At this point, we have two bifurcations for the bitcoin network. The bitcoin investor wants to know what to do before the event to be as well prepared as possible. Novices have not yet fully understood the purpose of the Bitcoin bifurcation, and we are here to help. One of the bifurcates is called bitcoin gold. The second bifurcation is Segwit2x (BTC1) and will take place at mining block 494 784.
What Are The Bifurcations?
What is the purpose of the bifurcation? The first bifurcation in bitcoin history took place on August 1 and generated bitcoin cash besides bitcoin. At this point, we have two Bitcoin bifurcations scheduled in two months. That means if the bifurcation takes place, we could have four blocks in total. They will have an identical transaction history until the critical moment in which new functionality is being deployed. After the bifurcation, the chain created by Satoshi Nakamoto separates from what are bitcoins. The old chain follows the old consensus rules and adds to the register transactions that respect them. The new chain adds deals to new regulations, making it virtually another business.
What Is The Purpose Of The Bitcoin Bifurcations?
The original Bitcoin remains the one with longer transaction histories, that is, the one that many miners join. They show support for implementation or another validating transaction on the blockchain they choose.
Bifurcations are nothing but updates to the software that governs the network. No matter how good the original technology is, it must be maintained and improved at all times. Sometimes there are problems of organizing transactions (such as scalability that we will talk about later), sometimes some of the community wants to create new rules. To find out more about bitcoin gold issues and controversies, read here.
We’ll start with scalability, a problem that has been discussed for over two years. Blockchain was not created from the start for the large volume of transactions we have today. Nakamoto predicted that if adoption among users will increase, the blockchain will have to deal with more operations. However, if he launched it with the ability to make more transactions from the start, the network could have been the victim of cyber attacks such as DDoS.
Miners validate a fixed number of operations every 10 minutes within 1MB. Bitcoin trader transactions are processed in any order by the miners. Because miners receive, besides the block reward and commissions for processed sales, they are very motivated to choose the sales that pay a higher commission.
Any transaction that exceeds the block limit will, therefore, remain unprocessed until the network decongestion, and the miners reach it. Until now, typically the remaining unprocessed transactions were validated over the weekend. In the summer, for the first time, we had situations where purchases remained untreated on weekends. They stay in the memory of unprocessed transactions.
Users have come to bid for space on the blockchain to ensure that their transactions are processed. So, the commissions have increased. It becomes unviable to buy or to make microtransactions. Large commissions favor those who transfer more massive amounts.
It is a scalability issue, i.e., the network needs to adapt to the higher number of users and operations they make to keep the Bitcoin viable for cryptocurrency investment. The proposed solutions for decongesting the system were SegWit, which creates some parallel chains on which transactions are validated and then increasing the size of the block. There have been many suggestions. Increase in block size, a simple implementation itself, was negotiated at 2MB, at 4MB, at 8, 16, 32MB. Moreover, yet what happens when this limit is reached? Do not we just postpone the problem without creating anything new?
The talks were ample, and eventually, an agreement was reached between the community members (entrepreneurs, users, and miners) who decided to implement parallel chains like Segwit and an increase in the block to 2MB.
As for bitcoin gold, it resolves theoretically another problem that creates controversy in the network. It’s about miners having too much decision-making power in the system. Because industrial mining has come to pass with ASICs mostly concentrated in China, some think that the bitcoin has come to be, or is at risk of being, centralized. This runs counter to the basic ideas of bitcoin technology. After all, what is the difference between a central bank making decisions for citizens and some farm operators choosing discretionary what the original bitcoin is. The reality is that the miners created all sorts of problems last year and this year. They have been told they are pursuing their interests and refuse to leap on improved blockchains for users who, however, disadvantage them financially. So, there is the problem that there should be no industrial mining anymore and that anyone should be able to handle it from the computer at home. However, with video cards, industrial mining can also be done. Furthermore, the one who proposed the change of bitcoin gold is a non-ASIC mining farm manager. It has created controversy.
You want to know what to do before the bifurcation to get bitcoin gold. Of course, we all want to get a free white cooler, whatever it is. It is not known what the value of the new coin will be. We do not have data on wallet development. We do not even know if the exchange will support bitcoin gold. While waiting for the decisions, we want to be wallet-ready anyway. You need to understand that the BTG price may be so small that developers are not even motivated to make wallets.
The bitcoin gold project (BTG) plans to bifurcate the network to create a bitcoin version that cannot be mined with ASIC miners. The reason why the interface is bifurcated is, according to the developers working on this project, to escape the centralization of the net.
How Do The Miners Centralize The Network
Miners have the most power in the system because they decide what transactions validate after code/technology. For more than two years, network implementations have been intensively negotiated with Chinese farm managers. They turned out to be delayed and challenging code upgrades. Of course, some of their problems were considered justified. The controversy remains, and China has more than 40% of the network’s hash power, so a consistent impact.
BTG developers plan to create a bitcoin that will only be able to survive with graphics cards and home processors. The consensus protocol we have now will change with an algorithm called Equihash. In this way, users will only be able to drive with standard equipment. Specially dedicated ASICs that have relatively high market prices will no longer give a significant advantage to market timing. In short, the cost of dedicated miners will no longer be justified, because they will stay with roughly the same power as graphics cards.
It is questionable whether this decentralizes the network, or moves power from ASIC farms to rigs. This idea is still part of the experiment.
The Segwit2x bifurcation is a technical compromise. It was thought of after the New York Spring deal, over which many miners and businesses agreed. Some believe that this agreement finally persuaded the miners to use their hash power (with which they practice and vote on network changes) to implement the SegWit protocol. However, it was agreed to activate it after three months to increase the size of the block to 2MB. This firm bifurcation will take place somewhere in block 494784.