The bitcoin is the world’s most valuable cryptocurrency. It has been around for about 8 years now and has experienced extraordinary growth. The cryptocurrency has been largely successful due to the absence of a centralised system as all resources are shared out between members. But in recent weeks, the bitcoin community has been shaky. This is due to the possibility of the existence of a new hard fork and it has divided the camp along philosophical, political and economic lines.
The new bitcoin hard fork is a new proposition largely supported by a group of people in the industry; the bitcoin miners. They believe the network as well as the processing time needed for transactions is slow. Data in bitcoin transactions is processed in batches called Blocks. The miners want to increase the data cap on blocks from 1 MB to as much as 4MB. Essentially, they want to increase the size of a block to cut down waiting time therefore making the network faster and more reliable. Though a compromise (with regards to SegWit) was originally arrived at, the opposition camp (consisting of core developers) do not see the immediate need for the increase in the data cap blocks. The difference in ideology is threatening to split the bitcoin currency itself into two; Bitcoin and Bitcoin Cash.
What You need to know about Bitcoin Hard Fork and Confusion hanging around Segwit 2X
What is SegWit?
SegWit (Segregated Witness) is a proposed program meant to update the current bitcoin software. It was developed by the team at Bitcoin core which is responsible for a majority of the Bitcoin referrals. Originally drafted to tackle and fix the level of malleability of the bitcoin, further applications like linear scaling of sighash operations is a more recently explored application and is what is causing the rift in the bitcoin community now. The proposed update seeks to expand block size by removing the quadratic scaling of hashed signatures. It is set to be accepted only if it receives support from 95% of the community.
What seems to be the problem?
In overview, increasing the block size would seem like a step in the right direction as it increases the speed of transactions so what actually makes it such a hot button topic?
The problem behind the hold up to adoption of the update has been to how the update plans to do tackle the problem. The update is going to use sidechains to relieve the stress on the block chain, all transactions will now be moved to an external third party that now effectively acts like a centralised processing hub. Since one of the allure of the bitcoin is its decentralised nature where no one person governs or controls the process this poses a problem for many people in the business.
For some people the reason has been quite different. Voiced by the core developers, it raises concern that an increase in block size as well as SegWit overall implementation will increase the already growing divide between small miners and the big timers. They reason that the Bitcoin will lose its allure as the big timers with a reduced time and increased processing speeds will be able to mine coins at a much faster rate than the small time miner. This causes the exponential divide that already exists to increase therefore discouraging beginners from delving into mining technology.
What are the main camps in the argument?
The camps drawn are pretty clear and straight forward, On one side of this imaginary battle line we have the core developers, who are responsible for the development of the bitcoins powerful program and implemenation. They believe SegWit implementation is potentially dangerous for the cryptocurrency. On the other side we have the miners, who use their massive computers to check and verify transactions. They believe implementing SegWit will be the way to save bitcoin. These two opposing forces have brought the world of bitcoin to a standstill.
What happens to the bitcoin when the two currencies split?
It is hard to tell the effect the split will have on the value of bitcoin. The bitcoin is however expected to stay and remain strong since its value is based on demand and supply.
Not only Coinbase, CEX.io also released an update regarding this developing. It is believed more bitcoin service providers are going to disclose their support for, or against, the Segwit 2x update as the event unfolds.
What do the digital asset exchange companies say?
Many digital asset exchange companies like Xapo, Poloniex and Coin Base have outightly stated they would not support the new Hard fork. Others like Kraken and Bitfine have come our to support the hard fork. Their reasons for accepting or opposing have been wide and varied. However they have all stated the need to be cautious in dealing with the new cryptocurrency.
Are you at risk of losing your wallet and bitcoins?
Short and simple answer, Yes. There is always the risk the new split will rob some wallets of their contents. Many wallet vendors have already started protocols to keep their customer’s wallet and bitcoins safe. However, it is advisable for the user to create a back up of his or her account. This prevents permanent loss of bitcoins.
How do you back up your wallet?
There are a wide variety of tools and ways to back up your wallet, private key and protect your bitcoins. This depends on the wallet provider and the platform you use. The safest options are the paper wallet and hardware wallet backups. Want to know more? Be sure to check out our article here.
Today the fate of the bitcoin is at stake. Will the bitcoin finally tank and lose its ever increasing value? Amidst the chaos, will the bitcoin cash be able to keep up with the bitcoin? Or is it all just white noise floating round the hype that is the bitcoin. One thing we know for sure is that nothing is concluded yet and the next coming weeks will be critical for the bitcoin and all cryptocurrencies.