Someone told you about bitcoin. They told you about the price boom. They used the word “disrupt”. They showed you how to install a wallet on your phone and how to get some. This article is about what they didn’t tell you or at least didn’t emphasize enough.
They probably didn’t tell you about how different a bitcoin address is to a bank account. You see, in bitcoin you’re responsible. For everything. In contrast to a bank there are few or no laws to protecting your bitcoin and your wallet provider is not to be trusted. What you can trust is the protocol. The code will do what it’s been programmed to do. So, do you need to review the entire core code yourself? Probably not. There are safe ways of storing your bitcoin which require very little technical skill. The basic rule of thumb is “your keys — your bitcoin. Not your keys — not your bitcoin”. A secure paper wallet can easily be set up by visiting a site like bitaddress.org, generating and printing an address offline and erasing your browser’s cache memory before going online again. Or you could buy a hardware wallet.
So, what will happen on Aug 1st 2017?
Well the basic story is that a majority of the bitcoin nodes will try to force the miners to implement a protocol upgrade proposal called BIP148. They will try to do this to end the stalemate between the various parties in the block size debate which has stalled the evolution of bitcoin over the last year or so. Transaction fees are very high right now because of this. This may play out in a couple of different ways but basically your main concern should be a possible chain split after a fork. A chain split will result in two different tokens. This happened to Ethereum last year and it has happened to other cryptocurrencies too.
If you don’t control your keys during a chain split three main things may happen:
Your bitcoin balance will stay the same and you will be able to use that bitcoin token as usual.
Your bitcoin balance will be zero over night since your wallet chose the wrong chain
Your wallet provider will offer you a chance to keep your token balance on both chains or to choose one of them
If you do control your keys you will have the same balance on both chains and you will be able to trade one for the other, effectively increasing your total bitcoin balance. In the case of a chain split there’s a big chance that bitcoin will lose its value however. Either way, you’re better off knowing what you’re doing and in bitcoin there’s no way of faking that. Now go on and educate yourself! Google BIP148, Segregated Witness, cold storage, soft forks and hard forks! It’s your donkey that’s on the line
Summary:
Under Bitcoin Improvement Proposal (BIP) 148, Bitcoin will be undergoing a user activated soft fork on August 1, 2017.
There are three possible outcomes of the soft fork, although the exact outcome is unknown as the outcome will depend on the actions of the nodes on the network.
In a worst case scenario, BIP 148 could cause Bitcoin to chain split into two separate blockchains, one with SegWit activated and one without.
Before we get started, let me try and define some very important terms, which I hope will make it easier for me to fully convey what exactly is going to happen on August 1st.
Hard Fork - A hard fork is a permanent divergence in the blockchain, that occurs when non-upgraded nodes can't validate blocks created by upgraded nodes that follow newer block validation rules. This can be caused by a change in a blockchain's protocol that makes previously invalid blocks/transactions valid, and as such requires all nodes or users to upgrade to the latest version of the protocol software. This essentially creates a fork in the blockchain, one path which follows the new, upgraded blockchain, and one path which continues along the old path. Generally, after a short period of time, those on the old chain will realize that their version of the blockchain is outdated or irrelevant and quickly upgrade to the latest version.
Soft Fork - A soft fork is a change to the bitcoin protocol where some previously valid blocks/transactions are made invalid, and the rest of the previously valid blocks/transactions are kept valid. Old nodes will still recognize the new blocks as valid. Soft forks don't require any nodes to upgrade since all blocks with the new soft-forked rules also follow the old rules, therefore old clients accept them. This kind of fork requires only a majority of the miners to upgrade in order to enforce the new rules