The discussion around scaling Bitcoin has continued into the summer months of 2017, with BIP 148 and SegWit2x now the two most talked about proposals. A key similarity between these proposals is that they both intend to activate the Segregated Witness (SegWit) improvement; however, up to this point, the way in which SegWit would be activated by each proposal has not been made compatible. A recently proposed change to the SegWit2x implementation could change this.
BIP 148 is a proposal from the pseudonymous developer Shaolinfry that attempts to force miners into the activation of Segregated Witness via economic forces. The way it works is that those running Bitcoin nodes that have implemented BIP 148 will only accept blocks from SegWit-signalling nodes starting on August 1st.
If BIP 148 is not signaled by more than 50 percent of the network hashrate by August 1st, then there will be a chain split; however, since SegWit is a soft fork, the chain not signaling for BIP 148 could eventually be reorganized into the BIP 148 chain if a majority of the network hashrate decides to support the BIP 148 chain at a later date or time. A reorganization would effectively mean that it was as if the non-BIP 148 chain never existed.
The main reason that miners may change their mind after August 1st would be if the economic majority of users decided to support the BIP 148 chain, although they may also feel the need to avoid a chain split entirely. In Bitcoin, honest miners are incentivized to follow the most profitable chain for them to mine in a soft fork scenario.
SegWit2x
SegWit2x is a proposal that came out of an agreement between many Bitcoin-related companies made during Consensus 2017 in New York. The basic proposal here is to activate SegWit once it is signaled by 80 percent of miners and then attempt a hard fork increase to the base block size limit to 2MB at a later date. This would effectively lead to a greater than 4MB block size limit because SegWit also includes an increase to the block size limit.
Notably, entities accounting for more than 80 percent of the network’s mining hashrate have signed an agreement to run SegWit2x code. The current agreed upon timeline is to start running the SegWit2x code on July 21st.
Making SegWit2x Compatible with BIP 148
The key compatibility issue with these two proposals, at least over the short term, is that they attempt to activate SegWit at different times. If BIP 148 activates before SegWit2x, then there could be an attempted activation of SegWit without majority support from miners, which would lead to a chain split (although the split could be temporary).
To solve this issue, James Hilliard made a pull request in the SegWit2x GitHub repository. The pull request would ensure that SegWit is activated before August 1st, as long as SegWit2x remains on schedule and those involved in the agreement still account for at least 80 percent of the network hashrate when the code is rolled out by all involved parties.
Hilliard’s pull request has been reviewed positively on GitHub by many different individuals, which means it is likely to get merged into the final version of SegWit2x.
The Threat of a Split Still Looms
Of course, a key issue that remains is that SegWit2x will attempt a hard-forking increase to the base block size limit within six months. Unlike a soft fork, a hard fork is not backwards compatible and will lead to a chain split by default, as long as there is enough support on the minority chain for it to continue.
If this hard fork is activated, a split of the Bitcoin community into two separate cryptocurrency networks is possible. It could lead to a similar situation that unfolded after the Ethereum network attempted a hard fork to bail out DAO token holders. There are now two Ethereum networks, known as Ethereum and Ethereum Classic.
Of course, anything can happen between the time SegWit activates and the hard fork is attempted. For now, it seems more likely that a chain split will be avoided on August 1st.
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Chain split
Since Bitcoin’s inception, its network has facilitated hundreds of millions of transactions. As a result, different groups of people (developers, investors, entrepreneurs, etc.), have debated on the best ways Bitcoin can be optimized to allow it to exponentially scale even further. In recent months, alternative software has been released that represents some of the interests of the aforementioned groups of people - software that is scheduled to go live toward the end of July.
The Bitcoin block chain, which is a record of all Bitcoin transactions to date, relies on a network of thousands of Bitcoin nodes running Bitcoin software. On Tue Aug 01 2017 05:30:00 GMT+0530, the Bitcoin block chain may experience what is known as a chain split. This is when a portion of Bitcoin’s nodes run software that another portion of nodes are not fully compatible with. As a result, some nodes may propagate confirmed transactions that other nodes may not accept or recognize. This may result in unreliable confirmation scoring for an unknown length of time. This means that any bitcoins you receive during this period could disappear from your wallet or be a type of bitcoin that other people will not accept as payment, until the situation is resolved.
Once the situation is resolved, confirmation scoring will either automatically return to their normal reliability or there will be two (or more) competing versions of Bitcoin as a result of a split block chain. In the former case, you may return to using Bitcoin normally; in the latter case, you will need to take extra steps in order to begin safely receiving bitcoins again.
This post currently describes what actions you can take to prepare for this situation. Subsequent to Tue Aug 01 2017 05:30:00 GMT+0530, we will update this post as best we can with relevant information, but you are also advised to monitor other Bitcoin news sites and community resources for updates and to cross-check all information, as someone may attempt to spread false news in order to exploit the situation.
Remember that you alone are responsible for the safety of your bitcoins, and that if you lose control of them for any reason, there is nothing the operators or contributors to this website can do to help you.
Note: there is a chance a milder level of disruption could start between now and Tue Aug 01 2017 05:30:00 GMT+0530. If that is the case, this post will be updated with details.
Preparation
If you accept bitcoins as payments, we recommend that you stop accepting Bitcoin payments at least 12 hours before Tue Aug 01 2017 05:30:00 GMT+0530, although 24 to 48 hours earlier may be safer. This will give time for all pending payments to confirm on the Bitcoin block chain before the event.
If you send bitcoins as payments, note that many services may stop accepting bitcoins at Tue Aug 01 2017 05:30:00 GMT+0530 (Sri Lanka Standard Time) or earlier.
Be wary of storing your bitcoins on an exchange or any service that doesn’t allow you to make a local backup copy of your private keys. If they accept transactions during the event, they could lose money and will likely spread those losses across all their users. If there end up being two or more competing versions of Bitcoin, then they may refuse to give you your bitcoins on versions they don’t like.
Bitcoin may experience significant price fluctuations in relation to other currencies. Learn more about price volatility and ensure you aren’t holding more bitcoin than you can afford to lose.
During the event
Do not trust any payments you receive after Tue Aug 01 2017 05:30:00 GMT+0530 until the situation is resolved. No matter how many confirmations the new payment says it has, it can disappear from your wallet at any point up until the situation is resolved.
Try not to send any payments. During the event there may be two or more different types of bitcoin and you may send all of the different types to a recipient who only expects one type. This would benefit the recipient at your expense.
Be wary of offers to allow you to invest in the outcome of the event by “splitting” your coins. Some of these offers may be scams, and software claiming to split your coins can also steal them.
After the event
We will update this section with more information after Tue Aug 01 2017 05:30:00 GMT+0530. Please monitor this page accordingly and wait until multiple news sources that you trust have stated that the event is resolved before returning to normal Bitcoin use.
Document history
Note: The information contained herein is not to be construed as an official statement by Bitcoin Core. Bitcoin.org and Bitcoin Core open source projects are run by separate teams.
A full history of this document is available. The following points summarize major changes, with the most recent changes being listed first.
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