Bitcoin’s Next Battle May Already Be Looming
Hi everyone, it’s Yuji from Tokyo. I’ve been writing about the trials and tribulations of bitcoin for more than a year.
The recent bitcoin civil war has been an ugly, highly politicized affair, with each side trying to manipulate the media and tilt public opinion in their favor. After almost every one of my articles went out, I was bombarded by opinionated enthusiasts through Twitter, email, and even face-to-face.
That’s why the community breathed a sigh of relief last month with a compromise called SegWit2x, an upgrade to bitcoin’s underlying software. After the agreement, the cryptocurrency has doubled in price, with bulls predicting a new golden age of blockchain innovation and more gains.
The problem is that SegWit2x is a two-step process, and only the first one is complete. The second step, scheduled for November, is already generating controversy and could halt the rally unless things go smoothly. Given the community’s stormy history, I would expect anything but. If you own or follow bitcoin, here are three things to watch in the coming months:
The first step of SegWit2x was SegWit, which has fixed bugs and given developers room to add new blockchain functions. As a result, if we start to actually see new tools being tested or implemented (like Lightning), it would go a long way to proving the bullish thesis that bitcoin can be as innovative as other cryptocurrencies, like ethereum. The second step of SegWit2x aims to double transaction capacity (hence “2x”). It was included to win support from miners, who earn fees from transactions. The problem is that some developers are now saying SegWit can do the same thing, and are backing away from the scheduled implementation in November. If support for “2x” part falls apart, either the miners or developers could walk away from the agreement, rekindling worries of a bigger split that rocked the currency in mid July. SegWit2x didn’t please everyone, and a minority of miners later broke off to form a new version of bitcoin called Bitcoin Cash. While its market value is currently just a tenth of bitcoin, it has been winning support from key businesses such as Coinbase and BitGo. If this trend accelerates and if Bitcoin Cash’s price rises, it could create incentives for more miners to abandon the original bitcoin and migrate to the new version, or even create more offshoots. The battle has been as much about bitcoin’s rightful identity as it’s been about protecting economic interests. Miners want it to function as a nimble payment system similar to Visa, which would let them earn more transaction fees. Their opponents, developers who upkeep bitcoin’s software, want it to act more as a robust platform that allows them to build new functions on top. Reconciling these two needs is at the core of the ongoing internecine battle, making it even more important for stakeholders to keep an eye on developments through November.
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