Exchanges Issue Contingency Plan in Event of Bitcoin Split
As the likelihood of a Bitcoin hard fork increases, a document published March 17 details a contingency plan that nearly 20 exchanges plan to be a part of in the event of a split in the Bitcoin network.
Exchanges include ones with massive amounts of volume, such as Bitfinex, BTCC, Kraken, and ShapeShift, as well as some lesser-known exchanges. The reasoning behind these actions was not philosophical as the document claims, but “rather for practical and operational considerations.”
As exchanges are expected to work continuously, the exchanges participating in this contingency plan need to prepare a course of action that is applicable across the sector, as to not bring about any confusion, chaos, or potential loss of funds in the event of a hard fork.
Many exchanges offer margin or leveraged trading, which mandates markets to operate continuously, further adding a reason to why these exchanges need to adopt a plan to prepare for a potential hard fork which would affect the biggest cryptocurrency.
The plan focuses on Bitcoin Unlimited and Bitcoin Core, which plans to designate Bitcoin Unlimited as BTU and Bitcoin Core (the current fork) will continue to trade as BTC/XBT. Bitcoin Core deposits and withdrawals from all exchanges participating will still be processed in BTC, even if the BTU chain has hashrate dominance.
Some of the participating exchanges will try to list BTU, with all the exchanges to “try to take steps to preserve and enable access to customers’ BTU.” However, no exchange can list BTU unless there is a way to run both chains independently without a problem.
The statement also states that failure for Bitcoin Unlimited or any other competing chain to implement reliable two-way replay protection will result in a delay of listing BTU, or BTU to be not listed outright. Ethereum’s hard fork lead to a vulnerability which, theoretically, allowed individuals to double their bitcoin holdings, taking advantage of the split in the network:
There is no timeframe on how soon these actions would occur if such a fork occurs for Bitcoin, but the very fact that the statement shows several major exchanges will stand together is sure to leave many concerned Bitcoin users at ease.