to prepare, it did not turn out to be very contentious or disruptive since it implemented strong replay protection and never seriously challenged either the hashing power / stability, market cap, or the brand of the mainstream Bitcoin.

Not so with SegWit2x. Miner support for the 2x fork is signaled to be strong, yet not overwhelming, while replay protection is said to be weak, and many of the 2x supporters claim that the fork will take the Bitcoin brand with it, implying that those that don’t follow along will be left with an alt-coin. Not to be outdone, (the Bitcoin Core team) promoted an article titled Beware of Bitcoin's possible incompatibility with some major services, implying that the 2x fork will not be "Bitcoin", even if a long list of service companies including Coinbase and BitPay support it. Although they are not opposed to hard forks in principle, the article says, the 2x fork is rushed and lacks the necessary consensus to justify a hard fork.

Would the real Bitcoin please stand up?

SegWit2x came out of the so-called New York Agreement of May 2017, a two-part deal that scheduled the activation of SegWit, which did happen as a soft-fork a few months later, to be followed by doubling the block size limit to 2 megabytes, which is on track to happen as a hard fork in November 2017. The hard fork was not meant to split Bitcoin, but rather to upgrade it - most everyone was expected to get on the same side of the fork.

As of October 2017, however, neither side has overwhelming support. The New York Agreement had wide, but again, not overwhelming consensus, and some even decried it as a “back-room deal”. Then Bitcoin Cash came out of left field with its 8 megabyte blocks and took with it significant support for increasing the block size of the mainstream Bitcoin. So many major exchanges and other players have announced plans to support both Bitcoins, the 2x one when it happens, and the current Bitcoin users that cannot or will not do the backwards-incompatible upgrade.

What you can do about it

There are several concerns going into the 2x fork, as outlined in this Bitcoin Magazine “survival guide”:

  • Disruptions of service and/or higher fees across the entire network. Not much you can do about that except not transact when it happens.
  • Making sure the Bitcoin you send is not lost. People have accidentally sent their original Bitcoin to a Bitcoin Cash address and vice versa - and it never arrives. With Bitcoin Cash the trouble is from human error, but with the upcoming fork, if and when the two blockchains will have comparable hashing power and are neck-in-neck for generating longest chain, even your wallet might get confused which Bitcoin blockchain it is interacting with. That is unless your wallet is running its own full node, such as the Bitcoin Core client, it relies on some other full node on some server, which in turn might get confused about which chain is the real Bitcoin. Then your wallet might display wrong balances or even send your coins to the other chain. Please do your research about your mobile, hardware, or SPV wallet such as Electrum. Note that Electrum lets you choose a server full node from a long list.
  • Reaping the benefits of the split: being able to send one each of the two Bitcoins at the same address separately from each other, so you can trade or sell one or both. This is where replay protection would come in, until you can split the coins into separate wallets and addresses. Unlike with Bitcoin Cash, replay protection for the 2x fork is said to be weak, but there are some advanced tricks you can research, such as making sure the transaction you are sending mixes UTXOs from already split transactions.

To have the most flexibility when it comes to splitting your Bitcoin (and as a general best practice), make sure your bitcoin is in a wallet where you control the private keys before the fork happens - as opposed to trusting an exchange or some other third party, where you only control the legal “keys”. A 3rd party might choose to recognize only one side of the fork, or not support the split until much later. With the Bitcoin Cash fork, the biggest US exchange, Coinbase, first announced that it will not support Bitcoin Cash, but after the fork and a public outcry, announced that it would implement support in a few months. Meanwhile, those that left their Bitcoin on Coinbase during the August 1st fork cannot access their corresponding Bitcoin Cash to sell or exchange it. Although this time Coinbase has announced that they will support both sides of the 2x fork holding your own keys still gives you more flexibility.

Not the last Bitcoin fork

We just might be entering a year of Bitcoin forks, with a now proven way to “air-drop” your new version of Bitcoin to all current holders, while tossing it up up to the exchanges and wallet providers to implement support and trading of the new token. Hold on for the ride.

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