Will July 31 Be the Death of Bitcoin?

The Bitcoin network will find itself as a crucial crossroads come July 31st.

This monumental day in the history of cryptocurrency will mark 24 hours of potential network chaos. There is a small chance we will effectively see a network chain split take place, although everything is being done to prevent that from happening. Now is a good time to recap what we can expect on July 31st, and how to prepare for whatever the future may hold.

July 31st is the most critical day for Bitcoin [Since it’s launch, and MtGox]

Ever since Bitcoin was first created by Satoshi Nakamoto, it was only a matter of time before the network would reach its full capacity. Similar to any other form of disruptive technology, Bitcoin finds itself in a position where scaling is a top priority. However, various developers have many different opinions on how this scaling solution should be achieved.  That is not entirely surprising, as different ideas can often lead to innovative and better solutions altogether.

Bitcoin has reached the tipping point. The network is slowing down, and these issues must be resolved.

Bitcoin Network Issues

Transaction Protocol Delays

Optimizing Bitcoin can be done in many different ways, according to the developers. On July 31st, we will see the activation of  a proposal known as SegWit2x. This particular concept will introduce the long-awaited activation of Segregated Witness on the particular network, with a block size increase to 2MB following three months later in the form of a hard fork. This solution is supported by quite a few mining pools and service providers, which is good to see.

However, the economic majority of Bitcoin users – non-miners, other service providers, exchanges, and most of the network nodes – are in favor of implementing Segregated Witness through a different solution. The UASF, also referred to as BIP148, will activate Segregated Witness on the network, assuming enough nodes will signal for its activation at 2 AM GMT+2 on August 1st. Moreover, BIP148 will NOT introduce a block size increase to 2MB.

It is evident both of these solutions clash in terms of ideology and timing, which is why the likelihood of a Bitcoin chain split should not be underestimated. Rest assured there will be some degree of network disruption, as SegWit2x will activate first. That is, if 80% or more of the total network’s miners still signal its activation by then. SegWit2x and the UASF are not mutually exclusive, but it is expected there will be no overlap between supporters of both solutions. 

What Will a Network Split do?

Network Fork

It is possible we will see one group of users support SegWit2x on one blockchain, and another group in favor of BIP148 on a different blockchain. If that happens, we will have two competing versions of Bitcoin. It then becomes quite difficult to determine which is the “real one” and which is the ‘altcoin”. These discussions will likely cause the aforementioned network disruption, which means all Bitcoin enthusiasts need to prepare for a turbulent 24-48 hour period.

Avoiding Bitcoin Network Issues

Anyone accepting Bitcoin payments should pause doing so on July 30th around midnight, to avoid any issues. Bitcoin users should hold off on sending transactions until August 2nd to make sure the dust settled. Exchanges will probably halt deposits and withdrawals, as well as trading, until these matters are resolved. There will be some price fluctuations on the charts, as that can’t be avoided during such a critical time. Make sure your coins are safe in a wallet only you can control through the private key by July 30th.

There will be more on this topic, stay up to date with Cryptocrooks.