Hardfork SegWit2X: opportunities and risks for Bitcoin owners

Hardfork SegWit2X: opportunities and risks for Bitcoin owners

It is difficult to find someone who would be interested in the topic of Bitcoin, but did not hear anything about SegWit2X. However, not everyone knows when the idea of the updated protocol appeared, how it influenced the alignment of forces in the Bitcoin community and whether it can now lead to a large-scale hard forks network. The most importantly important is, what does all this mean for Bitcoin holders?

What is SegWit2X and why is it needed?

However, when the number of users of the system increased dramatically, this volume was not enough. Transactions were slow, and the commission for their confirmation in the face of increasing network load was constantly growing. Over time, other system bugs became noticeable, low security against cyber attacks, a high probability of double withdrawal of funds and insufficient anonymity of participants in the process.

Bitcoin is an open source platform. Anyone can make changes to the blockchain. However, it so happened that since 2011, Bitcoin has been under the “care” of Bitcoin Core – the development teams that created the main wallet for storing of BTC. They were the ones who had to listen to the miners’ claims about the technical imperfections of the system.

Developers began to test the SegWit protocol in 2015, which was supposed to solve the problem of Bitcoin scalability. It was decided to leave the size of the blocks the same (1 MB), but to transfer the data on transactions beyond their limits, thereby increasing the network bandwidth.

Two years later, Bitcoin Core held a softfork, but the miners were unhappy. The network still didn’t scale well, and errors and cyber attacks have not gone away.

Then another group of developers led by a person under the pseudonym Jaap Terlouw proposed another protocol, called SegWit2X. Its main difference from the already launched SegWit was to increase the block size to 2Mb, which would ensure the network bandwidth increase by two times.

Bitcoin Core did not support such an initiative. After all, the introduction of the proposed changes meant a hardfork network, that is, its division into two separate chains. They could exist in parallel, but most often the chain remains alive, which received absolute user support.

Plans and failures SegWit2X

The event in New York was attended by representatives of 58 companies from 22 countries of the world – by a majority vote they declared the agreement to hold the fork. The idea of SegWit2X was supported by large manufacturers of mining equipment (including Bitmain and Bitfury), some cryptocurrency exchanges (Shapeshift, Xapo, Coinbase, etc.), as well as most large miners and mining pools.

Later, many independent miners and the majority of traders came out against hard forks. The first argued that hardfork is beneficial only to corporate miners and takes away from ordinary users the ability to independently extract bitcoins. The second came out in defense of the original Bitcoin and stated that they would not support the new coin.

Hardfork was scheduled for August 2017, but because of the persistent conflicts in the cryptocurrency community, developers moved it to November. Materials began to appear on the Internet with headlines like “The failure of SegWit2X proved Bitcoin’s invincibility.” However, the network was waiting for other shocks or rather just two other hard forks – Bitcoin Cash (August 8) and Bitcoin Gold (November 25).

As a result, two new cryptocurrencies based on Bitcoin source code appeared, which quickly found their fans. However, if you compare these forks with SegWit2X, then the difference between them is huge.

BCH and BTG are upgraded versions of Bitcoin that exist in parallel with the main coin. SegWit2X, on the other hand, involves creating a new chain that can completely replace the old one.

Understanding that we are talking about the form of the existence of Bitcoin, the participants in the network escalated the conflict. Some supported the old Bitcoin in every possible way, others saw the future of the network only behind the fast SegWit2X.

It is noteworthy that the new protocol implied confirmation of the BIP. Simply put, it could only be launched with the support of most miners. The developers could not manage to drag all users to their side. Moreover, the corporations that signed the New York Agreement preferred to stay away from the conflict. Some of them, having assessed the scale of the confrontation, generally withdrew from the agreement.

As a result, the developers have canceled the November hardfork. It was obvious to the majority of analysts that in the conditions of a sharp conflict of the parties they were not sure that the new coin could force out the original Bitcoin. However, the official reason for canceling the fork was the impossibility of reaching consensus and unwillingness to provoke new conflicts.

When will SegWit2X

Jaap Terlouw is working on the project again and is planning an epic return of SegWit2X. He said that hardfork will occur after the opening of block 494784 (approximately of December 28, 2017).

The official site http // b2x segwit.io has information about new plans for SegWit2X developers. They said that because of the long wait for confirmation of transactions and the constant increase in the system commission, the original Bitcoin can no longer be an effective means of payment.

However, they may well be a new cryptocurrency, which will appear after hard forks and activation of the updated SegWit2X protocol. What kind of opportunities will it give?

If you believe this statement, the finalized SegWit2X will not only solve all the major problems of Bitcoin, but also levels the main claims of opponents of hard forks. It is not surprising that the planned fork was seriously disturbed by the cryptocurrency community. Even though the developers themselves are promoting their idea under the slogan “Not instead, but together,” most analysts agree that the long-term coexistence of both chains is unlikely.

Cryptocurrency exchanges, which have already started selling tokens of a new coin, which is still called B2X, also add fuel to the fire. Now its cost is 0.01 BTC, but most miners expect that B2X will gradually force out the old Bitcoin, if only because the project has enormous technical capabilities that can give a new breath to the whole network.

At the moment, about 85% of the Bitcoin community members have expressed support for hard forks. Moreover, according to the main developer of SegWit2X, Jeff Garzik, about 10% of the miners have already started pre-mining a new coin. B2X was supported by many Chinese miners who refused to mine BTC because of the significant complication of calculations. Even the creators of Blockchain.info put on B2X success!

However, it is still not necessary to talk about the unanimous adoption of SegWit2X. If the majority of miners are now supporting hardfork, then the majority of traders continue to oppose it. If we assume that Bitcoin will be divided into 2 chains, then the coin that will get more support from traders will be the winner. If they raise the market value of BTC, B2X will not be able to move the original bitcoin.

Although experts remind that in terms of survival after hard forks, the support of miners is a priority. If they leave the old chain, traders will not be able to raise the value of the coin associated with it for a long time.

How SegWit2X Will Affect Bitcoin

Given the ambiguity of the situation and the conflicts between miners and traders, ordinary Bitcoin holders are asking the main question – what should they do now? Need to quickly merge bitcoins? Will accumulated coins disappear if the old branch dies? If not, does it make sense to invest in BTC, if B2X will develop in parallel with it, which received the support of miners?

If hardfork happens, each BTC holder will automatically receive new coins, which is not bad (it is expected that the starting price of B2X will be at least $ 130). If B2X doesn’t gain wide acceptance, you don’t lose anything – save BTC and get extra coins. If the original Bitcoin collapses, the information from the old branch will be copied to the new one, that is, the savings will again be saved.

Another thing is that because of the conflict in the cryptocurrency community, the price of Bitcoin may fall. Analysts suggest that the fall will be short-lived, but even a short but sharp outflow of capital can hit the cryptocurrency market rate strongly.

Some experts (including the owners of Bitmain, Blockchain and Coinbase) are confident that in the near future there will be two different bitcoins on the market at two different prices. At the same time, the current value of Bitcoin is “divided” between these coins – for example, BTC will cost 7 thousand dollars, in B2X – 6000 dollars or vice versa.

In addition, after the opening of block 499999, the network expects another hardfork – Lightning Bitcoin. The competition of developers for user support will increase in such conditions, and the course of Bitcoin and its forks will be even more unstable.

It is also important that the Bitcoin blockchain itself is built in such a way that the hard forks beat on the performance of the main chain, which manifests itself in the form of hangs, errors and network failures. The situation is aggravated by the fact that hardfork is the perfect moment for a powerful cyber attack.

If hardfork succeeds, and the new protocol completely replaces the old one, Bitcoin has every chance of becoming one of the most reliable, anonymous and protected cryptocurrencies. However, even if the conflict leads to the complete destruction of the entire network, other top cryptocurrencies will make a significant breakthrough. Analysts argue that ethereum, lightcoin and dash can dramatically jump up due to the outflow of investment from Bitcoin.

Even the potential collapse of Bitcoin does not threaten the prosperity of the cryptocurrency market. However, to find out whether to continue investing in Bitcoin, it is better to wait for the end of December. However, do not forget to withdraw funds to a reliable wallet in order to protect yourself from possible risks.