Hi Steemians,
Today I'll talk about a looming threat to the Bitcoin network, that could affect each one of us as holders of Bitcoins and how we could sail through this unscathed if we are careful enough.
If you remember, not too long ago, Bitcoins' price was at an all time high of around $3000 USD. But it's price has been steadily declining for the past 2 weeks and many of you, like me , will be scratching your heads thinking what's going on and why the price of Bitcoin has become stagnant? Well you've come to the right place, I'll explain why this is happening and what you need to do to protect your bitcoin holdings. Make sure to read through this till the end and as there're quite a few important things to note.
As we all know , Bitcoin's death has been pronounced so many times in the last 10 years by media all over the world, but this time the threat to this first cryptocurrency is very real. A longstanding stalemate has become a crisis situation now, with two sides (I'll tell more about them shortly) each threatening to employ their version of a “nuclear option” — each of which could potentially destroy the $42 billion market cap of bitcoin.
It's general knowledge now to all of us in the crypto world that the Bitcoin network can process about 7 transactions a second presently, but in reality people are sending a lot more than that and because of that there's a serious backlog of transactions on it's network. And it's going to get worse if some drastic steps aren't taken soon enough.
To solve this very real issue, developers and investors are discussing on two potential solutions. The first one is to increase the blockchain size from the present 1 Meg to 2 Megs and the second one is to perhaps split Bitcoin into two. But both of these solutions can create havoc for the price of Bitcoin and the other altcoins that depend on it. And that's the reason speculators & traders are having a difficult time throwing money into purchasing bitcoin ahead of whatever gets decided. And this is what's giving the crypto markets a lot of volatility lately.
Now, the main issue here is how to stop people from moving away from Bitcoin because of it's slow speed in handling the transactions and increase it's capacity to handle much more than the 7 transactions it can handle per second presently. Now to give you a bit more insight into the functioning of bitcoin, it's transactions are added in blocks to the bitcoin blockchain (we can consider this as a ledger that records every transaction). And each block is limited to 1 MB of data. Now the only way we can speed up a transaction is to add a fee to it, so that my transaction is picked up before others who have paid no fees or less fees. And because of this the transaction fees are running pretty high currently due to greater volume hitting up against this 1 MB limit.
Now I'll tell you about the two groups that I mentioned above in this conversation. The first group is called Bitcoin Unlimited (BTU) which includes a large miner and mining equipment manufacturer and they're pressing for removing this 1MB block limit so that the blocks are made bigger. The second group is that of the Developers who have been maintaining the protocol for the past several years, they're called Bitcoin Core Developers (BTC) and they want to make the blocks more efficient with an upgrade called Segwit (Segregated Witness).
This threat of nuclear option wherein an upgrade to the software that didn't have the full support of the bitcoin community may result in two versions of bitcoin and is therefor being called the "Hard Fork".
So if a person has 1 Bitcoin before a Hard Fork (if that happens), will then have 2 quantities of 2 different coins and this can lead to a lot of chaos from a market and brand confusion perspective. And therefore both the parties are working hard to avoid this contentious Hard Fork.
It's possible that it may happen and since the network is decentralized, we may not know in advance if one party pushes ahead without letting the others know. And this is the reason that Bitcoin's price is almost stagnant for the past couple of weeks and it seems the price may be moving backwards in anticipation of this possible Hard Fork wherein the big traders are hesitant to put more money into the Bitcoin market.
I think it's just too much information for just 1 post, so I'll continue this discussion in the second part which I'll post tomorrow. It'll basically deal with how we should safeguard our bitcoin holdings in case this so called Hard Fork goes ahead!
Let me know what your views are with regards to this conflict between the Developers and the Miners and what you think should happen considering we all have some (tiny or massive) investment in Bitcoin.
Continued.........
This post received a 22% upvote from @randowhale thanks to @cryptodog! For more information, click here!
very informative post and great insight to btc and btu, which is not gona happen
Thanks @shahzadnisar, nobody knows what's going to happen. It may or may not go ahead. We just need to be aware of it though and try and minimise our risks.
hi cryptodog, i'm mdog! Woof
thanks for the post. it's easy to realize that the current price is possibly already too high. it could well go back to $1500 within a series of weeks. and the problem with bitcoin has already been noted many times. it wont mean the death of bitcoin, since nothing can replace the original... slow transaction time is definitely a downside to BTC
Thanks @mdog. My 2nd part is going to deal with all these aspects, so please do check it tomorrow.
You explained the coming Bitcoin challenges in a great way. I am keeping a close eye on what is happening and I appreciate you writing this blog. You also picked up a new follower. Thanks for sharing and I will keep coming back for more updates. Have a great day.
Thanks so much @walkingkeys, please do check tomorrow for the 2nd part as it's going to be even more interesting.
Will do, thanks!
This is supposed to happen in August, right? BIP148? It's all pretty confusing to me. I'm stackin' silver until it's resolved.
It may happen in the coming few months, nothing is confirmed atm @longshot. Please do check the 2nd part tomorrow as I'll talk about how to protect our bitcoin holdings in case a hardfork happens.
Will do @cryptodog. Thanks!
good post!
(just one question: How did you add the bottom moving letters?)
Thanks @greensmile. You'll have to create 3 images either on photoshop or any other free software and then use a free gif maker.
Informative post .. but what you mean we should Withdraw our Bitcoins ? Dont invest in bitcoins ?
Thanks @slefesteem, please check the 2nd part tomorrow which will provide you the answers you need.
WOOF woof ! i am waiting :D
Haha, Cheers @slefesteem.
It is simple: Hold your keys. :)
If a hard fork occurs, what will happen to my bitcoins?
Depending on how you store your bitcoins, e.g. desktop wallet, online wallet, exchange…etc, you can expect one of three scenarios:
The exact outcome depends on how you are storing your coins and whether or not you control the private keys of your bitcoins. If you store your coins using an online wallet or a cryptocurrency exchange, then you don’t control your private keys, so you are letting another entity choose the fate of your coins.
To ensure that you will have both BTC and BTU, in event of a fork, you should store your coins via a local wallet on your machine, so that you would be controlling your coins’ private keys.
Good work @petrvl. But there's much more than this that you need to remember if this hard fork happens.