Nearly all digital currencies are back in green today as the sideways summer continues with bitcoin and ethereum making less than 1% gains this Sunday.
Bitcoin, in particular, has been moving in a near straight line for quite some time, drifting around $2,500 as the currency awaits decision time regarding its scalability.
That’s now just over three weeks away, with the self-imposed August the first deadline fast approaching. A deadline which determines what way bitcoin will go.
Bitcoin Core developers want segwit activated and nothing else at this point. Some of them support a flag-day soft-fork called UASF which forks the chain with around 30% of miners that currently signal for segwit.
Many other Bitcoin Core developers have come out against it, considering UASF as a complicated way of upgrading the protocol that could lead to an outright mess.
Miners and industry have come up with a Segwit2x proposal, to be developed by Jeff Garzick and others, with the finalized client expected anytime now.
The proposal firstly implements segwit in an unmodified form, but at the same time merges a hardfork increase of the protocol level limit currently set at 1MB.
It’s been called a compromise, facing flak from both sides. Small blockers really don’t like the hardfork part while big blockers really don’t like the segwit part.
Some Bitcoin Core developers have come out against it with a heated exchange taking place on the mailing list when Sergio Demian Lerner proposed a segwit2x Bitcoin Improvement Proposal (BIP).
So it is unlikely it will be merged in Bitcoin Core, with the decision now finally moving to miners as soon as the segwit2x client is to be released.
Nearly all of the miners have already signaled support for it. The client, therefore, will probably quickly reach its 80% activation threshold. Miners will then try and increase that to 95% by either the rest of them upgrading or by the upgraded miners forking the blocks of non-upgraded miners.
Once the 95% threshold is reached, segwit activates on Bitcoin Core too and goes live, with the bitcoin network finally making a decision after more than two years of debate.
Once segwit is activated, the hardfork part is binding only on miners that continue to run the segwit2x client, with all of them free to switch to Bitcoin Core anytime they please after segwit’s activation.
That means if some miners continue to run segwit2x in three months while some others don’t, then the bitcoin chain splits, but three months is a long time in this space.
As for the next three weeks, if most Bitcoin Core developers continue to stay against UASF, then a chain split is unlikely with miners probably activating segwit before hand.
Bigger blockers, therefore, will need to make a decision now, but they appear to be disorganized, with their thought leadership seemingly backing segwit2x, so they are unlikely to chain split and if they do it would probably be a minority coin.
As such, the next three weeks may see the smooth activation of segwit with the so called bitcoin civil war potentially ending at that point as bitcoiners and the wider market make their decision.
The effect of all that on ethereum so far has been an increase in uncertainty, adding to selling pressure by ICOs, with the digital currency slowly moving in a semi-sideways downwards fashion.
But the wider effects of bitcoin’s imminent decision on ethereum are difficult to predict for different scenarios. The currency could benefit from a bitcoin rise, which may drag it upwards, or may act as a safe heaven if things get a bit messy, or it may be dragged down with bitcoin.
Just for good measure, it may simply go sideways too and not react as ethereum now has its own ecosystem and factors that affect its price detached from bitcoin.
Whatever happens, it will probably be historical as far as this space is concerned, with the decision likely affecting bitcoin’s trajectory for many years to come, its governance, the way it reaches conclusions, and the way it moves forward.