Scaling has always been an issue for bitcoin. Various solutions have been proposed but not everyone is thrilled by them. One group in particular joined hands and signed an agreement which now is trying to takeover the bitcoin development by force. A split called Segwit2x is scheduled for Nov 16th this year.
Current Scaling Issue with Bitcoin
Bitcoin currently enforces a size limit of 1 MB per block which limits the number of transactions each block can have. Due to increasing popularity of bitcoin, the blocks have started becoming full which is forcing users to pay more per each transaction. With the increase in value of bitcoin along with increase in fee, it has become infeasible for users to do everyday transactions and use it as a currency.
Two sides of the Scaling Debate of Bitcoin
Until now, Bitcoin has been operating by simply increasing the block size whenever bitcoin needs to scale. This allows more transactions to process in a single block. But with every block size increase, bitcoin becomes less decentralized and cost of operating a bitcoin full node increases. Due to this trade off, current bitcoin developers have refused to increase the block size again and are instead working on other solutions like segwit, schnorr signatures which reduces the size of each transaction which allows more transactions to be included in the same block size. They are also pushing the use of offchain solutions such as lightning which allows merchants and bitcoin companies to do unnecessary small transactions offchain and push only settled balance to the bitcoin blockchain.
But since these technologies are not ready yet, bitcoin businesses are demanding immediate solutions. After repeated requests by various businesses, an agreement called New York Agreement was signed by the companies which contained a list of bitcoin companies who agreed to push their own solution to the bitcoin blockchain which will result in a split on November 16. The purpose of the agreement was to allow the activation of Segwit which was blocked by miners for over a year and to allow a block size increase to 2MB. The agreement was not signed by any bitcoin developer as it was against the consensus mechanism employed by the current bitcoin development team.
New York Agreement and Segwit2x
The New York Agreement was originally signed and presented in good faith to the bitcoin community but it quickly turned ugly. Segwit2x’s purpose quickly turned from scaling bitcoin to firing current bitcoin developers and taking over bitcoin development.
Segwit2x was originally signed as a way to increase the capacity of the network along with supporting the current bitcoin scaling plan. It was signed by some of the biggest companies in the bitcoin space such as Coinbase, Blockchain.com, Shapeshift and a number of DCG companies as the agreement was led by Barry Silbert, Founder of DCG. It had over 90% mining support that allowed for the clean activation of the Segwit2x Hard Fork.
As soon as the agreement was signed and segwit was activated, Viabtc, a signee of the New York agreement started their own chain called Bitcoin Cash. Viabtc didn’t announce their withdrawal from the agreement but it is pretty clear that they were not happy with the agreement. F2pool was the second company that announced their withdrawal from segwit2x as they told that they signed the agreement just to get segwit activated. Many other companies dropped out of the agreement soon after. The list of companies that have dropped out of NYA is available here.
The agreement was rejected by the current bitcoin team as they have a clearly defined process of proposing solutions on their github repository and the agreement didn’t follow it. This created a confusion in the community of who to support. Several polls were done and it was made clear that segwit2x had no support from the community.
Inspite of this, Segwit2x people kept pushing the hard fork on the community just to fulfill their agreement as they have the mining power support. The agreement which was earlier supposed to be a scaling agreement, was now an agreement that was supposed to replace the existing group of bitcoin developers.
Replay Protection Controversy
Replay protection is crucial feature needed while performing chain splits. This allows transactions on one chain to be separate from transactions on the other chain. The Replay Protection is a no brainer while doing contentious hard forks. The Segwit2x side decided to add a opt in replay protection which was not automatically applied but required users to manually add it to every transaction. The method of adding replay protection was way too controversial and it was later found that the added replay protection was buggy for lighting channels.
This led to the removal of opt in replay protection from segwit2x chain until a better solution was found. But instead of finding a solution, Segwit2x did a complete U turn on their earlier statements and refused to add any replay protection to their codebase insisting that Segwit2x will be the only chain that will survive after the chain split. Now the hard fork which was supposed to be just contentious, was now dangerous for the users as well. There is no consensus, so there is no way there will be a single chain after the hard fork.
Unproven Claims and Deniability
Erik Voorhees, Mike Belshe, Peter Smith and several other segwit2x signatories have been claiming that the community supports Segwit2x. Several polls have been conducted and several meetup group have proved the opposite to their claims. In almost every poll conducted, users have shown their support for the current chain.
But the companies have been calling off every poll as sybil attack and have refused to believe them. Companies have repeatedly said that they are representing their users yet none of them have asked any of their users with mails or polls about what they want.
Despite the lack of support, the companies are still pushing the hard fork and have also said that if their chain is able to accumulate more difficulty than bitcoin, they will start labeling their own chain as Bitcoin and the original chain as segwit1x. This will result in huge issues for users as what they bought on some of these companies might not work in other places.
What we advice currently is that you refrain from doing any transaction on any of the chain on 16th november and see how the market plays out. If you have money on any exchange, you should withdraw them to your personal bitcoin wallets before 16th november and verify which chain you are on before making any transactions.
Let us know how you feel about this contentious hard fork in the comments.
Update: Segwit2x has been cancelled