The Bitcoin Fork(s) & August 1st: Don't Panic, Read This

in bitcoin •  last year

It's about to go DOWN in Bitcoin land and for most normals it's overwhelmingly confusing. Fear not, I am going to share the best resources on the subject so that newbies and neckbeards alike can get a handle on the situation and be informed enough to protect themselves and their BTC.

I'd advise people to be prepared to not make many Bitcoin transactions in early August and to use an abundance of caution when doing anything with one's BTC in those weeks. And a word of caution as we approach August 1st: almost all the articles being written on the subject and all the tweets are tendentious FUD laden propaganda at this point, so almost no sources are reliable. Be careful even trusting what I write. Try and put anything anyone writes or says in context and consider what their motivations are before accepting what they say as true or accurate. There's almost no neutrality to be found.

The so-called User Activated Soft Fork (UASF) is also arguably the first Sybil Attack we've seen on a major blockchain. There is the potential for the miners to launch a 51% attack on August 1st or August 2nd against the UASF, which would be the first 51% attack we've seen on a major chain as well. There's a plausible scenario where there are as many as 3 different Bitcoins on August 5th. But also as of today there's news that SegWit2x today demonstrated it has 80% of the hash rate, which could end the UASF before it can happen -- if that holds, it's a more stable "kiss your sister" compromise outcome than many of the other scenarios that loomed.

But who knows and it's hard to know who to look to for what's going on. The exception to the FUD and fog of war has been the series of articles by Jimmy Song on the subject. These have been neutral, fact-based, well-written and thorough. This is a credit to Jimmy and he is example to all of crypto on how to conduct oneself. When people ask me what is happening, point them to him. Let him be your guide through these turbulent times. I link you now to several of his recent articles and excerpt the key section of each:

Primer on the User Activated Soft Fork (UASF)

If you’re a user on the network, that means that transactions will be slower for two weeks at a minimum (longer if the hashing power is lower) and more likely, there will be some serious disruption as merchants and exchanges will likely suspend any Bitcoin transactions until there’s some clarity on the forking situation.

Further, even after the forking situation is resolved, there’s a high likelihood of there being two Bitcoins and a very messy divorce.

Readers questions on a UASF (User Activated Soft Fork) via BIP 148

What are things people can know for certain?

Hard question. Game theory is often more art than science and you have to act with incomplete information all the time. What you “know for certain” completely depends on who you trust. Miners may not believe UASF will actually go through with the soft fork, for example and Users may not believe Miners would attack them.

A tactical breakdown of how the Game Theory of UASF may play out -- complexly and scarily

Believe it or not, I believe the fight will be even nastier than I’ve laid out. These are only rough first-order calculations of the game theory implications. There are likely to be many more moves, each with their own scenarios just as long as this article.

Jimmy breaks down Bitmain's "credible threat" move

Bitmain’s press release is what you would call in game theory a “credible threat”. They certainly have the mining power and cash on hand to commit to this project. As most of the hard fork ideas come from Bitcoin Unlimited, they also have software ready, however you may feel about its reliability. They are also addressing real problems with a soft fork like replay and wipeout protection.

If you’re thinking from a game theory perspective, the question now should be, why? Why is Bitmain releasing these plans?

Jimmy explains the NY compromise solution, SegWit2x

The steps taken in the past week look like Segwit will be activated and avoid a network fork on August 1. This is good news in the short term, but the long term question of whether there will be a hard fork to larger blocks or not is still unanswered. There is room for optimism, but there are still more battles to be fought.

Separately, I think Phil Daian's critiques on the dangers of UASFs is also worth noting. We'll see how the Bitcoin fork(s) or non-fork(s) plays out. We're in unprecedented grounds and the stakes are high which makes this fun. While it could resolve itself smoothly as the sides resolve their politics with proper compromises, one lesson I 've learned is that crypto is never boring, so August 1st has the potential to look something like this:

Give me Unicorn or Give me Death

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We will have huge pump before September - $10K

Thanks for a great explanation. I wish I know the Odds of what may happen? any idea?

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Until Augur has proper prediction markets live, we have to make educated guesses and also prepare for the worst and hope for the best.

And would you expect this to have a knock-on effect to the likes of ether, Litecoin, and possibly steem too?

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I don't think Litecoin has a real future, unless Bitcoin is dead dead, despite what people have been told. It has not technological merit beyond Bitcoin's, it pumped based on adopting Segwit, which I don't think matters at all for Litecoin because there are so few actual TXes on Litecoin that there is no demand for scaling solutions -- unless again Bitcoin fails and for some reason people adopt Litecoin out of familiarity and ignore all the better currency technologies like Zcash, Monero or all the stablecoins that will be on Ethereum like Maker. A lot of Litecoin holders have been misled but such is the ways of cryptocurrency and if people don't do their own due diligence, they are liable to get burned.

I don't think disaster scenarios for Bitcoin are good for any other digital asset in the short term though, not even Litecoin, not Steemit, not Ethereum.

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Cool thanks for the detailed response here. You've got me thinking about my Litecoin holding... Maker/Dai I need to take a look into I guess!

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I wonder if litecoin would be a better bet moving forward if it could be mined by the asics that are currently mining bitcoin.
Getting the bitcoin miners to switch seems way more important than segwit.

I have also found Jimmy to be one of the few not shrieking on either side. Segwit2x seems to be a total failure to accomplish the necessary scaling, while potentially injecting the possibility of intermediaries into Bitcoin transactions. It's fundamentally counter to my reading of the Bitcoin whitepaper, which specifically cites the efficacy of block size increases which would easily solve this issue.

The fact that one side argues against an easy solution with no clear technical drawbacks (that I am aware of) is a pretty good indicator they have ulterior motives.

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While I likely agree with you politically on this, both sides have dirty hands. SegWit as a SF seems like an inelegant solutions that increases the tech debt and yields much less on-chain scaling than is being touted with higher actual costs to economic nodes. It was not originally an on-chainscaling solution but was re-appropriated as one politically. It's all sad to to even think about.

Very nice information. Crypto are so important to our world even though most people haven't realized yet and Bitcoin is clearly a big part of crypto for obvious reasons, the biggest one most other crypto are directly tie to its price Steem being one of them.

Thank you for putting that out. Is there a way to contact you in private? On the Steemit chat when it gets back online I guess.

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I am in one Slack (non-Steem) that takes up most of my time, as I have a fulltime demanding non-crypto job. You can DM me on https://twitter.com/EeksTheUnwise if you want to reach me and I can give you my email so we can communicate in private.

I'd advise people to be prepared to not make many Bitcoin transactions in early August and to use an abundance of caution when doing anything with one's BTC in those weeks.

Best advice though. Does it mean transaction during this period can get lost or delayed?

Thanks for the recap, I think about the forks one can look at ETH ETC, it's not as ideal but in the long run it will play out anyway. In the split day prices will fall, just be sure to have your BTC in a wallet or in an exchange which is known for the good conduct (like kraken) so you will be sure to have both coins when the dust settles.

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ETC/ETH split was a little different because Ethereum's difficulty adjustment happens much more quickly than Bitcoin's. But it is the best example we have had to date of what a split could look like.

I dont think HArd fork will happen. But if happen, the best do to is hold your bitcoins. Do nothing,

I start to follow you, very nice post. Upvote too

@eeks great post keep up the good work well done

been reading a lot more posts on not to do transactions on bitcoin on that day just to be safe and then for for early august as well to see what the outcomes from it.

Great Article, enjoy the reading!

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Sorry if this has been covered else where, but is anyone expecting a big (although temporary) price drop after the fork? I've see some wild price swings in the last year. Considering the uncertainty ahead i cant imagine it not happening. And the blockchain world has been flooded by new users who arent accustomed to these kinds of violent price movements. Thats a substantial chunk of the btc community likely to panic and deepen the potential drop.

Im no expert and could be completely wrong, but does this make sense to anyone else?
This is my first reply!!

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Not bad for the 1st reply, we will see how the things goes

Thanks for this post.

More than the price going down, I am concerned about how the wallets and exchanges I currently use will handle my coins after August 1. After going through several videos discussing the various issues, I decided to get a hardware wallet (Trezor, in my case) for peace of mind. Not to scare everyone else, but I understand that some exchanges who implement hot wallets where all bitcoin is shared across customers may be hard-pressed to release bitcoin should everyone panic and decide to move out of exchanges in anticipation of August 1's event.

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I plan to hold all my BTC off exchange in that period of time. YMMV

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Do you mean you are concerned about merely holding your coins at certain exchanges/wallets? I was under the impression the complications are tied more to payment transactions after 8/1. Poloniex claims to be able to handle the split if you sit tight. However, based on the link below, polo users may LOOSE whatever coins are in open lending accounts at the time of the fork. Who knows what will actually happen, but if you are a polo lender its worth a read.

https://www.reddit.com/r/BitcoinMarkets/comments/6ex0ee/poloniex_lenders_beware_you_may_lose_half_of_your/

What other exchanges/wallets are you refering too?

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I'm more concerned about the liquidity of the exchanges. If everyone panics and withdraws bitcoin all at the same time, the honest exchanges who actually have the bitcoin will be okay, but others who claim to have bitcoin but in reality don't will have difficulty. We're all made to believe that whatever btcs are reflected in our exchange wallets are there. We shall see.

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I was under the impression that the bitcoin people deposit are actually there. But I just found out about the "open.btc" on the bitshares network. They apparently peg the value of a btc to "open.btc", which is what you own... not actual btc. Then I read that all exchanges do this. So when you deposit btc to poloniex, you actually own poloniex.btc or whatever they call it.
I didn't get far enough to understand why they do this, but it is an issue I was not aware of until just recently. Not sure how comfortable I am with that. But I only keep hot currency there anyway. 80% of my crypto is in cold or mobile storage.

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The doge has shown itself in the charts

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waiting for this since 2014

oh my!! I am starting to panic a little. But on a side note, I freaking love this cat riding the unicorn photo!! :)

I'm not sure what will happen, but I think we will see some panic in the market come august. I've sold all my BTC, and hoping to buy if the price dips. Otherwise I'm perfectly happy with not holding BTC, as there are many other alternatives who even gives a better ROI.

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Panic rarely pays in this space. I try and stay zen.

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You are absolutely right.
I sold all my BTC a couple of months ago, and I no longer intend to HODL it, but if I can make a quick buck i will make that trade ;)

Ok, for those who are predicting a BTC drop around the fork, any thoughts on where to weather the storm or even take advantage of the turmoil?
I'm considering ETH, NXT, Omni, Steem, and/or Stratis. This is based off correlations in the past 6 months. It seems many cryptos are loosely tethered to the health of BTC (grandpa), but some seem to be more isolated then others.

On a side note:
Although I'm just a yearling and may have better results hitting my mark with a psychic... Im blown away by blockchain tech and its future. I find myself at my computer for hours on end, not even noticing the day passing by. I am completely hooked!

BTW, I replied in the wrong section earlier, my apologies.

Conclusion:
BTC will launch like a rocket; or
BTC will sink like a no feathers duck; or
BTC will stay stable.
LOL

Nice blog. Nice to see I'm not the only one who thinks like this. The current total market cap of all cryptos might seem high but blockchain is here to stay and will involve all our lives. I do see a bright future for everyone that's hold's their coins with a long term vision. I found this great website: https://www.coincheckup.com The site is my go to place for crypto investment analaysis and indepth coin research. Check for example: https://www.coincheckup.com/coins/Bitcoin#analysis For a complete Bitcoin Detailed analysis