Bitcoin Segwit2x

Bitcoin Segwit2x

On or around the 16th of November 2017 (actually whenever block #494,784 is mined), the bitcoin blockchain will fork into two directions.  After the fork, the ‘old’ Bitcoin will continue to be called Bitcoin and the newly formed chain will be known as Bitcoin2.

Anyone who owns bitcoin before the fork will receive one Bitcoin (BTC) and one Bitcoin2 (B2X) after the fork on exchanges and wallets that support the new chain, without the need for you to take any action.

Read about Bitcoin forks and what happens to your bitcoins during a fork.

Most exchanges will temporarily suspend the deposit and withdrawal of bitcoins during the fork, probably for 24 hours or 48 hours either side of the fork.

However, this fork is unlike previous forks and you may not end up owning two types of coin in the long run…

What is special about Bitcoin Segwit2x

b2x

This fork is intended to improve the speed of bitcoin transactions which will have the added benefit of reducing the cost of transactions. Blocks stored in the new chain will be 2MB instead of 1MB, it requires new software and is a hard fork.

Segwit2x is not like previous forks in bitcoin’s history.  When the Bitcoin Cash fork occurred, for example, developers seemed happy to create a new blockchain along with its different rules. Whereas the Segwit2x fork is intended to keep all users on one chain.

There is no solid consensus on whether this fork is a good idea or not. So, Segwit2x could have any one of three outcomes:

  1. Bitcoins rules change and all miners upgrade their software to the new rules. The blockchain continues and Sewgwit2x’s rules become those of the mainstream Bitcoin chain. In other words BTC and B2X become one and the same – B2X wins and assumes the old name.
  2. Bitcoins split into two with some miners updating software and others not bothering. Two blockchains are now created out of the original one and both continue to be mined and supported with their own rules.  BTC and B2X remain as separate currencies.
  3. Nobody supports the new rules. In which case Bitcoin simply continues along its own merry way under the old rules and B2X fades away.

Arguments for and against the upgrade are raging across the bitcoin network and will probably continue to do so for some while.  Indeed, this is built into the whole concept of cryptocurrencies where there is no centralised governing body – so could be viewed as proof of concept behind the very idea of bitcoin. As a result of this uncertainty, you are likely to see increased volatility in the fiat value of BTC.

The ‘winner’ of the argument won’t necessarily be the technically better solution. It will simply be the one that garners the majority of support – a true democratic system.

What should I do about the Segwit2x fork?

If you are asking that question, the chances are that you are not a bitcoin trader, but more likely a bitcoin investor, and that is who this strategy, below, is aimed at. 

Traders will need to have a much deeper understanding of the process, the politics, the players involved on both sides and, perhaps most importantly, the inadequate replay protection.

Investors should most probably stay on the sidelines.  So, a suitable strategy might look something like this:

  1. Make sure your bitcoins are safe.  Cold wallets offer the best security
  2. Do not make any transactions the day before or the day after the fork
  3. Wait to see which of the three outcomes prevails.
  4. Only start transacting again when you see support for the blockchain(s) in your chosen wallet (or change wallets to do so).
  5. Think about switching to Ether or Litecoin until the current volatility subsides.

Written by Chris Brown


Page Last Updated: 08/01/2018 11:07:19