Decision Time for Bitcoin as Miners Start Signalling Segwit2x

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After more than two years of debate and protocol stagnation, miners have now begun signalling for Segwit2x, a new proposal that combines both Segregated Witnesses (segwit), and a 2MB “base blocksize increase” through a hardfork.

The proposal is backed by 53 companies and 83.28% of the hashing power, according to the Digital Currency Group (DCG). Those companies include strong small blocks and big blocks supporters.

Barry Silbert, founder of DCG, led what is now known as the New York Agreement , with Jeff Garzik, a former Bitcoin Core committer, announcing the release of the alpha version just a few days ago.

Soon after, miners began signalling, with Bitfury, a very strong supporter of Bitcoin Core, going first. Followed by, in no particular order, F2Pool, Antpool, BTC.TOP, BTC.com, Bixin (former HaoBTC) and ViaBTC, accounting for nearly 70% of the hashrate.

The rest will probably follow shortly, with BTCC and BW.com the two big ones, sending it to around 80%, its activation threshold.

Once that is reached, miners will then start signalling compatibility with Bitcoin Core, hoping to bring that to around 95%, allowing it to reach its threshold by either the rest of miners upgrading or by the upgraded miners forking the blocks of non-upgraded miners.

Thereafter, the segwit2x client is set to undertake a flag day hardfork in around three months, but there is nothing binding on miners to go through with it. Thus whether they will do so or not remains uncertain.

The segwit version in segwit2x is delivered “with the existing discount intact for maximum compatibility,” according to Jeff Garzik. Which suggests it is identical to Bitcoin Core’s segwit.

It therefore appears to have the support of r/bitcoin, where some commentators suggest that the proposal is just segwit as they don’t have to go through with the hardfork.

On r/btc, opinion appears to be more split, but mainly against the proposal, with some of them suggesting this is just a way to activate segwit as the hardfork probably won’t go through.

Commentary

Everyone is fed up with the scalability debate, so businesses and miners appear to have reached a saving face agreement giving in on what has been the main point of contention for segwit, the 75% discount.

It’s effect is to make on-chain scaling more difficult because of an attack vector whereby bigger blocks can be created through useless signature only transactions, thus requiring lower on-chain capacity for useful transactions.

There are probably some technical reasons for it, but the main reason is likely political. The 75% discount penalizes on-chain capacity increases, thus ensuring blocks remain as small as possible.

Small blocks operating at full capacity are required for the settlement network whereby on-chain transactions are largely reserved for second layers where everyone transacts, with the base layer largely serving the second layers.

In other words, Bitcoin Core won. Since it appears to be doing so with vast support, any alternative client is likely to be a minority coin with potentially little relevance.

That means once segwit activates sometime next month, the Bitcoin Core roadmap can go into effect, with the Lightning Network perhaps released soon after, followed by a number of new features, including Sidechains.

Bitcoin and Ethereum, the Two Visions

With bitcoin bigger blocks out of the way as the hardfork is unlikely to go through – and even if it does go through it’s only a 2MB increase without a clear roadmap thereafter, thus keeping blocks very small – the market may soon be given a choice between settlement bitcoin or ethereum with as good as unlimited on-chain scalability.

The two currencies may become even more differentiated, with a good analogy being bitcoin tor vs ethereum firefox.

Eventually, it will become clear one approach is better, but until then, the market will be given the opportunity to speculate, while bitcoin’s bigger block supporters may be left with only ethereum as a choice.

It is perhaps the best outcome as competent bigger blocks development teams did not win the support of bitcoin’s miners.

On the other hand, ethereum, with its own ecosystem, very capable developers, an approach fairly similar to bigger blockers, plus smart contracts, is a real option, to be judged not by closed door meetings, but by the open and free market.

Which will prevail in gaining the majority of market share only time can say, but the bitcoin scalability debate has left a sour taste in many. It remains to be seen whether they can now reconcile, but based on past instances that appears unlikely.

Bigger block supporters, therefore, may even split, but lacking any leadership and with their approach being largely the same as ethereum’s, they may not gain much mind share in the very crowded market place.

Whatever the end result, with a decision reached, we can at least hope they will stop being at each other’s throat, make their own choices, and return the focus on innovation.

 

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