This week in particular with the seemingly failed Barry Silbert compromise, some support seems to be ramping up for a user activated soft fork. Some developers who previously were against the idea now are changing their minds out of fear that the stalemate will continue to no end. Signaling of actual user activated soft fork nodes has risen to near double digit percentages and I think as time goes by we will only see this rise.
So what is a user activated softfork? Basically nodes are used to relay transactions on the bitcoin system, but they can also choose to not relay certain transactions. It is much more complicated than that, but for the sake of making it simple that is how I am going to explain things. Basically if you were able to have a majority of the nodes stop relaying certain transactions and the rules these nodes set, miners would start getting invalid blocks and not get paid for their work.
Essentially by setting a strict set of rules and only relaying blocks that follow them, miners would be forced to upgrade to those rules in order to not risk mining invalid blocks. In this specific case the users would be relaying and only allowing miners that were signaling for segwit, to continue. If a large majority of start running nodes with these conditions, miners will have to switch or they won’t be making any profit.
The problem is miners don’t actually have to switch and as we have seen before, nodes can be heavily manipulated. For example if I had a large amount of money I could purchase several VPS servers and run nodes on each of them, essentially showing more support than there really is for a specific upgrade. We have seen this happen in the recent past. There are some people who might be willing to spend the money to make sure this doesn’t happen under any circumstances. I fully expect more nodes to go online in the next month as a sort of node arms race starts to take place.
The implementation of a user activated soft fork also increases the chance of a hard fork by bitcoin unlimited or another group, as it will further risk tensions on the community. I personally think that bitcoin unlimited wont fork in a major way but there is a potential that it does happen under some sort of leadership. A hard fork into two chains would only be bad for bitcoin as it creates confusion and will only lead to more infighting in the long run.
The rally cry among people calling for a user activated softfork seems to be to do it by the end of the summer, with August being the month. That seems very close though and many developers are still warning against it so well see if that actually happens. There is a good chance that the rally will fall flat on its face, but it might also force the compromise that we need. If the user activated soft fork nodes are rising, maybe miners and developers will come to the table and avoid further straining tensions. I would suggest following this story closely as it will be very important, not just in bitcoin, but in the entire crypto space, as a potential future solution to problems.