Bitcoin Hard Fork Averted: OK, What’s Next?
The global Bitcoin community has been in a contentious brawl over the past three years; a war that has escalated in recent months around how to expand the capacity of the increasingly bloated Bitcoin blockchain network.
In May, a collaborative effort on the part of two groups forged a compromise to end the stalemate, all without sufficient input from a key stakeholder; Bitcoin Core’s developers. The proposed end game was a so-called hard fork, a move that has significant implications for the integrity of the network in that it creates two competing chains.
It is known as SegWit2x for the two solutions it advocates a compromise consisting of SegWit and a hard fork to a 2MB block size.
With all eyes focused on this looming hard fork targeted for a week and a day away, the coalition advocating for this major development called off plans for it in a surprise email released November 8.
The email announcement reads as follows:
“The Segwit2x effort began in May with a simple purpose: to increase the blocksize and improve Bitcoin scalability. At the time, the Bitcoin community was in crisis after nearly three years of heavy debate, and consensus for Segwit seemed like a distant mirage with only 30 percent support among miners.
Segwit2x found its first success in August, as it broke the deadlock and quickly led to Segwit’s successful activation. Since that time, the team shifted its efforts to phase two of the project – a 2MB blocksize increase.
Our goal has always been a smooth upgrade for Bitcoin. Although we strongly believe in the need for a larger blocksize, there is something we believe is even more important: keeping the community together.
Unfortunately, it is clear that we have not built sufficient consensus for a clean blocksize upgrade at this time. Continuing on the current path could divide the community and be a setback to Bitcoin’s growth. This was never the goal of Segwit2x.
As fees rise on the blockchain, we believe it will eventually become obvious that on-chain capacity increases are necessary. When that happens, we hope the community will come together and find a solution, possibly with a blocksize increase. Until then, we are suspending our plans for the upcoming 2MB upgrade.
We want to thank everyone that contributed constructively to Segwit2x, whether you were in favor or against. Your efforts are what makes Bitcoin great. Bitcoin remains the greatest form of money mankind has ever seen, and we remain dedicated to protecting and fostering its growth worldwide.
Mike Belshe, Wences Casares, Jihan Wu, Jeff Garzik, Peter Smith and Erik Voorhees
*CEO, BitGo, Inc*”
This announcement comes on the heels of the CME Group’s recent statement that it will launch a Bitcoin futures product. News of this sent the price of bitcoin soaring to a series of new record highs with an associated rise in market capitalization to the north of $125 billion.
Despite the current hard force ceasefire, questions remain as to how critical issues surrounding the proposed fork will eventually be resolved. The Bitcoin blockchain was on course to split into two in approximately eight days. But it appears that advocates of SegWit2x were unable to fuse together a consensus of supporters in the Bitcoin community to make it the go-to blockchain protocol moving forward. The fork would have increased the block size to 2MB, a move many argue offers a critical elixir to the persistent capacity issues plaguing the Bitcoin blockchain network.
Given the highly controversial nature of this change and the fact that many bitcoin companies had come out against the move, many feared that the fork would create a massive, potentially cataclysmic chasm within the global Bitcoin ecosystem.
The significance of this latest development has triggered a number of reactions and from the Bitcoin community.
Says Ned Scott CEO of the blockchain-centric social media platform Steemit, “When 2x was called off, it became immediately clear there’s greater consensus for a single Bitcoin blockchain and therefore there is greater value retained in the bitcoin ecosystem. The case was made by the immediate price increase when 2x was called off.”
Bharath Rao, CEO of the decentralized, leveraged cryptocurrency futures exchange Leverj also weighed in saying that while occasional forks due to deep philosophical differences are inevitable, habitual forks damage the network effect of any blockchain and undermines security and faith in the system. Cryptocurrency, he notes, is still experimental and repeated forks can fracture the community into tiny siloes and undermine the very concept of non-governmental money.
“Rewards exist precisely because risk and opportunity exist. Every small mitigation of a risk enhances value, and this event is no different. The Bitcoin community welcomed the cancellation of Segwit2x with a huge price spike. We hope to see a continuous stream of risks eliminated and value enhanced over the next several years,” says Rao.
Abhishek Pitti, CEO of Nucleus Vision an IoT-based contactless identification system believes that “canceling SegWit2x is a step in the right direction, saying that Bitcoin Core’s roadmap will prevail for now.”
Concludes Pitti, “While the intent behind increasing the block size was to make the Bitcoin network more efficient, going ahead with the fork without broad community consensus would have caused more harm than good for bitcoin. Furthermore, seeing the spike in bitcoin after the announcement shows that this move is welcome by the broader crypto community.”