What Exactly is Happening to Bitcoin on August 1st?
Bitcoin users all over the world are all too aware August 1st is approaching quickly. This day will be an important moment in the history of Bitcoin and potentially all of cryptocurrency. Multiple things can happen. No one knows for sure what the outcome of the 24 hours prior to August 1st, as well as the days after that date, will bring. Since it is just a few weeks before August 1st, let’s review the potential outcomes.
AUGUST 1ST IS A BIG DAY FOR BITCOIN
With all of the discussions about scaling Bitcoin almost behind us, the time for action is now. Regardless of how things will play out, we will finally see Segregated Witness activate on the Bitcoin network. Most true Bitcoin believers have been waiting to see this happen for over a year now. Those efforts were delayed by Bitcoin Unlimited for most of that time, but SegWit will prevail in the end.
The way in which Segregated Witness will active remains a topic of substantial debate. On July 31st, the activation of SegWit2x is scheduled to take place. This will only happen if there is over 80% signaling support from the Bitcoin miners, which appears to be the case at the time of writing. SegWit2x will introduce Segregated Witness first, followed by a block size increase to 2MB three months later.
There is a distinct possibility SegWit2x may lead to a Bitcoin blockchain split down the line. SegWit2x is a solution enforced by miners, and it has the support of most major mining pools. However, the rest of the community just wants to see Segregated Witness activate without the increase to 2MB blocks. This is why August 1st is the “official” activation day for Segregated Witness through the user-activated soft fork, also known as BIP148.
SegWit2x and the UASF are not mutually exclusive since they follow similar paths. However, the chain split could still occur when the SegWit2x supporters aim to introduce their 2MB hard fork, which is a radical change to the current Bitcoin protocol. Additionally, the user-activated soft fork can cause a chain split, assuming the community can get enough support to keep their version of the blockchain alive while others jump on SegWit2x. If that were to happen, we will see two separate instances of Bitcoin. This can create a whole new set of problems.
The activation of SegWit through the UASF is a guarantee at this stage. SegWit2x may have the hashpower right now, but it is only “intent to signal,” and not an official commitment whatsoever. SegWit2x needs at least 80% hashpower support to become successful. It only takes one decently sized pool to stop signaling and that plan will fall dead in the water. An alternative solution would be for miners to stop mining on pools supporting this solution and effectively reduce the hashrate supporting SegWit2x.
Even though there is a very real chance we will see competing blockchains, there is no reason to think more than one chain will survive for long. From an economic perspective, damaging Bitcoin is the last thing any sane person wants to do right now. One thing is for sure; move your bitcoins to a private wallet of which you alone control the private keys. Do so well before July 31st and wait to move them again until things settle down. August 1st will be a hectic day, and the future is still uncertain. We may see a very different Bitcoin come August 2nd.