A little over 3 months ago SegWit, a Bitcoin upgrade was activated after a long and hefty debate. The result of this debate also created an altcoin called Bitcoin Cash which was created by opposition to the Segwit solution. Now, we are on the verge of another split in the Bitcoin network called Segwit2X. For a complete history of everything that happened until now read this post.
The much-awaited Segwit activation came with a condition – a block size increase within 3 months of activation (i.e. Hard Fork). Miners who were initially against Segwit activated under the terms of the so-called New York Agreement (NYA). The NYA is also known as the Silbert or DCG Agreement, after the deal’s broker and the founder of the Digital Currency Group, Barry Silbert. Silbert brokered this deal between various industry players; most notably mining firm Bitmain, the Coinbase exchange, and BitPay payment service.
The SegWit softfork is seeing steadily increasing usage to the network’s benefit, such as lower fees. SegWit’s further, dependent improvements (chiefly, the Lightning Network) are virtually assured. Focus has now shifted to the NYA’s final part, which demands a mid-November 2017 hard fork to increase blocksize:
Text from the agreement’s announcement on Medium.com
This hardfork is now commonly referred to as SegWit2x or “S2X”. Segwit2X is implemented in code as btc1 by former Core developer and Bloq CEO, Jeff Garzik. It’s scheduled for activation at block height 494,784. The estimated time remaining is displayed via the 2x Countdown site.
6 Major Objections to the NYA
NYA has proven highly unpopular among the Bitcoin user base, judging by commentary and activism across various media platforms. Notably, many Twitter users have adopted the NO2X tag to signal their resistance. As more concrete evidence, consider the number of nodes (97.7% at the time of writing) which have chosen not to switch to btc1:
A breakdown of recent Bitcoin client distribution from Coin.dance; btc1 is displayed as khaki.
Here are the top 6 objections to the agreement:
1) The primary objection is political. Although the meeting was called “Consensus,” it involved only a small sampling of CEOs. The NYA was concluded without input from Bitcoin developers, the majority of companies or the millions of users.
2) As SegWit and its related improvements have already upgraded the transaction capacity of Bitcoin blocks, there’s no pressing need to raise the blocksize further. Blocks are far from congested. Thus, the secondary aim of the NYA is without justification.
3) As hardforks are inherently and unavoidably risky and disruptive, they’re best reserved for emergency usage. The only exception is a hardfork with unanimous support, planned long in advance. Forcing through a hurried hardfork with only minority support, for no tangible benefit (see point #2), will likely achieve nothing besides chaos and the creation of an Segwit2X altcoin.
4) Multiple Core developers are on record as likely to halt all code contributions should Segwit2X become the dominant chain. All contributors who’ve made their positions known have indicated rejection S2X. Without the competence and experience of these developers, the future of “Bitcoin” is highly uncertain.
5) Segwit2X does not include comprehensive replay protection. This means that, after the fork, a transaction on either chain may be “replayed” on the other. This is dangerous and likely to lead to loss. Users unaware of this issue will send equal amounts of both Segwit2X and BTC whenever they attempt to send only one kind.
6) Core’s attempts to prevent a messy network split with certain code in their 0.15 and later releases have been deliberately opposed by Segwit2X.
The NYA – Less than the Sum of its Parts
In the course of assembling a spreadsheet of companies listed in the NYA, some interesting facts emerged. Let’s begin with a simple count of the signatories:
Total Number of Signing Entities: 56
This is a fairly impressive number at first glance but it doesn’t hold up to closer examination. Further, it is outweighed by the number of companies which have withdrawn from or never signed the NYA. This list of non-participants shouldn’t be considered complete either; countless companies and projects have simply not expressed a preference either way. It also remains to be seen how many miners will redirect their hashrate from pools which don’t follow their preferred chain.
Total Minus Individuals: 54
From this total can be subtracted the two individuals: former Core developer, Gavin Andresen, and Guy Corem, former CEO of defunct ASIC manufacturer, Spondoolies. As neither individual is an active developer or CEO, their support for SegWit2x is unlikely to extend beyond PR or perhaps running a node. As such, they may be discounted as no more influential than any other Bitcoin user.
Total Minus Individuals & Yours: 53
Ryan X. Charles’ “Yours” startup is a signatory; however about a week before signing the NYA, Charles announced his decision to switch his project from Bitcoin to Litecoin. As such, Yours has no real stake in the future of Bitcoin and may be discarded as irrelevant.
Total Minus the Foregoing & Subsidiaries: 46
From this total, we may safely deduct the signatures of all subsidiary companies as redundant.
1) Bitmain manages and supplies a number of signatory pools: 1Hash, BTC.com and BTC.top. All of these pools contact details point directly to Bitmain. ViaBTC has already broken the terms of the NYA by mining Bcash and perhaps also for the reason that it received about ¥20 million in funding from Bitmain and private investors.
2) DCG has two subsidiaries which signed the NYA; Grayscale Investments and Genesis Global Trading.
3) Decentral is the Canadian “innovation hub” which develops the multi-coin Jaxx wallet. Counting Decentral and Jaxx as separate entities makes little sense.
Total Minus the Foregoing & Firms Which Have Retracted Support: 41
SegWit. Party displays updated stats on Segwit2X support, along with links to evidence of position changes. It indicates that 5 signatories have thus far publically withdrawn from the NYA:
Total Minus the Foregoing & DCG-funded Firms: 16
If we next subtract all companies which have received funding from the Digital Currency Group, as per DCG’s portfolio page, we reach an altogether less impressive total of a mere 16.
Given that DCG is in many cases the majority investor in such companies, these firms may arguably be considered as tantamount to subsidiaries. After all, major investment tends to purchase a degree of control, especially over small startups.
This may be the most questionable subtraction as in many cases the amount of funding received – and thus the degree of DCG’s influence – is unknown. It may well be that some of these companies are capable of operating entirely autonomously of DCG.
Preparing for the Split
Users who were present for the Bitcoin Cash hard fork should have an idea of what to expect. The first rule is to get your coins on to a wallet that is under your control. This means moving your coins off exchanges or any other web wallet. Make sure you have access to your private keys.
The major difference this time around is that it won’t be safe to spend coins after the split has occurred, due to the lack of replay protection. At this time, we advise all Bitcoin owners to sit tight and wait for a clear plan of action. It may be necessary for users or companies to manually separate their coins, although there are as yet no clear guidelines for doing so. We would advise users against trading around the time of the split, and to wait for the “all clear” before resuming normal operations.
Hashpower and Block Times
Unsubstantiated leaks have circulated of late, indicating that some major miners fully intend to redirect their hashrate to Segwit2X and perhaps even towards attacking the incumbent Bitcoin chain. The more hashrate switches chains, the slower blocks on the other chain will be until difficulty adjusts.
While the removal of significant hashpower would result in delayed transactions and high fees for a period, it’s likely that the market would correct the imbalance. The situation would be similar to Coke exiting their market; soda would be undersupplied only until the remaining competitors ramped up their operations.
And what about “Bitcoin Gold”?
Some of you may have heard about Bitcoin Gold, however this has nothing to do with Segwit2x. Bitcoin Gold is yet another hard fork that is planned for October 25th in which we will elaborate about in a different post.
To conclude – Keep calm and own your private keys
In the end, November’s upcoming fork seems like almost the same story all over again. Users should keep their private keys at hand and refrain from conducting any transactions until the coast is clear. What will happen to Bitcoin, it’s price and adoption? No one can really say, this is just one more of these “free market” exercises we’re going to have to experience in real time.
What’s your opinion of Segwit2X and the New York Agreement? I’d love to hear it in the comment section below.
READ NEXT: Top Ethereum wallet for Ethereum Investers