All is not well in the cryptocurrency world as the controversial bitcoin scaling proposal Segwit2x’s testnet created two different and incompatible testnet on Monday, resulting in the loss of about a third of bitcoin market value early this week.
The proposal known as Segwit2x was an agreement by bitcoin companies and miners to run code that will implement a hard-forking increase to the non-witness data in blocks roughly three months after the activation of Segregated Witness (SegWit).
SegWit2x proposal which was signed by more than 50 companies and published by investment firm Digital Currency Group is said to be the only viable solution to the bitcoin scaling debate. Although it claimed to have the support of 83 percent of businesses that operate computers that secure the blockchain and add new transactions to it, it was been greeted with criticism from different quarters.
The latest setback has developers on the USD41 billion bitcoin market very much on edge. Some refer to it as an inevitable consequence of being sidelined by SegWit2x developers who would not allow crucial input from Bitcoin Core Developers.
A compromise may be far in the horizon. Hence many professional traders are telling clients to be ready for higher volatility and prepared to act when the time is right.
“It’s a high stakes game of chicken,” said Arthur Hayes, CEO of BitMEX, Hong Kong, “If you are a trader, there is a lot of uncertainty as to what happens. Once there is a definitive signal about what will be done, the price could move very quickly.”
According Bloomberg data, bitcoin market value went down 20 percent from the peak of USD3, 000 reached in June 12.
Should a split eventually happen, analysts point to three possible outcomes for people with bitcoin investments; first the user activated soft fork (UASF) that begins on August 1, second is SegWit2x which starts around mid-July to October, and third the more recent Bitcoin ABC (UAHF) that might deploy in August.
The idea behind user activated soft fork is to get SegWit activated by utilizing the vote of full nodes otherwise referred to as the “economic majority.” While the idea has somewhat gained some support, it has also come under scrutiny from those who believe USAF may be contentious and could cause a blockchain split.
The user activated hard fork (UAHF) which was inspired by the idea of a time-based fork that should be possible to change to a height-based fork, according to Amoury Sechet, the chief developer.
However, some analyst has dismissed the slide in market value as expected. Bitcoin demand is growing around the world with many more organisations accepting it as currency for their business. Increasing popularity of bitcoin, they said, meant there will be more activity on the currency.
Bobby Lee, chief executive officer of BTCC, a Chinese bitcoin exchange said the increased volatility is nothing to worry about.
“It is not a problem. If you think about it, the volatility is natural for an asset class that is so new. There is no price discovery for it,” Lee said.
On Wednesday (GMT 12:36), Coindest price index showed the price of bitcoin was at USD2, 343.91 an increase from the previous day price of USD2,291.23.
FRANK ELEANYA
