15 Facts about the Bitcoin Fork on 1st August 2017

Bitcoin's greatest problem is the scalability. Since it has a limited block size of 1 MB, completion of Bitcoin transactions requires almost 10 minutes and allows only 4 or 5 transactions in a second. So improve these typical problems, two most popular scaling techniques are available. They are the SegWit2x and the BIP 148. A UASF (User Activated Soft Fork) is going to be introduced into the Bitcoin blockchain, learn more on Bitcoin Fork. From August 1, BIP 148 nodes will reject any Bitcoin blocks that do not signal support for Segregated Witness via BIP 9 which complies every Bitcoin user to transfer to the new fork for avoiding the risks. There are many advantages for this. But a group of the community is still opposing the idea. This may lead to a chain split too.

15 DETAILS ABOUT THE BITCOIN FORK THAT IS GOING TO BE IMPLEMENTED ON AUGUST 1ST:

1. WHAT ARE THE BASIC PROBLEMS WITH BITCOIN:

Bitcoin is currently limited in the number of transactions it can process. Today, it can only process up to 1MB of transactions roughly every 10 minutes. Owing to this limit, transactions take longer to approve during times of heavy use. Again users are paying high fees to the miners for every transaction because of the limitation in the space. Another thing is increasing the block size makes network nodes more costly, as node operators must store the entire copy of the block chain as computer files.

2. WHAT IS THE SOLUTION PROPOSED:

For solving the scalability problem of the Bitcoin, two methods or algorithms had been employed. They are the Segregated Witness and BIP 148. Developers have worked to make these two compatible, so, if enough mining pools support SegWit2x before August 1, Bitcoin can avoid a split. But still there is a chance for the split. Starting from August 1, BIP 148 nodes will reject any Bitcoin blocks that do not signal support for Segregated Witness via BIP 9. After the implementation, if they want to get their blocks accepted, users and miners have to shift into this new upgrade.

3. SEGREGATED WITNESS:

SegWit is a backward compatible protocol upgrade originally proposed by the Bitcoin Core development team. Since the protocol upgrade was first proposed in December 2015 and has been employed by different platforms, it had been a major point in the roadmap supported by Bitcoin Core. SegWit is now also part of the “New York Agreement”: an alternative scaling roadmap forged between a significant number of Bitcoin companies, including many miners.

4. BIP 148:

BIP 148 was the first proposal for UASF or User activated soft fork by ShaolinFry. BIP 148 is an interesting take on a UASF because it is actually designed to trigger the existing BIP 9 SegWit-activation threshold. Users can only redeploy the algorithm of SegWit only after the current version expires in November.

5. HARD FORK:

A hard fork is a software upgrade that introduces a new rule to the network that isn't compatible with the older software. It is just the addition or expansion of the new rules into a current system (A new rule that allows block size to be 2MB instead of 1MB would require a hard fork). If there are still nodes who haven't converted to the new version, they will be considered invalid. So every node should upgrade to the new version for doing transactions and mining. The problem comes when some sort of political impasse arises, and a portion of the community decides to stick by the old rules no matter what. ie it may split into two different chains.

6. SOFT FORK:

A soft fork, by contrast, is any change that's backward compatible. Let's assume that the new rule allows block size of 500 KB much less than the current version. Since its less than the current value, the nodes that haven't been upgraded allows the transactions. If it's not upgraded, the blocks the node mine will be considered invalid. This is why soft forks need a majority of hash power in the network. The soft fork was considered safe for the upgrades of Bitcoin so far because it reduces the chances of a chain split.

7. UASF (USER ACTIVATED SOFT FORK):

A user-activated soft fork (UASF) is an innovative idea that introduces the concept of how the authority of soft fork can be shifted from the correct people who have the network's hashing power. The basic thing about the UASF is that the users don't have to wait for support from mining pools for getting a soft fork, instead, the exchanges, businesses, and wallets that have full nodes controls the activation of soft forks.

8. CHANCE FOR CHAIN SPLIT AFTER AUGUST 1:

There is a chance Bitcoin will experience a chain-split on August 1st. A segment of all Bitcoin users is committed to activating a user activated soft fork (UASF) as described in Bitcoin Improvement Proposal 148 (BIP 148). They will reject all Bitcoin blocks not supporting the SegWit. If a majority of miners (by hash power) does not signal support for SegWit through BIP148 on August 1st, but at least some do, Bitcoin’s blockchain will split in two. They will be the 148 BTC coins supporting the new soft fork and Legacy BTC which is the not upgraded version.

9. THE EXCHANGE RATE MAY DROP:

It is sure that a chain split causes lots of risks. There is a chance that some sort of cyber-battle will break out between the two camps, perhaps even escalate to the point where Bitcoin's exchange rate(s) drops sharply, possibly to zero. That is one of the reasons why some prominent Bitcoin Core developers — like Blockstream CTO Gregory Maxwell and Chaincode Labs Co-Founder Suhas Daftuar — consider BIP 148 too disruptive.

10. CREATE YOUR OWN BITCOIN WALLET:

If you are storing your Bitcoins in wallets like Coinbase, Circle, etc or in some company storing your private keys, it's not at all safe if the coin split occurs. The users may end up losing their coins forever. Many exchanges have given support for the new project. But it's safe to create your own wallet.

11. EVEN IF THE SPLIT OCCURS, LEGACY BTC MAY BE DISCARDED:

If after August 1st when the new upgrade is released, the 148 BTC chain becomes the chain with more Proof-of-Work, all nodes will shift to the new soft fork. In that case, there is no other way, but to discard all the Legacy BTC coins. After the split, if it occurs, buying or exchanging the Legacy Bitcoins is a bit risky. Because it may just disappear if the new Soft fork coin overtakes it.

12. SUPPORT FOR THE NEW PROPOSAL:

In favor of SegWit2x are a significant number of high-profile Bitcoin businesses and individuals, most of whom are more closely affiliated with the ecosystem's startup and investment community. Bitcoin startups like Coinbase, BitPay, etc, most of the network's mining pools and Bitcoin developers like Gavin Andresen who was the former lead maintainer of Bitcoin Core are supporting the new soft fork.

13. OPPOSITION:

Even though the Bitcoin fork has many supporters, there are organizations and exchanges opposing the idea too. Some of them include Exchanges like Bitrated, Bitonic, Poloniex, etc, Many node operators and Bitcoin users and Nearly all Bitcoin Core developers responsible for maintaining the software.

14. THE POSSIBILITY OF COEXISTENCE OF 148 BTC AND LEGACY BTC:

There is a possible scenario where the two chains — 148 BTC and Legacy BTC — coexist. What’s more, even a scenario where more than two chains emerge can’t be taken out of the equation. In these cases, there is a chance that coins will be existing in two different forks. And users may confuse themselves with the two coins while sending them on an exchange. Splitting of the coins is a very complex process.

15. THE SOLUTION FOR COIN SPLITTING:

The exchanges will set up the services for the splitting of the coins if it becomes necessary and can help overcome the complexities faced by the split. You’d just need to send your bitcoins to an exchange, and the exchange will credit your account with 148 BTC and Legacy BTC. (They should even replay the transaction for you to make sure they indeed receive both your coins.) At that point, if you want, you will be able to sell or trade your coins.