After nine months of politics, bickering, trolling, blocking, accusations and all-out warfare, the most significant upgrade to the Bitcoin network in recent times, SegWit, is now locked in and will soon activate.
SegWit (a.k.a. Segregated Witness) was locked in at 00:06 GMT in the wee hours of the morning on July 21 via the BIP-91 method (called version bits, requiring 80% blocks, or roughly 2.3 days).
BIP-91 only gained traction when BIP-141 – the formal two-week plan to activate SegWit – was no longer possible to activate before the User-Activated Soft Fork (BIP-148) plan scheduled for August 1.
In the end, practically every mining pool signaled (or voted) for BIP-91, including staunch opponents such as Jihan Wu’s Antpool and ViaBTC. Of the major mining pools, only Roger Ver’s bitcoin.com mining pool opposed SegWit to the very end.
In a further 336 blocks (2.3 days), non-SegWit signaling blocks will be orphaned (which is to say, ignored). This is to give time for miners to reconfigure their systems.
BIP-91 is not SegWit itself, but it will now require all nodes to signal BIP-141 or be ignored. SegWit will activate traditionally via BIP-141, which takes another two weeks for lock-in. However, now that all nodes are already signaling for BIP-141, the BIP-148 UASF vs SegWit2x war scheduled for August 1 is a moot point and can be safely ignored. BIP-148 should lock in around August 7. After another two-week delay for laggards to upgrade, SegWit will finally be active on August 21.
Transaction fees for SegWit users will be halved, and very soon after we will see Lightning instant and almost-free net settlement payments. The ecosystem has already had time to roll out SegWit wallets on Litecoin, so doing it for Bitcoin will be trivial.
More exciting is the prospect of a combined Bitcoin/Litecoin Lightning node doing atomic swaps between the two chains without the need for an intermediary. This will change the model of exchanges entirely and reduce counterparty risk – the need to trust an exchange to hold coins without going bankrupt or being hacked.
Interestingly, along with the Chinese miners giving up on opposing SegWit, Bitcoin network congestion has magically dissipated. Two weeks ago, users were paying upwards of 400 Satoshi/byte ($2.50) for a priority transaction. Today, a priority transaction is less than half that, and even 5 Satoshi/byte ($0.03) transactions are expected to clear within 24 hours. One would think that it was all spam transactions by someone to create a crisis where there was none.
The collective Chinese side bluffed the Bitcoin-Core developers and tried to wrestle control over the future of Bitcoin development by delaying the SegWit upgrade and threatening a hard fork by arguing the need for more capacity. But now it seems that the capacity crunch was fake. The claims that SegWit was insecure and anyone could spend SegWit coins were fake. The threat of patent lawsuits and the need to protect Bitcoin users from patent-related lawsuits? Well, time will tell on that one. Their bluff was called, and they blinked first.
The threat of all-out civil war and a fork in the blockchain sent Bitcoin’s value from around $2,500 to $1,800 last weekend, and perhaps it was this more than anything else that forced the Chinese miners blocking SegWit to come to their senses and support the upgrade. At the time of writing, the price of Bitcoin has exploded to over $2,800.
Another reason they backed off is that by supporting the conservative mainstream core developers and not the fringe, hardcore UASF core developers, the Chinese mining community can still claim a victory of sorts – or at least they can claim the UASF side lost. But without Luke-Jr drawing the line in the sand for the UASF, BIP-91 would not have been used to activate SegWit and chaos would have ensued, so the UASF crew are also claiming victory.
So in the end, everyone wins. The Chinese miners won by preventing the UASF from happening. The UASF side won by forcing the Chinese to activate SegWit. Miners and investors won by getting richer. And users will win soon with cheaper transaction costs and increased capacity.
So does this epic, convoluted fairytale end with, “and they lived happily ever after”? Maybe, although two loose ends remain.
ViaBTC announced that regardless of the UASF/Segwit2x outcome, it would fork Bitcoin at 12:20 GMT on August 1 and create a new chain called Bitcoin Cash (BCC) with large blocks and no SegWit at all. In such a fork, anyone holding Bitcoin at the time of the fork will get the same amount of Bitcoin Cash. It is unclear if ViaBTC will follow through, and how much of its 4% of mining power will follow it to the new coin.
Then there is SegWit2x (the “SegWit now, big blocks later” plan using software called Bitcoin1). The Chinese miners led by Jihan Wu’s Antpool (which accounts for 22% of mining power) will still want to take control of Bitcoin development at some point. Even as Antpool joined the BIP-91 signaling, Wu tweeted defiance.
Bitmain is running btc1 software but we modify to only vote on bit4 only at this stage.
— Jihan Wu (@JihanWu) July 20, 2017
By signaling BIP-91 today, they can still claim victory. Thus, the issue of Bitcoin1 and SegWit2x will likely continue to pop in the news for a few months – at least until the planned hard fork date on November 18. Until then, enjoy the calm while it lasts.