by Joseph Young
The SegWit2x hard fork is expected to occur in mid-November of 2017. Inevitably, if the hard fork is executed within the next month, it will lead to a split chain and the creation of another fork of Bitcoin. Holders should not perform any bitcoin transactions around the time of the SegWit2x fork and wait until the ‘storm’ has passed. This guide details some ways you can prepare for the split.
How Will Leading Bitcoin Exchanges Address SegWit2x Hard Fork in November?
Leading Bitcoin exchanges and wallet platforms including Coinbase and Bitfinex, the world’s largest Bitcoin wallet platform and exchange, have announced that their plans to implement support for SegWit2x in November. Coinbase and Bitfinex will list SegWit2x as B2X, and the “BTC” moniker will be used for the original Bitcoin blockchain.
Upon the SegWit2x hard fork in November, users of most leading Bitcoin exchanges and wallets such as Coinbase, GDAX, Bitfinex, and Blockchain will be credited with B2X.
The SegWit2x hard fork is fundamentally different from the Bitcoin Cash hard fork in September. Last month, companies like Coinbase and Blockchain received significant amounts of complaints from users requesting support for BCH. Coinbase customers went as far to appoint a law firm to challenge the decision of Coinbase not to list BCH on its platform in court.
Consequently, both Coinbase and Blockchain announced their plans to list Bitcoin Cash. But, the two companies received criticism from users for their decision to integrate Bitcoin Cash support months after the fork occurred. At the Coinbase development team stated:
“Over the last several days, we’ve examined all of the relevant issues and have decided to work on adding support for bitcoin cash for Coinbase customers. We made this decision based on factors such as the security of the network, customer demand, trading volumes, and regulatory considerations. We are planning to have support for bitcoin cash by January 1, 2018, assuming no additional risks emerge during that time.”
But, as Litecoin creator and former Coinbase executive Charlie Lee stated, Coinbase and other leading Bitcoin companies such as Blockchain and Bitfinex cannot handle the SegWit2x hard fork in November as they did with Bitcoin Cash because it would most likely debut with majority support from miners. Since SegWit2x was proposed as a supposed “update” to the Bitcoin protocol with majority hash rate support, companies will not be given the freedom and flexibility to integrate SegWit2x support months after the fork occurs in November.
As Lee explained:
“Choosing to support only one fork (whichever that is) would cause a lot of confusion for users and open them up to lawsuits. So Coinbase is forced to support both forks at the time of the hard fork and needs to let the market decide which is the real Bitcoin.”
Therefore, users should expect every major Bitcoin exchange and wallet platform in most regions to support SegWit2x. So far, the following companies have announced support for SegWit2x; Coinbase, Bitfinex, Blockchain, Xapo, Korbit, Coins.ph, BTCC, BTC.com, and BitFlyer.
An interesting strategy for the Bitcoin Cash split was to use the different policies of various exchanges to open up arbitrage opportunities. For example, Kraken adopted Bitcoin Cash whereas BitMex ignored the cryptocurrency. The divergence allowed some clever people to gain from opening a margin trade; namely one bitcoin long on Kraken to be credited one BCH. Also, to hedge this position, a one bitcoin margin short could also be initiated on BitMex. Following the hard fork, an arbitrage as described above would have resulted in obtaining 1 BCH for free, as there was no BCH liability for the short conducting using BitMex. A more detailed guide outlining arbitrage opportunities for the upcoming SegWit2x hard fork can be found here.
Letting an exchange deal with the split has an advantage in that you will be able to seek market opportunities quicker than others who have not prepared. Since you will have access to both BTC and B2X quickly, you might be able to make better investment decisions.
Bitcoin Companies That Had Not Signed NYA May Not Run the Software
But, as Jimmy Song, Bitcoin developer and principal architect for Paxos stated, companies that previously had not signed the New York Agreement (or SegWit2x) could refrain from running the software.
“The notable companies that aren’t obligated to run Segwit2x are BlockStream, Chaincode Labs, BitGo, Poloniex, BitStamp, Bithumb, Kraken, and Gemini. As they have not signed the agreement, they are not obligated to follow it,” Song explained.
Hence, for Bitcoin exchange users, it would be the most practical and secure to confirm if the exchange will implement SegWit2x support in November or ensure that they are in control of their private keys (via a full node, hardware wallet or other non-custodial service) so they can access their B2X at a later date. Alternatively, users can simply move their funds to Bitcoin wallets that do plan to support SegWit2x in November, such as Blockchain.info.
In the days leading up to the hard fork, it is suggested to that you do not perform any bitcoin transactions, as it is unclear how wallets will handle replay protection. If you send bitcoin during or just after the fork, there is a risk that you end up sending a transaction on the Bitcoin chain and it is broadcast on the B2X chain as well.
This article will be updated as, and when, more information becomes available.