The SegWit2X Bitcoin hard fork was supposed to take place on 16th November at block 494,784, however, as is often the case in crypto world things have not turned out as planned. The Bitcoin 2X hard fork was called off a week prior to launch, lack of community support was supposedly the reason for the cancellation. With numerous signatories dropping out of the New York Agreement that was signed in late May as well as a highly active ‘#NO2X’ campaign on twitter.
Forking appears to be the emerging trend in Bitcoin and cryptocurrency markets, it seeks to improve on an existing coins protocol and technological capability. Typically, it aims to improve the functionality of a coin as with Bitcoin Cash’s 8MB blocks, or for ideological reasons. Bitcoin Gold’s fork was an attempt to create a Bitcoin that used an ASIC resistant Proof of Work algorithm to decentralise the power of the large mining groups. Bitcoin 2X was aiming to increase the blocksize to 2MB to improve the throughput of transactions and decrease the cost of fees.
The markets have been exceptionally volatile since the fork cancelation with daily movements of over 15% and record breaking daily volumes. It appears that the biggest winner of the cancellation was Bitcoin Cash as it now the only big block blockchain, the price pumped to a high of 0.41 BTC in the two days following the cancellation. The price of BTC shot up during the two hours following the cancelation announcement. As investors had been worried that the fork posed a threat to Bitcoin and would dilute its market share. After peaking at $7,800 the price fell even faster than it rose, dropping to a low of $5,400. This drop was attributed to the large portion of investors that had bought extra BTC to profit from the B2X hardfork, as each BTC holder would receive an equal amount in the new coin. These investors who could no longer profit from the hard fork sold out of their overweight positions in BTC. This also led to a significant rise in the value of the alt-coins.
The recent string of forks has caused controversy within the Bitcoin community as many see it as a method of hijacking Bitcoins network effect and brand. Something it has taken eight years to build. The debates over hard forking and scaling are highlighting the issues of decentralised governance. It could be argued that Bitcoin is the largest experiment in decentralised governance in history. The problems arise when there are multiple parties which have vested interests in the future direction of Bitcoin. As with the telephone the network effects of cryptocurrencies are what give them value. Accordingly, it is not desirable for the community or the world to have two Bitcoin’s in direct competition. For now, it looks like the miners, market and community have sided with the original Bitcoin despite its functional drawbacks.
What is certain is that more forks will follow and try to take chunks of the Bitcoin market share. Bitcoin Silver, Diamond and basically any other precious metal will soon appear. Is this the beginning of the end for Bitcoin or will these attacks only strengthen the resolve to all gather behind one coin? The recent highs of over $8,100 suggest that the resolve has indeed been strengthened.