Understanding The Bitcoin Fork!
The Bitcoin blockchain has become slow, transactions take time to be confirmed and one has to pay a premium for miners to quickly confirm one’s transactions. This is the tyranny of miners and Bitcoin is caught in a rather Marxesque struggle between the proletariat, of which I am part of (those who don’t mine) and the bourgeoisie (miners) resulting in what I term as the “Fork Wars.” One of the ways to address this weakness of the blockchain is to conduct a hard-fork.
What is a hard-fork you ask? Well, it is positively Robert-Frostian, remember his poem, “ Two roads diverged in a yellow wood…and sorry I could not travel both…Then I took the other, as just as fair…and having perhaps the better claim.”
Simply put, it is a permanent divergence from the previous protocol of a software. In blockchain terms, it is a transmutation of the previous version of the blockchain code base to a newer and robust one.
Essentially, it is meant to make previously invalid blocks or transactions valid and the contrary also holds true. This means that the nodes have to migrate to the new version, otherwise nothing will work, there is no backward-compatibility. It is my duty to also introduce to you the term soft-fork, which is a light way of carrying out a fork only previously invalid blocks are validated. The old nodes recognize the newly-validated blocks, thus a soft-fork is said to be backward-compatible.
The Bitcoin hard-fork is seen as an inevitability by most Bitcoin leaders, if it is to scale, especially with the increase of adoption. This debate has taken place over the years and a consensus is drawing. Much as been stated on blockchain’s technical limitations and overall strategy in terms of the philosophical underpinnings behind it are going to thrive. Of course this is a concern for anyone using Bitcoin to carry out business, particularly the Bitcoin marketplaces, exchanges. I guess the question for them is, will they let people trade the traditional Bitcoin plus whatever version there’s going to be?
The major bone of contention is the block size. The current version of the blockchain has a 1MB block size limit. Why is this important? Well, transactions in the Bitcoin network are added onto the blockchain in blocks. The blocks can only hold a finite number of transactions. Let’s look at some math(it is important):
- Block size- 1MB (1,000,000 bytes)
- Average Transaction Size- e.g. 400 bytes
- Total number of transactions in a block- 1,000,000/400 = 2,500 transactions
A block is realized every ten minutes. In an hour, for instance, the total number of confirmed transactions would be 15,000 transactions. That is a concern, specifically when you compare with other customary transaction tools like credit cards, which work with seconds rather than minutes.
The two sides are effectively divided into two:
1. Bitcoin Core: This is basically a soft-fork. With this group, they believe that change takes time, and this process takes time. These folks believe in sticking with the current 1MB block size, the continuous improvement of the code base to allow for smaller transactions and ultimately increase the Bitcoin transaction volume. The proposed solution to this end is known as Segregated Witness or commonly called SegWit. This solution solves a lot of links, but this camp only wants to focus on one aspect, which is lowering the transaction size. This helps, as you probably divined, with increasing the number of transactions. SegWit wants to fix the myriad of Bitcoin glitches utilizing the lighting network (allows for lightening transactions without having to worry for confirmation times). It would allow for millions or even billions of transactions.
2. Bitcoin Unlimited: This is the hard-fork. The people on this side of the divide are concerned with large blocks, increasing the block size from 2 MB and further increases; this creates the possibility of unlimited block sizes. The miners here have the say! As a long term solution, it makes sense. It increases the number of transactions. Currently, BU has a 40% harsh rate and when it gets to 50%, they could be able to force that irreversible fork. Whichever way the needle points, we must not forget the original motive of the Bitcoin-Blockchain, our first love. The ability t0 scale is the essence of innovation, this cannot be denied. Each method presents its own challenges, but we must look to the end, the means by which we justify it will determine the fate of posterity for this technology. Remember (thinks about The Matrix film), there is no fork.
Now, the main miners and developers of bitcoin came to an accord of adopting a new way of operating the crypto-currency. And this new technology has been christened SegWit2x. However, there is a a rival which has launched, dubbed Bitcoin Cash. While SegWit2x might have averted a crisis, the latter is sure to cause a ruckus.
Now the activation of SegWit took place on the 1st of August 2017 and it locked on 8th of August 2017; the Bitcoin price is expected to reach new heights, crossing the $3000 price point as people react to the fork.
Disclaimer: This opinion piece should not be construed to be financial advice, it is a technical review on the bitcoin fork. The reader is advised to do their own due diligence on safety, economic model and local regulatory compliance before utilizing suggested platforms read disclaimer.