Bitcoin’s popularity has led to congestion in trade, with transaction times and processing fees at one point soaring to records
Bitcoin is looking increasingly likely to splinter off again in November, creating a third version of the world’s largest cryptocurrency as miners and developers pursue separate visions to scale its rapidly growing marketplace.
Major industry players, including the bitcoin investor Roger Ver known as “Bitcoin Jesus" for proselytizing on behalf of the digital currency, say consensus between opposing camps looked increasingly unlikely. That opinion was echoed by some of the biggest mining pool operators and also programmers -- known as “Core" developers -- who were instrumental to developing the infrastructure of the original bitcoin network.
In recent weeks, a group of miners -- people who crunch complex math problems to generate and transact the digital currency -- split off from the legacy bitcoin to use a new version known as Bitcoin Cash. Ver is moving some of his funds into the new offshoot as he anticipates what would be the second split of the currency of 2017. Ver admits he could potentially benefit from such a schism as more coins are created.
“There’s probably going to be another split between bitcoin legacy and SegWit2X version of bitcoin but that just gives me more coins that I can sell for the Bitcoin Cash version," Ver said in an interview on Bloomberg Television at a conference organized by Bitkan in Hong Kong.
Bitcoin's likely to split again in November as debate rages on
Bitcoin’s popularity has led to congestion in trade, with transaction times and processing fees at one point soaring to records. Debate over how to deal with the problem has divided the trading community, with some proposing boosting the number of transactions in each block that has to be verified by miners, and others advocating for moving some information off the main network.
One faction of the community is pushing for a network upgrade in November, which could lead to a split if no consensus is made.
When the split occurred around the beginning of August -- with Bitcoin Cash diverging from legacy bitcoin -- the digital currency initially slumped 6.8 per cent in a two-day slide as investors appeared to discount the value of the new coin. But prices subsequently rallied, surging to a record $4,880.85 by Sept. 1 before China announced a crackdown on cryptocurrency exchanges and initial coin offerings that sent prices plunging 20 per cent.
While an early adopter of bitcoin, Ver has also attracted controversy for his embrace of Bitcoin Cash, which some developers criticize for giving too much power to miners.
If another tear occurs in November, it would create a third version of the cryptocurrency and potentially further scatter capital and resources as three offshoots of bitcoin emerge.
SegWit2x refers to a compromise proposal developed to deal with the surge in transactions. In August, miners agreed to implement the first phase of the proposal, or SegWit. They were expected to increase the blocksize to two megabytes around November in a second phase.
Avoiding such a splinter requires miners to reach at least 92-per cent consensus on supporting the second phase of SegWit2x, but that’s becoming increasingly unlikely, according to Wang Chun, co-owner and chief administrator of F2Pool, one of the world’s largest mining pools.
Even though SegWit2x garnered more than 93 per cent support in July, miners and developers seem to be backing away from the proposal, a compromise that harbors characteristics disliked by extremists on both sides. Wang said he thinks the split will “happen, 100 per cent."
Many Core developers agree. Several have said they’d prefer to focus on writing code in the future for only the SegWit chain: currently the largest version of bitcoin at about $64 billion in market value.
“Many developers, users, miners, and businesses have already stated they do not agree with the pointless 2x fork, so we’ll likely end up with three chains," said Samson Mow, chief strategy officer at Blockstream, which has close associations with Core developers. “Long-term, only the main bitcoin chain which has the support of users and developers can survive."
Then there’s Bitcoin Cash, which was split off so miners could boost the block size of transactions. It’s more useful as it can be moved more quickly and cheaply than other cryptocurrencies, Ver argued. Some bitcoin exchanges and wallets have said they will support the new coin, while others are uncertain whether Bitcoin Cash will have lasting market value.
Already, key players are warning investors to brace for more turmoil. Core developers including Peter Todd say the fork this time could be much more tumultuous, and could incur more user confusion of what version can be dubbed the actual “bitcoin."
“In a sense, a split is 100-per cent guaranteed," said Todd, a key coding contributor to bitcoin. “The split is likely to be more disruptive."
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