The Bitcoin Fork(s) & August 1st: Don't Panic, Read This

It's about to go DOWN in Bitcoin land and for most normals it's overwhelmingly confusing. Fear not, I am going to share the best resources on the subject so that newbies and neckbeards alike can get a handle on the situation and be informed enough to protect themselves and their BTC.

I'd advise people to be prepared to not make many Bitcoin transactions in early August and to use an abundance of caution when doing anything with one's BTC in those weeks. And a word of caution as we approach August 1st: almost all the articles being written on the subject and all the tweets are tendentious FUD laden propaganda at this point, so almost no sources are reliable. Be careful even trusting what I write. Try and put anything anyone writes or says in context and consider what their motivations are before accepting what they say as true or accurate. There's almost no neutrality to be found.

The so-called User Activated Soft Fork (UASF) is also arguably the first Sybil Attack we've seen on a major blockchain. There is the potential for the miners to launch a 51% attack on August 1st or August 2nd against the UASF, which would be the first 51% attack we've seen on a major chain as well. There's a plausible scenario where there are as many as 3 different Bitcoins on August 5th. But also as of today there's news that SegWit2x today demonstrated it has 80% of the hash rate, which could end the UASF before it can happen -- if that holds, it's a more stable "kiss your sister" compromise outcome than many of the other scenarios that loomed.

But who knows and it's hard to know who to look to for what's going on. The exception to the FUD and fog of war has been the series of articles by Jimmy Song on the subject. These have been neutral, fact-based, well-written and thorough. This is a credit to Jimmy and he is example to all of crypto on how to conduct oneself. When people ask me what is happening, point them to him. Let him be your guide through these turbulent times. I link you now to several of his recent articles and excerpt the key section of each:

Primer on the User Activated Soft Fork (UASF)

If you’re a user on the network, that means that transactions will be slower for two weeks at a minimum (longer if the hashing power is lower) and more likely, there will be some serious disruption as merchants and exchanges will likely suspend any Bitcoin transactions until there’s some clarity on the forking situation.

Further, even after the forking situation is resolved, there’s a high likelihood of there being two Bitcoins and a very messy divorce.

Readers questions on a UASF (User Activated Soft Fork) via BIP 148

What are things people can know for certain?

Hard question. Game theory is often more art than science and you have to act with incomplete information all the time. What you “know for certain” completely depends on who you trust. Miners may not believe UASF will actually go through with the soft fork, for example and Users may not believe Miners would attack them.

A tactical breakdown of how the Game Theory of UASF may play out -- complexly and scarily

Believe it or not, I believe the fight will be even nastier than I’ve laid out. These are only rough first-order calculations of the game theory implications. There are likely to be many more moves, each with their own scenarios just as long as this article.

Jimmy breaks down Bitmain's "credible threat" move

Bitmain’s press release is what you would call in game theory a “credible threat”. They certainly have the mining power and cash on hand to commit to this project. As most of the hard fork ideas come from Bitcoin Unlimited, they also have software ready, however you may feel about its reliability. They are also addressing real problems with a soft fork like replay and wipeout protection.

If you’re thinking from a game theory perspective, the question now should be, why? Why is Bitmain releasing these plans?

Jimmy explains the NY compromise solution, SegWit2x

The steps taken in the past week look like Segwit will be activated and avoid a network fork on August 1. This is good news in the short term, but the long term question of whether there will be a hard fork to larger blocks or not is still unanswered. There is room for optimism, but there are still more battles to be fought.

Separately, I think Phil Daian's critiques on the dangers of UASFs is also worth noting. We'll see how the Bitcoin fork(s) or non-fork(s) plays out. We're in unprecedented grounds and the stakes are high which makes this fun. While it could resolve itself smoothly as the sides resolve their politics with proper compromises, one lesson I 've learned is that crypto is never boring, so August 1st has the potential to look something like this: