Bitcoin Hard Fork: If You Want Peace, Prepare for War

The author of this article, Piotr Piasecki, is a Master of Science and a double Bachelor of Science in Computer Science and Informatics. He currently serves as an advisor to the Cryptocurrency Certification Consortium (CCCC), Chief Scientist at Provable Inc, and a core developer of Factom.

Over the past few weeks, we have had a lot of discussion about Bitcoin forks. Every member of the Bitcoin community has been making their voices heard, so I thought I’d write down my thoughts as well.

Bitcoin Forks from a Historical Perspective

Although the recent debate has advanced significantly, this is not a new issue. In mid-2015, BIP 101 proposed increasing the block size, and in late 2015, BIP 141 introduced SegWit. Since then we have seen a number of projects that want to fork Bitcoin - BitcoinXT, Bitcoin Unlimited, and Bitcoin Classic. In addition, there are many other proposals, such as sidechains, Liquid, user-activated soft forks (UASF), and so on.

In summary, we all agree (ok, there are some exceptions) that we need to increase the transaction capacity of the Bitcoin network. We really can’t wait any longer — scaling has become an issue since 2015, and it has become an issue that must be solved now.

The Bitcoin network is slowing down

For a long time, Bitcoin had a first-mover advantage - everyone wanted to get on the network and build on top of it. The early days of the Bitcoin community were very interesting - seeing the first Bitcoin ATM installed, getting the first merchant to accept Bitcoin payments. However, things are very different now.

A transaction needs to wait for multiple blocks to be confirmed and pay more than 30 cents in fees - this is not much better than what we saw years ago.

If nothing changes, we may see many large Bitcoin companies expand or migrate to other platforms. Coinbase is no longer willing to pay transaction fees for customers, Storj has switched to Ethereum, etc. As Ethereum's market value continues to rise, there are fewer reasons for customers to stay in Bitcoin.

Fork

The Bitcoin scaling issue has not only not been resolved to this day, but has brought the community into a fork situation. However, as far as I understand, the current fork debate has been divided into two main camps - those who support Bitcoin Unlimited (BU) and those who want to activate Segregated Witness this year.

As we try to figure out what happens next, we have to remember that we haven’t seen many examples of contentious hard forks.

In my opinion, BU is on a path to activate the hard fork regardless of the consequences. BU is gaining more and more nodes and hashrate. BU's node count could be fake, as there have been reports of mining pools that do not support BU being attacked (by orphaning blocks that do not signal support in a minority attack). There are also concerns that someone could blacklist miners that signal support for SegWit through an effective ASICs mining monopoly.

Finally, we also need to remember the man who pushed for the adoption of BU – Roger Ver.

I’m not going to discuss his past or character here, instead let’s focus on the fact that he is an early Bitcoin adopter who looks like he will go down in Bitcoin history. He holds at least 130,000 Bitcoins, which is four times the total amount of Bitcoin raised in the Ethereum presale. So my guess is that he can afford to pay for the hard fork himself, even if it doesn’t make financial sense to do so.

Because of this, I think BU will activate its fork soon. So let’s talk about what happens after the fork?

Forked Aftershocks

Recently, there was an interesting exchange between Gavin Andson and Blockstream co-founder Matt Corallo about whether Bitcoin Core should choose to accept a possible fork. However, it seems that the current answer is "NO", which means that the Core camp will not accept the BU block, which will lead to a fork.

If you want to keep the Bitcoin network on one side of the fork, then you have to attack the other side. Whether this is an ethical or legal way to proceed is up for debate. Regardless, it is important to remember that a 51% attack on the Bitcoin Core fork is possible. Fortunately, there is a "nuclear option" to defend against this happening - changing the PoW. Given that the vast majority of the Bitcoin network's computing power relies on ASICs, any change to the mining algorithm will eliminate all mining hardware. This means that attackers who are already lurking in ASICs will end up with a bunch of useless hardware, but honest miners will also face the same problem.

So if BU forks and tries to attack the Core chain, we may end up with a forked chain that changes PoW. This forked chain will either survive with the help of miners who oppose BU, or it will be abandoned by the wayside by miners because they will follow the trend and switch to BU to maintain income.

In the early days, the chain that changes PoW will still be vulnerable to attacks. There are many altcoin miners who are ready to invest their CPUs and GPUs. Whether they will become supporters of the Bitcoin PoW fork chain or become mercenaries of the attackers remains to be seen.

If there is no attack on the minority fork, the Bitcoin landscape may be more peaceful, but also more divided. Many exchanges have already issued hard fork statements, and it seems that they will either ignore BU or treat it as a competing coin. In short, Bitcoin is likely to repeat the same scene as ETH and ETC.

If Bitcoin forks and BU does not gain key supporters (miners, exchanges, developers, etc.) in the early stages, then BU may go the way of Elacoin. (Elacoin was an obscure competitive coin that used proof of work and was beginning to die. However, a new developer decided to breathe new life into the coin by creating a proof of stake (POS) fork. Many people were excited about this update, so the coin's trading volume rebounded.) For a cryptocurrency, someone must trade and develop it in order to keep up.

Prepare

Since the Bitcoin fork has not yet happened, there is still time to prepare. Every Bitcoin business must consider the impact of a hard fork on their business. What will happen to Bitcoin users' BTC balances? How will you deal with replay attacks? What edge cases need to be considered?

We have discussed this issue while working on Factom and we will not be helping customers keep custody of their BTC balances.

Finally, every Bitcoin user must be prepared for the fork. Whether you decide to put your Bitcoin on a responsible exchange, keep it in your own wallet, or sell it now and buy it back at a lower price when the fork occurs, you must stay awake, otherwise you will have to take the risk of losing some of your coins when the fork occurs.

in conclusion

Bitcoin needs to solve the transaction throughput problem as soon as possible. BU may try to hard fork soon. This fork will either split the community or attack the minority chain (or small computing power chain) to force everyone to switch. This attack may lead to another fork and uncertainty about the future of the minority chain. Everyone should be prepared for this fork. As the ancient Roman military writer Vegetius said: If you want peace, then prepare for war.