Today I will take a different approach and post an editorial that has to do with this week's hottest topic: the Segwit2x cancellation and aftermath. All you're about to read is my humble opinion on the whole Segwit2x business, nothing more. Be sure to state your opinion on the matter in the comment section below. Am I right? If not why? What's your opinion on the subject?
Initially, I wrote this editorial for Medium but I've also decided to post it here on steemit for more exposure.
Like always, the editorial is brought to you by CryptoHQ, the ultimate high-quality news aggregator for Bitcoin, Cryptocurrency & Blockchain. No sponsored content, no annoying ads and popups, and definitely no fake news. Only a few and the most interesting cryptocurrency articles for the day are selected and displayed on this site. High Quality guaranteed!
Enjoy!
In one of his latest blogs, Bitcoin developer Jimmy Song discussed extensively about possible scenarios that could unfold before and after the Segwit2x hard fork. Mr. Song presented at length three possible scenarios:
- The Segwit2x hard fork is canceled;
- Bitcoin Core capitulates;
- The hard fork happens with the majority of the miners staying honest and mining the new 2MB blocks.
At first glance, we might assume scenario one happened. The team behind Segwit2x suspended the hard fork indefinitely as stated in the e-mail sent by BitGo CEO Mike Belshe on Wednesday. However, this is NOT the case.
Mr. Song correctly ‘predicted’ none of the three scenarios are likely to happen. In fact, more complex scenarios are bound to happen that may be a combination of the three.
Indeed, the Segwit2x team might have canceled the hard fork but amidst the Bitcoin Core celebration, they unleashed what I believe was their true plan all along. A plan that nobody thought of. A very clever outcome that combines two of the possibilities presented above: one and three. Yes, ladies and gents, the hard fork has already happened several months ago, in August, with the miners already mining bigger blocks. Not 2MB though, but 8MB. YES, Bitcoin Cash is the real ‘Segwit2x’ only without Segwit and with much bigger blocks.
Segwit2x V2.0
The plan is indeed brilliant and could produce a shift of power in the cryptocurrency world.
For months, Bitcoin Core have focused their attention to undermining the New York Agreement and the companies that backed it up. ‘Corporate takeover’ was an expression mentioned too often in their writings to the point they succeeded to attract support from the majority of the community. To upgrade, the Bitcoin network has to follow a certain protocol that’s been going on since its inception. The companies behind the NYA ignored that protocol and agreed to upgrade behind closed doors dismissing the developers and the long-time Bitcoin community. One could question that such agreement was necessary to solve the scaling debate brought to a standstill in recent years but that’s not the point here.
Yes, Core succeeded in making the Segwit2x team ‘the bad guys.’ And seeing the community turning against them, the NYA companies began backing down one by one. They realize a contentious hard fork would not only weaken their already precarious position, but also could weaken Bitcoin itself. In other words, the move would have been suicidal.
As a result, they prepared a very interesting counter-attack. And, on Wednesday, they put it into practice. They ‘apparently’ let their ego aside, acted like the more mature side, and declared themselves ‘defeated.’
Core started celebrating prematurely and while Core weren’t watching, the Segwit2x team made their next move.
Problem: Bitcoin Core! Solution: Bitcoin Cash!
With their public image ‘unscathed’ – they were the more mature side admitting lack of consensus after all – they pointed at Core and at the scaling problems Bitcoin is facing. Since there is no end in sight for the scaling debate, they started proposing one by one the solution to the problem and that’s Bitcoin Cash. They have low fees and much bigger blocks, right?
Unfortunately though, since the majority of the mining power signed the NYA, the masterplan also includes what I sincerely believe to be a 51% attack aka the majority hash rate attack.
51% attack?
A 51% attack is the elephant in the room for any ‘unbreakable’ blockchain. To put it plainly, if an adversary has the majority of the mining power (51% or more), he or she can ‘revise’ the transaction history and prevent new transactions from confirming.
Obviously, changing the history is basically suicidal and means the blockchain is unreliable and insecure. In such an environment, Bitcoin is worthless.
IF the reddit ‘reports’ concerning the very high fees on the Bitcoin blockchain ARE TRUE and the mempool is ever-growing, then the majority of miners are now performing a majority hash rate attack. With unjustified high fees plus, maybe, spam (??), the miners who signaled the Segwit2x hard fork before the suspension announcement are preventing new transaction from confirming.
Yes, the Bitcoin network has a scaling problem, no one is questioning this fact, but is seems the miners are just hyperbolizing the problem to make it obvious Bitcoin Cash or Segwit2x V2.0 is a much better solution.
Game Theory
But wouldn’t a problematic Bitcoin also mean a problematic risk/reward ratio for miners? And ultimately, a much lower profitability? NOT if you are planning to take Bitcoin’s market capitalization and place as the king in the crypto world.
Going back to the blog Mr. Song posted on November 7, in scenario three, he talked about mining profitability and opportunity cost to keep miners incentivized. He said:
In order to motivate miners to stay on 2X (edit note: replace B2X with BCH), there has to be some reward that is at least as much as the opportunity cost… Each B2X (aka BCH) token has to be worth 1 B1X token (aka BTC) in order to reach profit parity… A better price for 1X (aka BTC) makes the opportunity cost go up… A worse price for 1X (aka BTC) makes the opportunity cost go down.
So, with these notions explained, the developers gave four outcomes in which ‘economic stability’ could be reached. Since we are discussing about BCH, we can select two such outcomes (BCH edition) that may happen as we speak:
- Price follows Hash Power: price of BCH is going up; price of BTC is going down.
- Massive Dollar Injection: BCH is pumped; fear, uncertainty, confusion leads to BTC crashing down to Earth.
That is why I do believe we are now witnessing a very interesting twist in the plot, a very clever scheme meant to combine Scenario One with Three and undermine once and for all the Core development team.
My Take: Lose-Lose situation
Unfortunately, the Bitcoin community (simple enthusiasts, non-developers, non-business) is caught in the middle in this Game of (Hard) Forks.
In A Song of Fire and Ice, the author George RR Martin presents brilliantly elaborated political schemes and invented yet real-life-lookalike power struggles. That is why the TV series Game of Thrones is one of the most watched EVER.
This is what we are witnessing now: a power struggle between sides eager to take control of this ‘digital gold’ we call Bitcoin. Elaborated political schemes meant to manipulate the commoner. And, while the sides are probably thinking of win-lose situations, in the grand scheme of things, there are only lose-lose situations for the ecosystem as the whole. And I am not referring to Bitcoin only, but to the entire cryptocurrency market.
In one of his many great presentations, Mr. Andreas M. Antonopoulos talked about forks., how and why they happen. Everyone thinks is in control, he said, the developers, the miners, the businesses, and the users. And now, this internal power struggle is right in front of us.
I do agree the Bitcoin network must solve its scaling problem as soon as possible. However, I do NOT agree with what is happening now: trying to undermine the Bitcoin blockchain by performing a what could be a majority hash rate attack. And for what? For miners and businesses to have better control of the network?
In my humble opinion, this creates a very dangerous precedent and confirms the pseudo-decentralization of some of Bitcoin’s ‘systems.’ If the miners can ‘force’ the users to switch from BTC to BCH to suit their own ends, who is saying they cannot do it again and again… and again? Maybe next time, they will force you into buying a different cryptocurrency where they have better control and where they can profit more. Thus, turning us all into mere puppets.
If this happens, the initial purpose of any blockchain (decentralization, freedom and taking control of your own life and financing) becomes obsolete. As a result, cryptocurrencies will have no reason to exist anymore. They will only be just mere strings for a party or another to take hold of us and ultimately control us just like the current real-life financial, economic, and political system.
And I’m fairly sure this is not what Satoshi Nakamoto envisioned when he/she/they created Bitcoin.