What is going to happen to bitcoin on August 2017? What is bitcoin hard fork? Will bitcoin price go down or up on August 1, 2017? Bitcoin is going to dead on August 2017? What is SegWit2X? What is SegWit? We are repeatedly getting these questions since last few days, so we decided to answer them in a single post.
The bitcoin network’s scaling problem is a long-running issue including thousands of stuck transactions waiting for confirmation every hour. The Bitcoin protocol allows blocks with a size limit of 1 MB. For a network with the dimensions of Bitcoin with several hundred transactions per minute, 1 MB per block is no longer sufficient. The result is a queue of countless transactions to be confirmed. Some transactions with a low transaction fee now require hours, if not days.
There have been several attempts to solve this scaling issue. Unfortunately, none of them have been emerged as a clear winner, leading to multiple factions being formed. Each faction favors their solution and believes other factions will lead to the ruin of Bitcoin.
Currently, one of these proposals, known as the User Activated Soft Fork (UASF) BIP148 is scheduled to go live on 1 August, 2017. Another group of miners has stated their intention to create another Hard Fork of the Blockchain if UASF is indeed activated, splitting the Bitcoin chain into two, one with SegWit activated and one without. We call them Bitcoin A and Bitcoin B . This scenario would probably be the worst possible solution for both digital currencies in the short term. If, for example, 50% of the network for solution approach A and 50% for solution approach B were correct, a competition between the two currencies with a different set of rules would probably be unavoidable.
What Goes Wrong or Right After a Hard Fork ?
However, the impact of UASF (User Activated Soft Fork) on Bitcoin on August 2017 could be far more far-reaching than “just” increasing the efficiency of the Bitcoin network. With the forced entry of the UASF as of 1 August, most of the node operators will activate the SegWit UASF and thus reject all blocks that do not signal SegWit support. If, therefore, the majority of the miners did not signal SegWit support by BIP148 until August 1st, the Bitcoin blockchain would split. Then there would be two different bitcoins.
The good news: Each Bitcoin would be copied to both blockchains in case of a split of the blockchain. If you own the private keys, you have both coins, Coins A and Coins B.
The bad news: Such a split can be a problem for users, depending on how the individual online exchanges and wallet providers have prepared for such a possible scenario. So you should prepare yourself.
How to Protect your Bitcoins
Fork or not, the best way to protect your bitcoins is to ensure that you have the private keys. With the keys you always have full control over your bitcoins. Don’t store your bitcoins in any exchange like Coinbase, Bitfinex etc. Don’t use an online wallet like Blockchain.info, mobile wallet or third party online service to store your bitcoins. If your bitcoins are stored with third parties on August 1, then you’re forced to use your bitcoins on whatever fork that platform chooses to support.
Bitcoin Paper Wallet aka cold storage solutions are the safest way to control your bitcoin. You can generate a paper wallet on a device with no internet access. Bitcoin paper wallet represents the public and private keys of a Bitcoin address, generated by an application. You can print off those keys to a paper and send coins to that address. By doing this you can print your very own paper wallet and it can be stored securely in exactly the same ways that cash can. Once paper wallet is generated, you can transfer your Bitcoins to cold storage.
In addition, you should only invest as much money as you can handle for any investment that is risk-averse. And most importantly: keep calm and hodl. Even if it is currently quite unlikely that the network will be split directly by means of a hard-fork, it represents a possible scenario. The activation of SegWit can be seen as a major milestone. Even if opinions are clashing here, something is moving in right direction to make Bitcoin Blockchain system more efficient, Bitcoin on August 2017.
What solution does SegWit offer for the scaling problem?
SegWit increases the block size limit and allows the implementation of a second layer solution. The current problems of bitcoin scalability result mainly from the insufficient block size. The blockchain consists of innumerable, successive blocks. The blockchain, in turn, is the directory of all the transactions that have ever taken place in the network – the heart of every crypto.
With a growing user base, the number of transactions is also growing. If the block size is the same, you do not have to be a genius to recognize that the problem will deteriorate without rapid action.
SegWit provides two solutions to scale Bitcoin. First of all, the block size can be increased to 4 MB immediately with SegWit. However, there is also a catch: 4 MB is the absolute maximum , even if the block size will ultimately adapt to the network. According to experts, the block size would scale up to 2 – 2.1 MB with a SegWit activation under given circumstances.
The second trump that SegWit provides for the Bitcoin network is the solution of transactional formability. SegWit thus eliminates a major obstacle to the introduction of a second-layer solution. This means that with the activation of SegWit, a second application could be applied simultaneously to the protocol, thereby paving the way for the Lightning Network . The Lightning Network is often seen as the ultimate solution to scalability. With the Lightning Network one could handle a large part of the transactions “offchain”, ie away from the blockchain and the network accordingly relieve.