On November 16, the blockchain that governs Bitcoin is divided in two. Can the fight for the "true Bitcoin" make the prestigious cryptomoeda lose its value?
Bitcoin, which was founded around nine years ago, continues to appreciate and add to its records, having reached $ 6,194.88 (€ 5,341.65) on October 21 and exceeded the 100 billion dollar mark. The reasons for this valuation are not clear, but the truth is that every day there is "fresh" money coming in, mainly from South Korea and Japan, the countries where the most is invested in this crypto-currency. Investors can be confident in their investment, one might think, but the truth is that Bitcoin is about to face its biggest challenge ever, not knowing if it will survive, and how it will.
According to Forbes, on November 16, Bitcoin's original blockchain (a sort of ledger where all the data on all the world's coins are stored) will be divided into two, each with its set of coins. Investors may see this as good news because they will eventually see the amount of criptomoeda they hold doubling overnight, but the struggle to know which of these two new currencies will be the "true" Bitcoin could spur the chaos in the markets . Those who sell their set of criptomoedas run the risk of being financially affected - either because they chose the set that will devalue or because there may be a rush to sales from both sides and Bitcoin itself may lose much of its value.
It is true that Bitcoin has already gone through a similar event - the division between Bitcoin and Bitcoin Cash - but in this case what happened was not a division in technology, it was the dissidence of a group that abandoned the initial form to create a new criptomoeda . The plans did not go well and the new currency depreciated sharply due to the torrent of sales, falling to just over $ 300 for Bitcoin Cash.
What is it about?
In this regard it should be noted that Bitcoin transactions are grouped and processed every 10 minutes and that the maximum information limit in each block is 1 MB, an arbitrary limit imposed at the beginning of Bitcoin's lifetime to limit SPAM. Increased transactions have delayed processing and increased transactional rates as people compete to get their transactions processed as quickly as possible.
At its most basic level, the issue that divides the community is trivial: how to upgrade the network to accommodate more transactions in any length of time? The way this upgrade will be done is what has caused the biggest reaction, with both sides - the so-called Cypherpunks, who created the original technology, and Silicon Valley supporters who have popularized the currency - to turn accusations into a battle that has already three years.
Divisions, divisions ...
The debate revolves around how the space will be enlarged. Cypherpunks believe in better "tidying" up information, to fit more in the same space, and slightly increase the size of blocks, whereas Silicon Valley believes in doubling the size of information blocks because the first solution will only be temporary. This is where the great philosophical divergences begin. The first group states that if larger blocks are made, their creation will be more difficult, the builders will be diminished, and the construction of this construction will begin, with the danger of the monopoly stalking. The second group says that moving from tiny blocks to small blocks will be only a temporary solution and will have to increase size again soon. So why not do it all at once?
If the division cypherpunks Vs. entrepreneurs of Sillicon Valley represents the philosophical divide, the political division is represented by the two technologies in contention: SegWit vs. SegWit2x. Bitcoin's four main owners are the developers, the startup miners and the users, ranging from immigrants to ultra-rich, who are waiting for the digital gold rush.
In February 2016 in Hong Kong, a group of miners and developers agreed to adopt the SegWit2x solution (more storage, double the space), but most developers continued to work with the SegWit solution. Nevertheless, in the fall of 2016, the developers stated that this solution would only be adopted by 95% of the miners they wanted to adopt. Six months later, only 30% had stated their willingness to do so, with most feeling betrayed by the attitude of the developers. The developers said that the miners wanted to take control of the system and threatened with the forced adoption of the SegWit technology on August 1 of this year, which would split bitcoin into two chains.
It was then that the third political group, the business, came on the scene. In May, the largest blockchain conference on the planet, promoted by a subsidiary of the Digital Currency Group, reached an agreement with the miners for the adoption of SegWit2x. The group comprised 58 companies and owned 83% of Bitcoin's processing capacity, stated that it would adopt this solution if 80% of the miners declared their support, which happened in two weeks, and the developers called this agreement a hostile takeover of network.
What happens in November?
The plan that will be put into operation intends that the division be made in such a way that the original network (that of 1MB blocks) does not survive. The idea is to allocate so much processing power to the new chain, which will make the old one dysfunctional, guaranteeing the title of "true" Bitcoin. If 90% of the miners leave this network, a block will take 100 minutes to be created, 10 hours to be confirmed and it will take 140 days to adjust the extra difficulty.
In addition, the developers of SegWit2x should replicate the transactions in the two chains ie the smaller will be even slower. Also, because transactions are replicated, whoever sells a set of coins will lose both.
Given that between 85 and 90% of the miners have already signaled their intention to adopt the new technology, it would be right to think that this will triumph. But it will not be that way. If 85-90% of users support the chain with less processing power - as the Forbes research indicates - to the point of dispensing with their Bitcoin SegWit2x to buy more Bitcoin SegWit1x, nothing is decided and everything will depend on the price.