Will Bitcoin Have a Hard Fork in 2017?

What’s the deal with Bitcoin’s hard fork rumours?

Since mass adoption among cryptogeeks, some issues regarding the scalability of the bitcoin blockchain started to arise. Developers and other stakeholders are locked in a heated debate over how best to scale the network. This does not go without a fight and a lot of disagreement. There are some irreconcilable differences causing a so-called “hard fork” that would split Bitcoin in two.

What do exchanges say about this?

Since there’s a lot of hard dollars going round in Bitcoin and other cryptocurrencies that are built on the same chain, it is an issue exchanges like Poloniex and Kraken have to take a stance in. Most exchanges have already indicated to support both assets if a fork takes place. However, the co-founder and CTO of international Bitcoin exchange BitMex, Samuel Reed, stated that:

It will not be possible for any exchange, including BitMEX, to support both chains separately. For these reasons, BU will not be listed or used as a deposit/withdrawal currency until replay protection is implemented and BU is not at risk of a blockchain reorganization if the Core chain becomes longer.

What’s the problem?

Bitcoin as a coin is too popular, and can’t handle the weight of transactions going through the network. Also, it has to be said that downloading a blockchain half the size of a normal hard drive, is also pretty annoying (if you insist on using a local wallet that downloads the complete blockchain).

Bitcoin transactions are processed in “blocks” that involve complex cryptography to verify and set the transactions. But as the currency grows and more and more transactions take place, the one megabyte size limit on blocks that is built into the system is becoming an issue, causing delays in processing transactions. A purchase might take hours to confirm, making it unwieldy for real-world use. Compared to Ripple or other cryptocurrencies like Ethereum, this is a joke.

What happens to Bitcoin with a hard fork?

There are two camps in the debate, pushing two different possible solutions: “Bitcoin Unlimited” (which we’ll henceforth refer to as BU), and Segregated Witness (SegWit). Sort of the same we saw with the Ethereum hard fork last year, where the currency got split in ETH and ETC, respectively.

They’re both proposed software updates to the bitcoin network that would change how it functions. They can’t both coexist: Their implementations would “fork” the bitcoin network, effectively splitting it into two competing digital currencies.

What happens to your Bitcoins?

If you hold bitcoin and there is a HF (Hard Fork), you will own bitcoin on both forks. You don’t need to do anything. When the blockchain branches into two there will be two digital assets immediately after the hard fork. Bitcoin holders who possess their private keys will have access to assets on both chains after the split event occurs. So, if you store your Bitcoins in a local wallet on your computer or on your phone you can just stay put and watch the fork happen.

Keep your BTC safe, just in case

Holding cryptocurrency on an exchange is not a recommended practice, even when everything is ok. After a blockchain split customers storing bitcoin on an exchange will have to succumb to the rules of that specific trading platform. For instance, it’s highly possible that exchanges will pause withdrawals for 24-48 hours during and after the fork.