You may have heard of something called Segregated Witness or SEGWIT for short – now do not worry if you haven’t because this is to do with the long now ongoing debate about how to increase the number of transactions that can be dealt with in one block of Bitcoin.
That last paragraph needs to be explained so here goes:
Every time a Bitcoin transaction happens anywhere around the world, miners need to confirm the transaction. These transactions form a queue and are included in the next available Bitcoin Block and once they are confirmed by enough miners they are deemed to be part of the blockchain ledger as real and genuine transactions and are then set in stone. While transaction confirmation is being awaited those transactions go into what is called the Blockchain Meme Pool.
Currently, there is a total limit of 1 megabyte of data as a capacity on each block and because Bitcoin transactions are growing constantly, big queues are now forming and have been doing so for a while for each block in the system and confirmation times are getting longer and longer.
Now miners (being crafty types) are making hay with this issue as they have realised that they can get increased confirmation fees from impatient people who want to get their transactions confirmed quickly (we’ll call these queue jumpers for ease). Not such bad news of course if you are directly benefitting from mining pool income.
Thus, we have a situation now with Bitcoin where you can elect (through your chosen wallet) to increase the normal fee you would pay to send Bitcoin so that the transactions happen more quickly. Also, of course, without these increased fees, miners are tending to automatically prioritise bigger transactions over smaller ones because, of course, bigger transactions automatically create bigger fees.
SEGWIT was a proposed move made by Bitcoin Core to increase the size of a block’s data capacity to up to 4mb. Obviously with SEGWIT in operation each Block on the chain can deal with many more transactions and this keeps everything rolling smoothly. For several reasons (I will not cover them here) the real increase in data isn’t going to be anything like the full 4mb – but block capacities will more than double under SEGWIT nevertheless.
Ahh, but life is never so simple…
SEGWIT was introduced in November 2016 with a view to being fully implemented by November 2017 once a clear majority of mining nodes had signalled their agreement and approval of it but this take up of SEGWIT has been slow to say the least.
Basically, a miner signals the “I’m up for SEGWIT” approval by announcing that (through the mining software) when a block is processed. This is very simple to do and something that requires a minor update to their software.
But like the very best of squabbling schoolchildren, it hasn’t been that simple because another group of miners and Bitcoin zealots decided that they would prefer a thing called Bitcoin Unlimited and no limit whatsoever on Bitcoin Block size and its data.
Now you’d think that an increase to limitless versus an increase that merely doubles would be a good thing BUT sadly, to make such a big change in Bitcoin’s core programming would require a major change and something called a hard fork and most folks don’t like hard forks because they are final and instant and if you don’t go with it for whatever reason, you could find yourself suddenly not producing – (we’ll call it) real Bitcoin anymore and instead a second Bitcoin emerges that runs along a totally new chain.
SEGWIT, on the other hand, is a subtle change that requires something we call a soft fork. With a soft fork, blocks produced that do not conform to the new rules become orphan blocks and eventually they would simply cease to exist. Now folks, I must confess here that I am a little bit lost with the intricacies of this technical stuff so I am doing my best to simplify so, for the real tech heads among, you do not be too hard on me if I have oversimplified in some areas.
Long and the short of it is this – SEGWIT easy or soft, Unlimited hard. But the squabbles are ongoing and so Mr Clever Pants on the SEGWIT side (actually his real name or pseudonym is “shaolinfry”) came up with BIP 148.
So, what is BIP 148 and why should we care?
We should care because understanding at least a little of this could stop you making a serious cock-up and putting or keeping your Bitcoin in the wrong place and keeping it there on 1st August 2017.
Before I continue, be aware that this “having it in the wrong place” scenario would be worst-case scenario only if things do not work out as expected between now and then. But worst-case scenario can easily be avoided by simply being aware of what I explain here. I cannot stress enough that “worse-case scenario” is very unlikely in my opinion so I will explain exactly what that is right at the end of this article once a useful explanation of why this is happening is given.
Maybe you should go grab a cup of coffee first.
A BIP is a Bitcoin Improvement Proposal. 148 (or whatever the number following the letters B I P are) simply gives it a reference number or title.
Because the implementation of SEGWIT has been dragging its heels so to speak, BIP 148 is designed to kick it into gear on a fixed date – that date is 1st August 2017 to make sure that SEGWIT, as it was originally designed to do, is fully implemented by November 2017.
For the purists and tech heads I should state that if SEGWIT happens anyway to 95% or more of the Bitcoin network by or before 1st August, then BIP 148 will not happen at all because it will not need to happen.
Before BIP 148 was sent out into the field, SEGWIT approval was only at around 31% of the network and it needs to be at around 95% of the network to automatically activate. It was starting to look like SEGWIT was going to be bogged down forever.
Bitcoin Unlimited had even less support affirmed than SEGWIT so that clearly wasn’t happening either…phew (take a breath and a swig of coffee).
Now we have BIP 148 and what BIP 148 does is to force the Bitcoin community into a decision i.e. run with SEGWIT or not. Although signalling for or approval for SEGWIT stood at only 31% or thereabouts, remarkably, software change across the network nodes that would allow SEGWIT to work was at around 80%
BIP 148 is what we call a USER ACTIVATED SOFT FORK or UASF for short. Most changes to the Bitcoin core rules happen through a MINER ACTIVATED SOFT FORK (MASF) and this makes 148 kind of unusual. There is an outside chance that not every organisation in the Bitcoin network, even now, will go along with SEGWIT and that is the purpose of this lengthy article namely, to advise on what could (remember worst-case scenario) happen if you are a glass half-empty type of person.
A Hard Fork (you may remember) is what happened to the Ethereum Blockchain a little while back and how Ethereum Classic was born when two separate camps could not agree on a change that was needed to improve security on Ethereum following an attack on their network.
Well worthy of note is that Ethereum has gone from strength to strength lately and us lucky Bitclub members get to mine Ethereum as well as Bitcoin if we want to!
A hard fork can turn one chain into two and it is normal for one of the chains to eventually disappear or become something completely different but not always. In the case of Ethereum, two coins were born out of the one and their coins or tokens are now separate entities. Ethereum and Ethereum Classic.
A hard fork with Bitcoin could in theory create two Bitcoins. In truth, a soft fork temporarily creates or can create separate chains also but the difference is that under a soft fork only one chain is seen as the valid chain and the other eventually disappears. One side eventually has to realise that financially, there is little point continuing to support an alternative that has no value.
The “unknown” is that we do not normally know which chain will emerge as the one with economic majority. In the case of BIP 148 it is looking increasingly likely that we know where economic majority will fall and that is with Bitcoin supporting BIP 148.
Why do I say that?
There was a consensus reached in New York recently (23rd May) between the bigger mining concerns and other influential concerns in the Bitcoin arena with regards to activation of SEGWIT. This article NEW YORK AGREEMENT covers the agreement and it is particularly encouraging to see Bitclub listed there as in agreement and also offering technical help to any organisation struggling to make the Bitcoin protocol software change.
Even those against SEGWIT (in the main) now see the need to stabilise the blockchain and get this (even if it becomes temporary) change in block size moving.
So, what happens to our Bitcoin come 1st August 2017?
Well probably nothing will happen. If, as is hoped, instantly and after the 1st August the "BTC BIP 148" chain gets more accumulated "proof of work" it should be the only chain to survive and any split would be over and done with almost instantly and all BTC BIP 148 Bitcoins will simply be Bitcoins again.
But if that doesn't happen fast a split chain could go on some and we might be saddled with (theoretically) two types of Bitcoin for a while thereafter and HEREIN LIES THE SLIGHT DANGER.
Certainly, there should be little to be concerned with if you already hold your Bitcoin in a wallet that has confirmed BIP 148 readiness (for example Blockchain.info have stated their readiness) - it is possible that if the split occurs and continues for a while you might get both coins for a short while but one of those coins will eventually (will have to) become the real Bitcoin again. The way this will happen is that, to be sure and safe, your wallet could operate a split and give you both types of Bitcoin.
You will recall perhaps that when the Ethereum chain split, holders of Ethereum on most exchanges were given the same number of Ethereum Classic as they held in original Ethereum.
Anyone who is more than simply mildly concerned about the implications of BIP 148 needs to only make certain that they have total control over both of their Bitcoin wallet keys (public and private). If your wallet service provider (and if you aren’t sure, send them a support ticket to ask for their confirmation) has confirmed that they are BIP 148 ready and you have nothing to fear, you should be fine.
If you want belt and braces and absolutes then get yourself a hardware wallet (I use the Ledger Nano S) and store your Bitcoin on that before or by 1st August and then wait for the dust to settle before moving it anywhere else. That way you are doubly safe. It has also been confirmed to me that KEEPKEY (another hardware wallet) is also BIP148 ready.
There is little to panic about here. The chances are that wherever your Bitcoin happens to be on 1st August, you will be fine. This article has been written in response to concerns that have been emailed to me and brought to my attention and I personally have no fear about the future of my Bitcoin. In the end, when the dust has settled on this change Bitcoin can move ahead again with a much greater capacity for growth in transactions.
This is likely to do nothing but good for the future of Bitcoin as it will alleviate the transaction congestion we’re living with and bring the mining confirmation fees back to normality.
Any Bitcoin held in Bitclub network is fine, Bitclub are 100% behind BIP 148.
To end this article, what is worst-case scenario in a nutshell?
It would be that some mining concerns take the bloody-minded view that they are going to ignore BIP148. A theoretical second chain emerges and the Bitcoin blocks mined are orphaned and therefore have no value in the long run. Or an exchange (or wallet service) takes the view that they are going to do nothing about BIP 148 should BIP 148 happen and somehow end up with Bitcoins that nobody wants because they cannot be certain that they are Bitcoins that were created on the right chain.
ALL OF THIS IS VERY UNLIKELY, I CANNOT STRESS THAT ENOUGH!
The idea behind any User Activated Soft Fork (UASF), in short, is that users simply activate the soft fork at an agreed-upon point in time. If these users represent a majority of the Bitcoin economy — exchanges, merchants, users — miners are financially incentivized to follow the new soft fork rules.
If they don’t, they could mine invalid blocks (according to the majority of the Bitcoin economy), and the “bitcoins” they earn would be worth less — or worth nothing at all. As we move close to 1st August this outcome seems less and less likely though.
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