Mid-November of this year will see another hard fork on the biggest cryptocurrency globally, Bitcoin — which is being referred to as the SegWit2x hard fork. This is by far the most significant hard fork of the year — with the potential to significantly impact the future of Bitcoin trading.
At the time of the hard fork the Bitcoin blockchain will undergo a bifurcation — one strand will continue as the previous core Bitcoin and a new strand will be the new SegWit2x hard fork cryptocurrency.
What is it?
The November Bitcoin hard fork has become highly contentious in the Bitcoin community. The major sticking point has been that most Bitcoin miners wanted a block size increase in the current (core) system, rather than an alternate, entirely separate, SegWit based currency.
The initial proposal has come from Bitcoin blockchain miners who aim to run the SegWit2x version of bitcoin and increase the block size to 2MB, and the block weight to 8MB. The question remains if one version of Bitcoin or the other will gain authority in the marketplace.
When is it?
This update is expected around November 18th, 2017 at block 494784. The proposal for the SegWit upgrade was agreed 5 months ago, in May 2017, after extensive debate, with a final agreement made with some of the biggest Bitcoin players in the market, after signing the “New York Agreement” (NYA). The agreement outlined that within 6 months of SegWit activating, the block size would be doubled to 2MB — and now that time has arrived.
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What are the benefits?
The key benefit of the SegWit2x update is to expand the scale of Bitcoin transactions — potentially making Bitcoin trading cheaper and faster and potentially leading to wider adoption. Larger block size enhances the ease of transactions as more can be processed in each block — leading to reduced transaction fees and increased network throughput.
What are the drawbacks?
The SegWit update that was set in motion by agreement in May 2017 has already enabled a greater number of transactions per block — in turn leading to reduced transaction costs. To date this stage of the update has only been implemented at under 20 percent capacity- there is far more room in this update, showing that this stage was powerful enough in itself in reaching the initial goals.
This indicates the SegWit2x update is not necessarily useful at this time and many members of the Bitcoin community believe there is an underlying agenda at the heart of the matter. Specifically, some of the companies may be attempting a corporate power grab of bitcoin. There are many companies who are heavily involved in bitcoin that disagree with the updates and chose not to sign the NYA.
Having two concurrent currencies may create confusion and distrust in the Bitcoin space. The unanswered question is about who will determine the future development of Bitcoin after the hard fork if the SegWit2x update currency replaces the current core bitcoin as the one that is used the most. Crucially Bitcoin currently is open source with over 500 developers from across the globe, but the 2x version is not. The traditional Bitcoin has a team of developers that have long track records and strong reputations whereas the engineers representing the NYA signers are unknown.
How will it affect Bitcoin Traders?
The largest Bitcoin exchanges and wallet platforms have announced plans to implement support for SegWit2x in November — with many proposing that SegWit2x will be listed as B2X, and Bitcoin will continue as BTC. Therefore, users of most leading Bitcoin exchanges and wallets will be credited with B2X when the hard fork occurs.
The following well recognised names in the sector have confirmed they will provide support for SegWit2x — Coinbase, Bitfinex, Xapo, Blockchain, , Korbit, BTCC, Coins.ph, BTC.com, as well as BitFlyer. It is most important for investors to avoid transacting Bitcoin around the time of the hard fork to avoid risk of loss in the software upgrade.
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Sources:
1. https://www.coindesk.com/block-494784-segwit2x-developers-set-date-bitcoin-hard-fork/
2. https://www.coindesk.com/f2pool-reneges-mining-pool-pulls-segwit2x-support-hard-fork/