1. A hardfork again?
The danger of a hardforward, i.e. the splitting of the network into several separate blockchains, seemed to have been minimized some time ago. In recent days, however, the issue has once again been high on the agenda of the bitcoin community. So what happened and why is this so threatening-sounding hardforward threatening bitcoin again?
2. Why did the likelihood of a hardforward seem low?
To do this, we need to look back at how events have unfolded in the issue of scaling bitcoin over the past few months. The main improvement that much of the community has been pushing for has long been Segregated Witness (SegWit). However, it required the support of at least 95% of miners to activate it. Based on their economic interests, not everyone agreed to support the proposal. At some point, the confrontation between several camps reached an impasse, the way out of which, it seemed, could be the SegWit2x proposal. The solution consists of two parts: the first one activates SegWit, the second one increases the block size to 2Mb.
However, it also faced some difficulties: the fact that the proposal was accepted behind closed doors by a group of miners and companies caused discontent in the community. The answer was the UASF proposal, a user-activated softfork. It would also activate SegWit, but at the expense of node holders, thus depriving miners of an economic advantage.
The activation of the UASF is due on August 1, 2017, but it also carried the threat of a hardfork. It was avoided with another BIP 91 solution, which proved to be compatible with both SegWit2x and UASF. Its activation took place on July 22, after which all paths to SegWit implementation were opened.
3. So why is there talk of a hardforward again?
In a series of all these events, a group of industry representatives (mostly Chinese miners who are pushing for a larger block size) announced their intention to launch a separate client called BitcoinABC. Initially, it was supposed to become a kind of safety net in case the second part of SegWit2x was not implemented. The client was assigned a separate coin called Bitcoin Cash (BCC).
However, to the surprise of many, BitcoinABC developers announced their intention to launch the protocol as early as August 1, i.e. the same day that UASF activation is supposed to take place.
4. What does the launch of BitcoinABC (Bitcoin Cash) mean?
First, it is a permanent fork of the current bitcoin network, which, while retaining previous record history, is incompatible with the solutions described in the SegWit2x and UASF proposals. Nevertheless, the probability of its implementation, according to many in the industry, is estimated at almost 99%.
The FAQ section of the project’s website states:
- Is Bitcoin Cash different from Bitcoin?
- Yes. Bitcoin Cash is an extension of the Bitcoin project as a peer-to-peer digital currency. It is a fork of the bitcoin blockchain with updated consensus rules that make further growth and scaling possible.
5. I use bitcoin. How does this affect me personally?
The Bitcoin Cash fork means that if a user has a certain amount of bitcoins as of 12:20 UTC on August 1, 2017, when the new client is expected to be activated, they will have the same amount of BCC coins after that.
6. Just like that, free money?
Yes. But under one condition – the user must personally control the private keys to their wallet. If the funds are stored with a third-party provider (such as an exchange or one of the online wallets), there is a high probability that the user will not be able to get the BCC coins he is entitled to. For example, the popular Coinbase wallet has already announced that it will not support Bitcoin Cash because it is incompatible with the current version of bitcoin.
A number of exchanges and wallets say they are ready to distribute BCC to users, but there is no certainty that they will be technically ready to do that.
7. What other risks might there be in a Bitcoin Cash launch?
All hardforces carry risks of replay attacks and wipeout attacks. According to Bitcoin Cash developers, protection against replay attacks is already built into the new software. As for the risk of a wipeout attack, it may be insignificant because it is a completely new blockchain.
8. What are the main features of Bitcoin Cash?
First, Bitcoin Cash offers a much larger block size – 8Mb versus the current 1Mb version of bitcoin. The block size in Bitcoin Cash, meanwhile, is supposedly configurable depending on needs.
Second, as already mentioned, the new software has a built-in mechanism to protect against attacks (although this statement is questioned by some bitcoin developers), as well as a slightly different structure of transaction signatures.
Third, Bitcoin Cash promises faster recalculation of complexity than the current version of bitcoin (2016 blocks).
9. What does this mean for bitcoin?
This is the most difficult question, and it is not easy to answer at this stage. According to part of the community, the Bitcoin Cash hardfork means nothing more than the creation of a new altcoin, which will have its own blockchain and its own ticker – BCC, not BTC.
However, questions remain as to which pools will mine BCC and which circuit will have a higher hash rate. Would it be correct to call BCC a bitcoin if the hash rate of this circuit suddenly turns out to be higher than the current version of bitcoin? What will be the volumes of both chains and what will be the price ratio of the two coins? Finally, how will the launch of Bitcoin Cash affect the second part of Segwit2x, i.e. the increase in block size to 2Mb, and which chain will projects working on top of the bitcoin blockchain (CounterParty, Omni, etc.) choose?
10. What is the best way to prepare for the hardforge?
It makes sense to clarify with your providers how they are preparing for possible hardforces, otherwise the best solution is to withdraw money to a wallet, the private keys of which are controlled by the user himself. In this case, when hardforward occurs and new coins appear, the user will be able to perform the necessary actions and receive coins in both chains.
11. What exchanges and wallets support Bitcoin Cash?
There are not many so far, and the information is available on the official website of the project. As of July 26, such exchanges as ViaBTC, OKex (OkCoin), BitHumb and Huobi are mentioned here. Wallets – BitcoinABC, Ledger and Electrum Cash (the team of the popular Electrum wallet has already made a statement that it has nothing to do with the latter).