As we approach closer to August 1st, we have noticed the increasing frequency of questions regarding the potential Bitcoin split. In essence, our community is wondering what will happen to Bitcoin and if their bitcoins, protected by TREZOR, will be safe. While we cannot predict the development of the network, we can answer your question regarding TREZOR: Your bitcoins, if protected by TREZOR, are in the safest place even for an event, such as a chain-split.
General Advisory for August 1st
You can take precautions during these times of uncertainty. Due to the possible disruption in the Bitcoin network, we recommend not sending nor accepting Bitcoin transactions from July 31st until the network stabilizes. The TREZOR Shop will temporarily stop accepting bitcoins from July 31st (CEST) until further notice.
In case of a chain-split, nothing will happen to bitcoins protected with a TREZOR, if you do not send coins during the period of uncertainty. If the network will split permanently, you will end up with two (or more) types of bitcoin in your TREZOR wallet.
We also recommend you to read the announcement from Bitcoin.org
But let’s start from the beginning: What is happening on August 1st?
Deployment of SegWit
The debate about scaling Bitcoin has now focused on how to deploy Segregated Witness (SegWit — BIP141), and with which changes should it be released. There is a number of competing proposals, but the recent discussion revolves mostly about three of them: BIP148 UASF, SegWit2x, and BIP91.
BIP148 UASF is an activation method of Segregated Witness, where UASF stands for User Activated Soft Fork. Essentially, the users will activate SegWit by themselves, instead of relying on the miners. They are doing this by modifying their Bitcoin nodes, to not accept any non-SegWit blocks after August 1st. This can be done by an average Joe, who maintains a node in his house, but also economic players, like exchanges and wallet providers. If the economic majority supports BIP148 UASF, then the miners would have a strong incentive to switch to SegWit, as if they would not, their computational power spent on mining blocks would be wasted. However, if not enough miners support BIP148, then there is a real possibility that this chain would split off, as the legacy Bitcoin chain would continue on as the longest valid chain, fracturing the network.
SegWit2x is the scaling agreement also known as the New York Agreement. Apart from SegWit activation, it also proposes a subsequent hard fork to a 2 MB blocksize. However, this proposal is incompatible with SegWit (BIP141) and the BIP148 UASF activation method, as it uses a different activation bit (signal). Consequentially, as Bitcoin Magazine reports, “Different nodes would be looking at different activation bits, meaning they could activate SegWit under different circumstances and at different times; and that would mess up SegWit-specific block relay policy between nodes, potentially fracturing the network.” SegWit2x require 80% of the hashrate for activation.
BIP91 proposal could solve the issues with inter-compatibility of the aforementioned proposals and solve the threat of a chain-split. Its activation mechanism is similar to BIP148, in the sense that after the threshold, BIP91 nodes will reject non-SegWit blocks. However, it is completely miner dependent, as it is activated by the same method as SegWit2x: 80% of blocks mined must signal for SegWit for at least 2 days. Its activation deadline is July 29th.
None of these proposals require any action from ordinary Bitcoin users, only from miners!
It is quite possible that the Bitcoin network is heading towards a network split (also known as fork or chain-split). What consequences will it have for your bitcoins in your wallets?
More information about the debate can be found in the links at the end of this article. We will provide you with more resources, in case you are interested in the details.
So what happens to my bitcoins?
Firstly, before any of the SegWit proposals activate, there will be no chain-split, meaning that there is only one Bitcoin. No matter which node you connect to, everyone is using the same Bitcoin. In TREZOR Beta Wallet, you might be using the “standard” Bitcoin wallet, but you will see the same balance in the BIP148 UASF Wallet.
Scenario: BIP91 activates.
Under this scenario, SegWit could activate on Bitcoin without the network splitting. However, there is a narrow window for it to activate, from July 21st to July 29th.
Scenario: BIP148 UASF activates, the network does not follow fully.
If BIP148 activates, but the network does not follow fully and the BIP148 does not become the longest chain, the Bitcoin network will split in two: BIP148 Bitcoin and Legacy Bitcoin. This is because BIP148 nodes will not recognize non-SegWit blocks, and thus will not accept Legacy Bitcoin’s blockchain as the longest chain. These Bitcoins will run in parallel.
Scenario: BIP148 UASF activates, becomes the longest chain.
If BIP148 activates and enough miners follow it, it might become the longest chain. By Bitcoin rules, the Legacy Bitcoin chain will be discarded and the network will follow the BIP148 chain. Bitcoin avoids a split, as all ready nodes should update to SegWit.
Scenario: SegWit2x activates, BIP148 does not follow.
As two different incompatible proposals go ahead with their intentions, the network is fractured and Bitcoin is split in two.
There might be a fork — chains might split into two different directions. However, the issue is that nobody knows if, how, and when it will happen.
TREZOR Users: Not Affected.
Luckily, if your bitcoins are protected with TREZOR, you do not need to worry about them. TREZOR is coin-agnostic — it is merely a signing device, and does not care with which blockchain it interacts. If the chain splits, we will do our best to support most, if not all of them. Then, the only thing that matters is to which node you connect your TREZOR.
If you are connected to a legacy node, you will continue using legacy Bitcoin. If you are connected to an UASF node, you will be interacting with BIP148 Bitcoins. If you are connected to a SegWit2x node, you will see SegWit2x Bitcoins. Moreover, you can switch between these nodes, like you can switch between other cryptocurrencies.
Of course, you can take precautions not to lose any coins. The important thing is that you should not send or receive any bitcoins during the times of uncertainty. Do not believe coin splitting services, or any too-good-to-be-true deals. They are often just scams, trying to steal your coins. In any case, as stated above, your coins will be split automatically, since you own the private keys to the original Bitcoin. If the network forks, so will your coins.
(The difference between this case and the hard fork case described in the linked article above is that in case of a hard fork, the date of the chain-split would be much clearer. Essentially though, all which is described in the linked article applies to this case too.)
TREZOR Shop Disruption Contingency Plan
TREZOR Shop will temporarily stop accepting Bitcoin as means of payment during this uncertain period. From July 31st until further notice, the only accepted payment option will be credit and debit cards.
The production and sales of TREZOR will remain unchanged. All orders, including backorders, will be fulfilled as expected.
We apologize for the inconveniences caused. We hope to resume normal operations soon.
About Us
TREZOR is the most trusted and ubiquitous hardware wallet in the world. It offers an unmatched security for cryptocurrencies, password management, Second Factor, while maintaining an absolute ease-of-use, whether you are a security expert or a brand new user.
SatoshiLabs is the innovator behind some of the most pivotal and influential projects with Bitcoin and cryptocurrencies, from TREZOR, the world’s first cryptocurrency hardware wallet, or CoinMap.org to Slush Pool, the world’s first bitcoin mining pool.