To begin with, Bitcoin has been the talk of every news channel, tabloid, website, etc. for a long while now. It’s increasing popularity might’ve caused a little problem for the network. Bitcoin is in a messy situation right now and something needs to be done. Fortunately, two possible solutions have been proposed as well, but only one can exist.
What is Bitcoin Hard Fork?
It is a compulsory software update that is required in order for the program to function. It can be implemented to fix bug errors or any security issues present in the older version of the software. Also, a hard fork is irreversible.
The “hard fork” will split the blockchain, leading to the introduction of a new chain of transactions branching from the original one.
Bitcoin Fork Explained – What’s The Issue?
In simple words, Bitcoin is unable to withstand the number of transactions taking place on the network.
The technical explanation is that the 1MB block size limit which is programmed into the system has become a problem and is causing delays in the processing of transactions. Basically, a purchase can take from a few minutes to hours to confirm.
Two techniques were proposed, which result in two different solutions: Bitcoin Unlimited, and Segregated Witness. They’re both proposed software updates to the Bitcoin network with the aim to completely change the way Bitcoin functions.
Obviously, the two can’t coexist, that would “fork” the Bitcoin network – splitting it into two different digital currencies.
A fork is known as a software update. Basically, updating a program from an old version to a new one to fork bitcoin.
Starting off with Bitcoin Unlimited, this proposal is favored majorly by Bitcoin miners. To understand this, you must know the concept of Bitcoin mining. Bitcoin miners use specified powerful computers to solve complex mathematical algorithms in order to verify a transaction and be rewarded with newly issued bitcoins.
We are aware that there is a built-in block size limit of 1MB in the Bitcoin network, however, BU gives miners the permission to vote on increasing the block size whenever they want. This gives them control of the Bitcoin network, due to which they’re favored by miners.
On the other hand, SegWit is being voted by many Bitcoin enthusiasts and developers. Their aim is to optimize the Bitcoin coding in a way that allows them to decrease the transaction size and increase the transaction volume, all while sticking to the 1MB block limit. They suggest the use of a soft fork.
A soft fork is a software update that lets the network to adapt to the new functionalities and features implemented. The update doesn’t interfere with the existing software and the older version will still be usable.
When is Bitcoin Hard Fork Happening?
Every Bitcoin user around the world is anxiously waiting for August 1st– a day that will mark the history of bitcoin. No one really knows what to expect but we are all eager to know what will be the fate of Bitcoin. We’re approximately 2 weeks away from the big day so let’s reflect back on the possible end result.
On 31st July, the activation of SegWit2x is set to take place. SegWit2x is a proposal that will enact SegWit through a Soft Fork but will increase its block-size limit by Hard Fork after three months. So, basically, SegWit2x will be introducing Segregated Witness first which will follow a 2MB block-size increase three months later.
Moreover, SegWit2x has the support of major mining pools which means it’s backed up by miners.
What Will Be The Bitcoin Hard Fork Consequences?
When the 2MB hard fork is scheduled to be introduced, there are chances of a chain split to occur cause of the soft fork. This, in return, would lead some part of the community jumping on to SegWit2x while others remain on SegWit.
This can create a very messy situation as there would be two different kinds of Bitcoin present. The last thing we’d want is to damage Bitcoin, particularly since there are high chances of two competitor blockchains existing simultaneously.
What Should I Do in Order To Prepare For August 1st?
You’re advised to move your bitcoins to a private wallet, where you solely are in charge of your private keys. Also, be sure to do this before July 31st, and remain until storm calms down. We are not aware of what is in store for us on August 1st or the day after, and the future is a total blur. So, let’s sit back and watch the calendar hit August.
Who Will Be The Winner?
Aha! Too bad we can’t answer this question because half the community goes for SegWit and the other half for BU. There’s not really much we can do, just voice out our opinion and educate others with whatever we learn and maybe help them come up with opinions of their own.
We’ll just have to patiently wait and watch how this turns out.
I’d like to point out that I have a very limited technical knowledge and only know my way around a few technical terminologies. This post is a compilation of weeks of research that I’ve put together myself. So, if you do find any errors, do let me know in the comment section below and I’ll be sure to check.