This guide will clarify everything that you need to know about the two upcoming Bitcoin hardforks – Bitcoin Gold & Segwit2X – and what you should do in preparation for it.
Another chapter of Bitcoin’s controversial journey beckons and this time, there’s going to be 2 hardforks in the next coming weeks that would possibly entail the creation of another 2 Bitcoins. Just recently on August 1, Bitcoin had created a new currency called Bitcoin Cash, that was a result of increasing Bitcoin’s block size capacity from the default 1MB to 8MB. This increase in block size was proposed as a scalability solution to allow for more transactions to be processed, thereby alleviating the bottleneck and reducing transaction fees. (Read also: Guide to Common Crypto Terms)
What are Hardforks and Why Does It Happen?
Hardforks refers to a split in the current chain due to a major change to the underlying protocol, which would basically change the main features of the Blockchain. It can either be planned or controversial. A planned hardfork is a protocol upgrade (hence requiring a change in the protocol) that has already been stated on the project’s roadmap since the start. An example is Ethereum’s Metropolis hardfork, which upgrades the base for better scalability and private transactions that have been outlined in Ethereum’s roadmap.
A contentious hardfork is due to disagreements within the community which results in a portion of them creating a new chain (and in their perspective a better one) by introducing major changes to the code, just like the creation of Bitcoin Cash. (Read more: Guide to Forks: Everything You Need to Know About Forks, Hard Fork and Soft Fork)
What Are The Upcoming Bitcoin Hardforks?
In the next few weeks, Bitcoin will undergo 2 more controversial hardforks which are as follows:
Bitcoin Gold: Expected hardfork to occur on October 25
Segwit2X: Expected hardfork to occur on Block 494,784, approximately on November 18
Let’s look at each hardfork and how you can take action to prepare for them. (See also: Exclusive: How Coinbase and Other Exchanges will Handle the Segwit2x Hardfork)
Bitcoin Gold Hardfork
Announced right before Bitcoin Cash forked, the ambition of BTG is to re-decentralize Bitcoin by allowing anyone to fairly mine Bitcoin again. It solves the issue of miner centralization through changing the consensus mechanism that makes them resistant to mining-specific (called ASIC) hardware, which is currently being used by large, centralized mining pools. (See also: Bitcoin’s Civil War: How and Why?)
Funfact: Currently, an ASIC hardware can perform 1 million times faster than an average CPU
The relationship is simple; having more hashing (processing) power means having greater influence over the Bitcoin network, which could, therefore, compromise the security of the system and compromise its very nature of decentralization. The idea is to create a level playing field for anyone to mine Bitcoins using CPUs and GPUs, and thereby achieving true decentralization.
- Great idea of re-empowering the average person in Bitcoin mining to achieve true decentralization
- Uncompleted codebase; only one volunteer developer until now. That’s a worrying indicator
- The decision to pre-mine coins for developers, which is opaque at the moment. It may seem as a cash-grab, which has negative implications
Segwit2X is a major controversial hardfork that has deeply segregated the Bitcoin community politically and philosophically. The core of the controversy lies in the proposed solutions to solve Bitcoin’s issue of scalability. Bitcoin’s current block size of 1mb impedes its ability to process a growing number of transactions stemming from higher usage, acceptance and traction. This, therefore, causes longer confirmation times and higher fees for users.
On average, the Bitcoin network processes 7 transactions per second. Compare that to Visa’s capability of processing 56,000 transactions per second
Segwit2X consist of 2 parts:
- Segwit: A process to increase the volume of transactions through transaction malleability, officially released in November 2016
- 2X: An increase in the block size limit from the current 1MB to 2MB that requires a change in Bitcoin’s underlying protocol, which therefore requires a hardfork
The community is highly divided with proponents arguing that it will result in lower transaction fees and faster confirmations, while opponents argue that it increases mining centralization, results in security concerns and leads to brand confusion. More importantly, many feel that the entire deal was orchestrated by a small group of elites that are not representative of the entire community, which goes against the ethos of true decentralization and “elitism”. (Read also: Guide on Privacy Coins: Comparison of Anonymous Cryptocurrencies)
What Should I Do?
The by-product of a hardfork is the creation of a new coin, assuming there’s support for it. And since both of the upcoming Bitcoin forks are contentious, they’re supported by a segment of the community and we can expect 2 new coins; BTG and B2X. (Read also: Coins, Tokens & Altcoins: What’s the Difference?)
Here’s a list of exchanges that would possibly support both coins:
Exchanges that Support Bitcoin Gold (BTG)
Exchanges That Will Highly Likely Support Segwit2X (B2X)
It is highly recommended that you keep your Bitcoin in a private wallet in which you control your private keys. Leaving your coins in an exchange is risky as you do not control your coins and if the exchange doesn’t support BTG or B2X, you WILL NOT receive the free coins. Only by storing your coins in a private wallet that you control will you be able to redeem BTG and B2X. The best private wallets are hardware wallets which usually provides support in the event of hardforks. (See more: Guide to Cryptocurrency Wallets: Why Do You Need Wallets?)
Advice: Leaving your BTC in your hardware wallet doesn't mean that you'll get the forked coin automatically(e.g. BTG). If your hardware wallet doesn't support it, then you need to manually redeem your BTG by exporting your private keys and importing them into the official BTG wallet (assuming it will be ready). This requires osme form of technical knowledge. However, it is very likely that Ledger/Nano would support the forked coins (BTG & Segwit2X), but it may take awhile.
Alternatively, you can also use software wallets such as:
Security Tip: Do not give your private keys to any websites that demands your keys. Your private keys should only be known to you and you should protect it with your life. Loss of your private keys essentially means loss of your precious Bitcoins> If possible, activate 2FA to enhance your security. You can read more here: Guide to Cryptocurrency Security: Activating 2FA.
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I'm Aziz, a seasoned cryptocurrency trader who's really passionate about 2 things; #1) the awesome-revolutionary blockchain technology underlying crypto and #2) helping make bitcoin great ‘again'!