St. Peter in Coins: The Destiny of Bitcoin
By JULIA HOFFNER | June 26, 2017
A turning point in the digital community is quickly approaching. Digital cryptocurrencies have become increasingly popular across the globe. They operate independently of a central bank and verify legitimate transfers of money in a way we have never seen before. The users of these currencies have complete responsibility of their stock, coupled with keys to their digital “wallet”; the entire system runs on a private, encrypted digital plane.
Because of these cryptocurrencies’ international nature and exponential growth in investors, communities have formed around them as well as, inevitably, politics. Bitcoin, a cryptocurrency that has emerged as extremely popular in recent years, faces a Bitcoin Improvement Proposal (BIP148) that, in a worst case scenario, could destroy the currency and take others with it. As Vinny Ligham, a board member of the Bitcoin foundation puts it on Twitter: “#Bitcoin may need to "die" just one more time, so that it can live forever. August 1 is NOT Independence Day, it's Judgement Day! #hopeful”
There is indeed truth to Lingham’s analysis on the approaching day. Without diving deep into the technicalities of the process, it is important to understand what exactly the proposal entails and its outcomes, especially if one is a Bitcoin investor.
Like any organization, program, or in this case, currency, there will always be attempts to improve infrastructure. Bitcoin is currently set up in “blocks” of transactions and data that get backed up because of a data limit. To fix this, some support a User Activated Hard Fork (UAHF), which will make transactions used before August 1st invalid. If Bitcoin cannot pull that off (as it needs a majority to win) then it must resort to a User Activated Soft Fork (UASF), which will split the economic chain into two paths: one as it was before and one that runs a different program called SegWit.
While the debate seems like solely a infrastructure improvement, there is a chance the process doesn’t run smoothly. The Bitcoin community must come to a 95% agreement for either the UAHF or the UASF to be enacted on August 1st. However, the Chinese Bitcoin community owns about 70% of the mining community. Thus, if they do not all vote one way, coming to a 95% agreement would be very difficult and the other 30% would most likely mean nothing.
If the Bitcoin community cannot come to this 95% majority, the vote counts as undecided, which is the worst case scenario. In this scenario, all coins will exist on both chains that were created because of the split. This creates a risk that the old chain will be overpowered and discarded, creating some level of chaos.
Despite this, one of two scenarios are most likely: BIP148 either succeeds with a majority or fails with a majority and Bitcoin continues more or less as it was before August 1st. Bitcoin users are watching the currency intently as the day approaches, and the debate continues.