Abstract: This lump examines the political landscape around the SegWit2x hardfork. Albeit some see SegWit2x as a sensible middle ground compromise, others see this kind of bargaining as the worst possible outcome.
What Is SegWit2x?
SegWit2x is a plan to dual Bitcoin&rsquo,s capacity limit. SegWit2x should not be confused with SegWit itself, which was a capacity increase and upgrade, that has already been successfully activated on Bitcoin.
SegWit2x is an increase in the maximum amount of non witness data per block, to 2MB from 1MB (or an increase in the fresh block weight limit to 8M from 4M). This should result in 2MB of effective capacity if users do not upgrade to the fresh SegWit style transactions or 4MB of effective capacity if SegWit is used.
Unlike SegWit, the SegWit2x upgrade is an incompatible switch to Bitcoin&rsquo,s consensus rules, known as a hardfork, which means it may result in the launch of a fresh coin. Bitcoin holders prior to the fork will receive both &ldquo,original Bitcoin&rdquo, and &ldquo,SegWit2x coin&rdquo, after the split. In many ways, this is very similar to the latest Bitcoin Cash hardfork, both with respect to the capacity increase and the launch of a fresh coin.
The hardfork is expected to occur on around Tuesday 21st November 2017.
The Supporters of SegWit2x
The SegWit2x proposal arose out of the Fresh York Agreement (NYA), which took place in May 2017. There are 56 signatories to the agreement, including large payment processing companies like BitPay and Coinbase. Almost all of the largest Bitcoin mining pools signed the agreement. Miners can showcase their political support for the agreement by adding an &ldquo,NYA&rdquo, tag into the Bitcoin blocks they produce. In the last three weeks, around 94% of blocks flagged support for the NYA.
However, critics of the NYA could point out that 33 of the 56 signatories, around 59%, are portfolio companies in the Digital Currency Group (DCG), an investment company run by the principal instigator of the NYA. Therefore one may argue the signatories do not represent widespread support across industry. Albeit some DCG portfolio companies did not sign, indirectly indicating that portfolio group companies were not coerced to sign.
Please see the total list of signatories below:
Principal agreement organiser
Wholly possessed by DCG
Wholly possessed by DCG
Signatories Reneging on Agreements
Signing letters indicating support for a hardfork, is not necessarily a fresh phenomenon, indeed five of the major signatories of the NYA have already backed out of a previous hardfork agreement. BitPay, Coinbase, Circle, Xapo and Blockchain.info, all signatories of the NYA, signed an earlier letter in August 2015, where the companies committed to a hardfork attempt, only to eventually renege on that agreement. The infrastructure company BitGo also signed the August 2015 letter, but did not sign the NYA, albeit primarily it was erroneously included as a signatory.
Three of the NYA signatories emerge to have backed out of the agreement:
- On 22nd August 2017, one of the signatories, Bitwala, announced that they would not go after the agreement.
- On 31st August, one of the mining pools who signed the agreement, F2Pool, announced their intention not to support SegWit2x. Albeit as it stands, this pool still has the &ldquo,NYA&rdquo, flag in its blocks, but says it plans to liquidate the flag next time it restarts its servers.
- On 1st September, the CEO and founder of another company who evidently signed the NYA, Wayniloans, Tweeted that they never agreed to all of the NYA and that the agreement switched after Wayniloans signed it.
The Opponents of SegWit2x
Albeit many businesses agreed to support SegWit2x, it does not show up as if supporters of the agreement have sought the support of users or Bitcoin investors. Many seem to feel that there was a lack of user engagement in the NYA process or even the pretense of requiring user support. SegWit2x was therefore seen as more of an ultimatum, than a proposal, by some. Many users emerge to feel that SegWit2x is attempting to force them to support the fresh coin, rather than taking a more friendly treatment of inviting them to opt in. Bitcoin users typically like to feel empowered, which is why many of them originally became involved in Bitcoin, rather than using the traditional financial system. Therefore SegWit2x may alienate some users and investors, who are unlikely to want to go after the fresh coin.
The majority of Bitcoin developers oppose the NYA. When asked, almost all of the developers of the Bitcoin Core project indicated they do not support it. The Bitcoin Core project will also not implement SegWit2x, despite evidently needing to correct misleading statements indicating that Bitcoin Core supports SegWit2x.
The fresh version of Bitcoin Core, 0.15, will attempt to ban SegWit2x peers. Some people have misinterpreted this as an attempted political budge against SegWit2x, by partitioning it from the network early, however this is not the case. Core knots banning SegWit2x knots is beneficial for technical reasons. Since Core will not be following the SegWit2x chain anyway, it is actually helpful not to connect to SegWit2x knots, so that SegWit2x clients have better connectivity to other peers who do go after the SegWit2x chain. Prior to the split, non upgraded Core knots will act as a bridge inbetween SegWit2x clients and Core 0.15 clients, such that no early network partition occurs.
As for businesses and exchanges who did not sign the NYA, most are yet to comment. However, some major exchanges and trading platforms, including BitMEX, have published standards about minimum technical safety requirements necessary for a hardfork coin to be supported. As it stands, the SegWit2x proposal does not seem to meet all of these requirements, therefore many exchanges may be incapable to even list the fresh coin, let alone support it as an upgrade to Bitcoin. However, there may be time for SegWit2x to fix these issues before the hardfork date.
The Rivaling Narrative Over Part 1 of the NYA
There were two parts to the NYA, part 1 was to activate SegWit, while part Two was to do a hardfork within six months. SegWit has recently been activated on Bitcoin. Albeit there is no objectively true reaction to this question, people on either side of the debate have been arguing which political circumstances caused the successful activation of SegWit.
Supporters of the NYA argue that since SegWit has activated, part 1 was successful and that therefore there is positive momentum behind the overall SegWit2x proposal. Others argue that this is not the case and that the activation of SegWit was primarily caused by a User Activated Soft Fork (UASF) .
The SegWit activation client was originally released on 27th October 2016 and miners had not activated the proposal by failing to indicate they had upgraded, for almost Ten months. A UASF client, called BIP148, was being promoted in some sections of the Bitcoin community. This UASF client made it mandatory for miners to flag support for SegWit by 1st August 2017, or a fresh coin would be launched. The SegWit2x client adopted BIP91 , another proposal which also made flagging support for SegWit mandatory. BIP91 activated on 21st July 2017, which then required all miners to flag support for SegWit on 26th July 2017, just Five days before the 1st August deadline.
Detractors of the NYA use these timings to shove the narrative that the UASF brought about the successful activation of SegWit, not part 1 of the NYA.
However, this issue only matters from a political point of view and has no technical significance.
The Influence of Bitcoin Cash
Many may also argue that the launch of Bitcoin Cash also fundamentally switched the politics of the situation. In our view, Bitcoin Cash has made SegWit2x slightly less likely to succeed.
Firstly Bitcoin Cash delivered almost all of what the &ldquo,larger blockers&rdquo, dreamed, namely it delivered a hardfork to larger blocks. Many therefore may not see the need for yet another hardfork, which does almost exactly the same thing anyway.
In addition to this, Bitcoin Cash has some technical advantages over SegWit2x, with better safety features included in the hardfork and better scaling technology. Bitcoin Cash supplies many of the technical benefits of SegWit, as we explained in our earlier lump on the subject.
The Political Landscape
Unluckily, the Bitcoin community has become increasingly polarized into different camps, illustrated in the diagram below:
Illustrative diagram of the &ldquo,blocksize debate&rdquo, political landscape
For a coin to succeed a sultry grassroots movement, willing to promote and defend the system is vital. Abandoning both of these sultry groups (group 1 and group Two), may not be a wise stir for the free riders (group Three). If the most enthusiastic and ingenious Bitcoin supporters are abandoned, the free riders may eventually find that they are not left with anything useful at all.
Bitcoin is an ambitious project, aiming to take on some of the most powerful financial systems in the world. The Bitcoin industry should not underestimate the challenges and threats that will emerge. It is naive to think that industry can make this project succeed alone. Albeit they may not always be the easiest people to deal with, the sultry, tenacious and dedicated early adopters, investors and developers are a necessity. A &ldquo,compelled compromise&rdquo,, like SegWit2x, which undermines what many want from Bitcoin, may either make some of these people leave or at least lose the passion and fighting spirit, which may be needed in the long and bumpy road ahead.
SegWit2x as a moderate political compromise
At very first glance, SegWit2x seems like a sensible middle ground political compromise, with both sides making some sacrifices. One may think a middle ground compromise coin makes some sense and some large corporates emerge to have rallied around this idea.
However, many are interested in Bitcoin precisely because they see it as being resilient against these kind of political compromises, which are already a common occurrence in the traditional financial system. Rather than being a moderate compromise, these group 1 people see the NYA as the worst case screenplay, precisely because it&rsquo,s a compelled political compromise. However, being against this kind of compromise may be an unrealistic expectation and the real world is total of compromises. The group 1 people may simply be too extreme or unreasonable.
It is certainly true that resilience against political compromise is an unusual and weird characteristic, not common in the business world. However, to many this is what makes Bitcoin fundamentally very different and unique compared to other forms of electronic money and other systems. And if we do not think Bitcoin has dynamics that are fundamentally different to typical business scripts, then why bother with Bitcoin at all? Afterall the US Dollar emerges to work pretty well. Perhaps what this comes down to is how ambitious one is for Bitcoin and how unique one thinks it can be.
As Satoshi said when responding to someone claiming that Bitcoin cannot solve political problems in cryptography:
Yes, but we can win a major battle in the arms race and build up a fresh territory of freedom for several years
Perhaps to some people, the success of SegWit2x could mean these several years are up. But we do not expect all of these people to give up without a fight.