There is a lot of confusion around the bitcoin hard forks that are occurring at present. Specifically with the Segwit2x,.So in this blog I want to explain it for you,so you can get a clear understanding of what it is and how it works.
SegWit is short for segregated witnesses and it is a proposal presented by the Bitcoin Core team.
In transactions there are three key elements. The sender, receiver and the signatures (commonly referred to as witnesses) and these make up a big part of the transaction size. Instead, Segwit updates the 1MB block size limit
Here is a great video that explains it for you https://www.facebook.com/cnbccrypto/videos/1528547000561874/
What this means in simple terms is that bitcoin transactions are recorded and stored in a block of data of 1Mb every ten mins. As bitcoin becomes more popular, more transactions are being logged & recorded. The more transactions are recorded the less we can store in the 1Mb size block and a backlog starts to form of transactions that need recording. Rather than every ten mins transactions are now being processed and verified every few hours.
The Bitcoin network developers want to up the size of the bitcoin to to 2Mb so they can process transactions across the board faster and in a much more efficient way.
Often called simply a “digital currency,” bitcoin is best viewed as a protocol (a set of code) that delivers data (in this case bitcoins) in defined quantities (called blocks) that are then stored in a sequence (called a blockchain) on a distributed set of global computers. Bitcoin is decentralized – in that many people help make the network function, and in choosing to run its software, users all agree to abide by the same rules to keep it operational.
Segwit2x; The plan calls for a very specific fork (or a change to bitcoin’s rules), one that would make certain rules valid that weren’t valid before. Specifically, Segwit2x would change the size of the blocks passed regularly around the network and stored in the blockchain from 1 MB to 2 MB.
Some users think this is a good idea, others don’t.
With bitcoin cash and bitcoin gold, for example, bitcoin users could have paid little to no attention and it wouldn’t have impacted their transactions. If you held bitcoin on certain exchanges (or your own wallet), you received new cryptocurrency.
This smooth outcome, however, isn’t guaranteed with Segwit2x. Complicating matters is that in many ways, Segwit2x sounds (and is) similar to other bitcoin forks.
Like other recent forks, Segwit2x is:
• An alternative software – A modification of the bitcoin software run by network participants and that enforces the protocol rules. In this case, Segwit2x’s code is called BTC1.
• An attempt to increase the block size – Most forks focus on one specific rule of the network (block size), despite other possible optimizations that could lead to capacity boosts.
• A hard fork – Anyone whose software is not upgraded to the new rules will no longer be a part of the network.
First and foremost, whereas bitcoin cash developers appeared content to create a new blockchain (with new rules), Segwit2x’s goal is to keep all bitcoin’s existing users on one blockchain.
In this way, Segwit2x could have different outcomes.
• Bitcoin’s rules change — Most (or all) miners upgrade their software. The bitcoin blockchain continues to function but features larger blocks. Segwit2x’s rules become the rules of bitcoin.
• Two bitcoins are created — Only some miners upgrade their software. This creates two blockchains – a so-called “legacy” bitcoin, and a “Segwit2x” bitcoin, both with different rules and unique cryptocurrencies.
• Bitcoin’s rules do not change — No significant miners run the new software, and the network continues to run the current rules.
But, what’s at the heart of the arguments for and against?
First, SegWit2x seeks to upgrade bitcoin in two ways:
Still, the specifics of the debate revolve around basic facts about current network design and performance.
Bitcoin is currently limited in the number of transactions it can process. Today, it can only process up to 1MB of transactions roughly every 10 minutes.As all users pay a fee to miners to make transactions, this limitation on space has increased average fee costs Increasing the block size makes network nodes more costly, as node operators must store the entire copy of the blockchain as computer files.
To begin, SegWit2x is not the first proposal for scaling bitcoin’s transaction capacity.
SegWit2x, though, differs in some key ways.
It was not put forward by, nor has it been endorsed by, Bitcoin Core, the network’s main open-source developer team. It doesn’t introduce new ideas so much as combine those previously proposed by various developers in a new way.
The reason is that those who support the change, and those who do not, both appear to have support from different parts of the community. In short, while Segwit2x claims to have a super-majority of miners and exchanges, it can’t be said that 100% of network users support just one side.
Segwit2x draws the most support from:
• Miners – The network users who run hardware necessary to secure the blockchain and profit from bitcoin’s block rewards.
• Startups – The businesses that profit by providing a service to bitcoin users, allowing them to spend, store or purchase cryptocurrencies.
• Bitcoin should be digital money — It should compete with the U.S. dollar or other fiat currencies, and thus, a priority should be put on its use as a means of exchange.
• Competitors are gaining because of bitcoin’s inaction — They believe protocols other than bitcoin have continued to gain traction because they’re useful for payments; those protocols are currently capturing value that otherwise would have been bitcoin’s.
• Existing upgrades aren’t enough — They say the addition of code to the blockchain in August hasn’t brought about the capacity increases promised.
When will all this occur?
But while there remain many ifs, one thing we do know is the fork will occur on or around November 16.
However, an exact date can’t be pinned down. This is because the change will be enacted at a specific block (number 494,784), at which time miners will be able to run the new software.
And a split is what many bitcoin users are most concerned about, leading them to worry about the SegWit2x proposal in general. In light of these anxieties, one of two things could happen to user’s bitcoin directly:
With enough support, bitcoin upgraded to SegWit2x will work normally, and users will not likely experience any service disruptions.Without support, a bitcoin split puts users at risk of losing their bitcoin. Cryptocurrency experts propose not making bitcoin transactions during the uncertain time period around August 1.
The most evident benefit to SegWit is a capacity increased that is introduced in the form of a different transaction format. However, there are also other benefits to SegWit, which are outlined here. This includes increased security for multi signature transactions, linear scaling of sighash operations, script versioning and more.
- Speed up the processing time
- Increase block size
- More transactions
- Could enhance bitcoin
- Could be a non event
What are your thoughts on the Segwit2x hard fork?
Does this help you understand the hard fork?
Leave your thoughts in the comments below.
The Crypto Pro’s