The Good News - SegWit Activation
The Bitcoin network is currently plagued with slow transaction times and there urgently needs to be a solution to this detrimental problem. A solution proposed in 2015 was Segregated Witness (SegWit) which is a software update that effectively increases the number of transactions a block can store on the blockchain, thereby increasing the transaction speeds. There has been big debate within the Bitcoin community as to whether SegWit should be implemented on the Bitcoin network ever since it’s proposal in 2015. The good news is that the debate is over and SegWit will be activated on the Bitcoin network in the coming weeks. However, there is a new debate: how will SegWit be activated on the Bitcoin network? This is an important question, as careless deployment of SegWit could result in the splitting of the Bitcoin blockchain creating two competing Bitcoins. Read my article here on how to secure your Bitcoins in the case of a chain-split.
BIP 148 UASF
Bitcoin Improvement Plan 148 (BIP 148) is a plan to implement SegWit using a User Activated Soft Fork (UASF). After the deployment of the UASF, all nodes on the Bitcoin network will reject any blocks that do not signal support for SegWit. This is controversial, as the nodes are effectively pushing any blocks that do not signal SegWit off the Bitcoin network, forcing the Bitcoin blockchain to split into two chains; creating two different Bitcoins.
SegWit2x
SegWit2x also plans to activate SegWit on the Bitcoin blockchain but it takes a different approach. Before we get into how SegWit2x works, it is important to note that SegWit does not physically increase the size of a block, it simply rearranges the contents of a block thereby freeing up space within the block. This is the main reason why SegWit does not have the support of the whole community behind it, as it does not increase the size of a block in terms of code, it simply manipulates the code. SegWit2x is an answer to this problem. SegWit2x not only activates SegWit on the Bitcoin blockchain, it also physically increases the size of all blocks from 1MB to 2MB in the form of a User Activated Hard Fork (UAHF). SegWit2x plans to implement the UAHF 3 months after SegWit is activated.
Implementation of SegWit2x would result in faster transaction times compared to the transaction times after the implementation of BIP 148. SegWit2x is also less risky, as it waits for 80% of miners to signal support for SegWit before rejecting nodes that do not signal support for SegWit. This greatly reduces the risk of a chain-split.
BIP 148 vs SegWit2x
SegWit2x has a lot of support behind it from major companies and mining pools. SegWit2x is supported by 80% of the Bitcoin network hashrate. On the other hand, BIP 148 has much less backing from major companies and mining pools, the support is split. SegWit2x supporters are aiming to activate SegWit2x before August 1st , this means that 80% of the hashpower would signal support for SegWit before the activation of BIP 148. In this case, BIP 148 would have no effect and SegWit will be activated smoothly on the Bitcoin network without a chain-split; this is the best-case scenario.
Conclusion
Evidently, implementing SegWit2x seems like the best path to safely activating SegWit on the Bitcoin network. The main difference between Segwit2x and BIP 148, is that SegWit2x explicitly asks mining pools for support before passing through a code change while BIP 148 doesn’t. Therefore, there is less risk of a coin-split when implementing SegWit2x and the resulting transaction times will be faster than implementing BIP 148. The path to SegWit activation will be bumpy for Bitcoin and I’m sure that this will be reflected in Bitcoin price drops and fluctuations. However, once SegWit is activated, Bitcoin will recover and the price will reach new highs. I am excited to see what happens in the coming weeks and I hope that SegWit will be activated smoothly on the Bitcoin network, solving the scaling problem once and for all!
References
Why wouldn't the miners/anybody else want to activate segwit2x?
Because in the past, the majority of updates have been implemented by the Bitcoin Core team who are a team of trusted and experienced Bitcoin developers. SegWit2x has been proposed by a different team altogether, some miners don't trust them and would rather stick to a team with a proven track record (Bitcoin core and their BIP 148 UASF). Also, for whatever reason, Bitcoin Core arent on board with SegWit2x, if they do end up supporting it all of the hash power would support SegWit2x and there would no longer be a problem.
Ah, gotcha. Why did they go for a soft fork rather than a hard one like Steemit did, by the way?
Basically, a Soft Fork is a software upgrade that is backwards compatible whereas a Hard Fork isn't. This means that people who don't upgrade when a Hard Fork is implemented will be kicked off the network, while people who dont upgrade when a soft fork is released can stay on the network but they wont be able to see/use the features implemented in the Soft Fork. With Steem a Hard Fork was implemented because it would be messy if there were some users earning more than others. With the BIP 148 Soft Fork, once the initial chain-split resolves, users who havent activated SegWit can still remain on the network and detect new blocks. However, their transaction speeds will basically be slower. But for the chain-split to resolve, the majority of users must accept the Soft Fork. Therefore, only a minority of users will be using old software.
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