The SegWit2x Hard-Fork Cancellation ExplainedDate Written: November 24 2017 Written By: Kyle David
On November 8th, The Chief Executive Officer of BitGo, Mike Belshe, made an announcement that SegWit2x would not be able to activate as a result of insufficient community support. According to Belshe, this event, which was going to fork Bitcoin, could have been an undermining factor towards the strides the Bitcoin has made so far.
In his four-paragraphed statement, Mike saw it as a wise decision by the community to cancel the SegWit2x fork which would have impacted Bitcoin in various spheres. What was contemptuously missing on his statement were the causes and implications of the proposed fork.
Despite all that, it is very vital for cryptocurrency enthusiasts, especially Bitcoin owners, to understand how such actions might impact the future of the world’s largest cryptocurrency.
SegWit2x’s Purpose & Why It Met Opposition
November 16th was the date that had been originally predicted for the activation of the SegWit2x fork (block 494784). More than 80% of the mining hash rate expressed their support for the fork as it was intended to increase the block size six months after its activation. Major bitcoin firms such as Bitmain, BitPay, CoinBase, and even other major exchanges like ShapeShift and Bitfinex, originally agreed to support the the Bitcoin hard fork. According to the fork’s proponents, the size limit of 1mb blocks could no longer support the ever-growing volume of Bitcoin.
This would then result in even more expensive transaction fees and increased confirmation times. As a matter of fact, the average transaction fees peaked at a high of $19.198 USD on November 12th. At the moment, the average Bitcoin transaction fee has come down by more than 50% according to bitinfocharts.
Expensive fees limit the practical use of Bitcoin to larger transactions and make ordinary small payments ineffective. This is not a big deal if you are holding Bitcoin, or view it as a speculative asset – but for those who see it as an alternative payment method, this is could be a huge problem.
A large portion of the Bitcoin community believed that some of these problems could have been permanently fixed by the planned SegWit2x. But in sharp contrast, the developers of Bitcoin Core, who also control the repository of Bitcoin Github, ultimately objected the planned SegWit2x.
When all was said and done, the entire market seems to have agreed with them. One of the problems they were able to pinpoint from the proposed fork was that it lacked a form of built-in replay protection since both blockchains share the same format of the transaction.
The Effects of SegWit2x
Bitcoin Cash seems to be one of the beneficiaries of the cancellation of the SegWit2x, as many cryptocurrency owners saw it as a potential alternative for sending lower value transactions without incurring high confirmation fees/times. Bitcoin Cash has 8Mb blocks with a medium fee that is estimated at around $0.07. This is substantially lower compared to that of Bitcoin in recent weeks.
After the cancellation of the SegWit2x fork, the price of Bitcoin Cash went up as high as $2400 USD, which is more than double what it had been before November 8th. The cancellation of the SegWit2x was one of the major reasons why Bitcoin’s price plummeted from around $7500 before SegWit2x was cancelled to about $5300 in just a few days. The price has since recovered to above $8000 at the time of this post.
Bitcoin’s price actions had certain similarities to what had happened before both Bitcoin Gold and Bitcoin Cash forks. After these two forks, the price went down, a sign that there were certain owners who purchased Bitcoin because of the free money and sold it off after receiving their free coins.
Even at the moment, the developers of Bitcoin are trying to come up with alternative solutions for expanding the scalability of Bitcoin. Off-chain transactions are one of the possible solutions that have been proposed. This would allow users to create channels where they would be able to send Bitcoins to each other with almost non-existent fees.