It’s been two months since the commotion on August 1st which caused Bitcoin to split and BitcoinCash to be created. But just when the community is finally taking a breather from the Bitcoin feud, our eyes are now shifted to yet another major milestone for Bitcoin – SegWit2x.
What is SegWit2X
Commonly seen as a compromise, SegWit2X uses bit 4 signalling with an intention to re-unite the Bitcoin community by implementing both SegWit (BIP 141) and a 2 MB hardfork. The idea is not foreign and offers another alternative to scaling the Bitcoin Network.
In short, Segwit2X will activate an optimization similar to SegWit (BIP 141) proposed at the end of 2015 by Pieter Wuille which aims to solve the scalability issue of the Bitcoin blockchain network by increasing transaction volume but without increasing the block size. However, SegWit2x differs from BIP141 in a way that it would also increase the block size and as a result trigger a bitcoin hardfork. Segwit2x is now currently due to activate in November 2017. It is also worth noting that it was not put forward by, nor has it been endorsed by, Bitcoin Core, the network’s main open-source developer team.
The road up to now has been most eventful so we have summarized the important dates into a timeline for your easy understanding:
Segwit2x will activate 90 days (12960 blocks) after Segwit sets in and will include a maximum block size limit of 8MB (but the codes are compressed to make it look like 2MB). It also comes with a max block weight limit of 8M and a max block sigop limit of 160k. Finally, a 1MB limit will be imposed on each transaction’s non-witness data for the sighash scaling.
Although the increased block size might sound like a solution to Bitcoin’s scaling issue yet Bitcoin Core developer – Luke Dashjr suggested that ‘even 1 MB blocks are already clearly dangerous to Bitcoin’. The effect of the spilt is still under wild speculation and no consensus has been reached by the Bitcoin community so far.
Lovers and Haters?
As always there are 2 opposing sides for every decision to be made in the crypto world, the main players are illustrated below:
What’s at stake?
The most obvious impact is that Segwit2x could enable a second Bitcoin hard fork in 2017, one that could potentially create another version of the Bitcoin Blockchain and yet another Bitcoin related cryptocurrency. Similar to what happened in August, you will most likely have both BTC and BTS(Bitcoin Segwit2x) balance; in other words, your token holding will double.
At first glance, this might seem like a great thing since you now have more tokens in hand, however this doesn’t mean that the value will also double. It is worth noting that the value of both tokens will be determined based on market supply and demand. Yet a split would lead to an even bigger issue called Replay Attack.
Since both the tokens will share the same private key, an attacker can take this as an opportunity to reuse transaction details on both blockchains.
What should I do?
To minimise your risk during the spilt we recommend the following:
1. Ask your Wallet Provider – whether you are using a hardware wallet such as Trezor or keeping your Token on an exchange like OKEx, you should always ask what their policies are regarding the spilt.
2. Downsize your positions – before, during or immediately after the spilt. Let the network settle down and give the network sometime to operate smoothly.
3. Stay updated – with the current development and understand that the situation can change drastically in a short period of time.
As a general reminder, one’s choice of what to invest needs to be made carefully. And remember: never invest, what you can’t afford to lose.