This is an exclusive opinion editorial from Charlie Lee, the creator of Litecoin and a prominent figure in the cryptocurrency community, on the possible actions that will be undertaken by Coinbase and various exchanges with regards to the Segwit2x Hardfork in November.
I’ve been asked multiple times how I think Coinbase (and other exchanges) will handle the Segwit2x hardfork in November. For background, although I’m no longer working at Coinbase, I was previously Director of Engineer at Coinbase and led the GDAX team, and I still give Coinbase advice. This is how I think this 2x hardfork will play out. (See also: Guide to Forks: Everything You Need to Know About Forks, Hard Fork and Soft Fork)
With the ETC and BCH hardforks, it was clear that those 2 coins will be the minority fork, so it was safe to use a wait-and-see approach. So Coinbase didn’t support those forks initially. And only if there was traction on those forks, would Coinbase spend the time and resources to support those forks and let people access their coins on the minority chain. That is what Coinbase did with both ETC and BCH hard forks. (See also: What’s the Difference Between Ethereum and Ethereum Classic? and Bitcoin’s Civil War: How and Why?)
For the 2x hardfork, things are a bit more tricky. 2x is supposed to be an upgrade to the Bitcoin protocol. What that means is that ideally, everyone should upgrade to the 2x code before the hardfork and the hardfork will just happen and everyone would just switch to the new chain and no one would be on the old chain. This only works if everyone did this. Because this is a hardfork, if not everyone upgrades, then there will be 2 chains. The supporters of 2x and the NYA agreement believe that if all the mining hash rate switches over to the 2x chain, the original chain will be dead and no one would use it. But how is that different than fiat currency, where miners decide (by fiat) that your old bills are no longer valid? Thankfully, Bitcoin doesn’t work this way. It’s the people who use the coin that gives it value, and miners will mine the coin that makes them the most money. And right now, pretty much all the Bitcoin Core developers and a large part of the community including a lot of prominent figures in this space have come out against this hardfork.
Since this 2x hardfork is so contentious, Coinbase cannot handle it the same way they handled the ETC and BCH hardfork. In other words, they can’t just choose one fork and ignore the other fork. Choosing to support only one fork (whichever that is) would cause a lot of confusion for users and open them up to lawsuits. So Coinbase is forced to support both forks at the time of the hardfork and needs to let the market decide which is the real Bitcoin. Now the question is which fork will retain the “BTC” and “Bitcoin” moniker and which will be listed as something separate. Although Coinbase signed the NYA agreement, I do not believe that this agreement binds them in any way with respect to how to name the separate forks. For practical reasons, the BTC symbol belongs to the incumbent, which is the original chain. This is because there will be no disruption to people who are running Bitcoin Core software and depositing/withdrawing BTC to/from Coinbase and GDAX. And only if you trade the coin on the 2x fork, would you need to download and run the BTC1 Segwit2x client.
If the market really supports this Segwit2x upgrade, that coin will trade at a higher price. And then we will all agree which is Bitcoin and which is a minority fork. There will be no contention at that point. (Read also: Coins, Tokens & Altcoins: What’s the Difference?)
This is the advice I have given to Coinbase and I expect Coinbase and other exchanges to handle this Segwit2x hardfork in this way.
This is an opinion piece and does not, in any way, reflect the actions that will be undertaken by Coinbase or any other exchanges for that matter.
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