Showing posts with label fork. Show all posts
Showing posts with label fork. Show all posts

November 17, 2017

Twist in the plans of SegWit2x, Possibility of a Hard Fork looms over

BY Bhushan Akolkar - November 17, 2017 (www.coinspeaker.com)


In a fresh new twist in the plans of SegWit2x hard fork, there is every possibility for the hard fork to go through in the near time.

The much-debated SegWit2x hard fork was being officially canceled last week after several community leaders and a large number of miners withdrew their support due to lack of consensus. As a result, the hard fork plans were completely halted which meant that Bitcoin will not be splitting into two, as projected earlier. However, just a few hours back, there has been the latest twist in this story as Director of Comms @ Coinbase, David Farmer took it to his Medium-blog that there are still a small group of miners who are attempting to go ahead with the hard fork.

Considering the possibility of network instability in such a case and in order to protect the customer’s funds, Coinbase is likely to suspend the buying/selling of Bitcoins 2 am Pacific Time on November 17th, an hour before the fork which is projected to occur between 6am to 8am Pacific Time on November 17th. Once the fork gets initiated and confirmed, all the normal operations will resume afterward. As per the latest information available on blockchain.info, the total number of blocks mined currently shows to 494743 and the SegWit2x is scheduled to take place at 494784 which is pretty close from the existing position.

Earlier this month, Bitcoin prices scaled to new highs above $7800 mark, but however soon after the announcement of the cancellation of SegWit2x, the prices corrected majorly for a week. Later, Bitcoin managed to regain its lost ground and currently, it trades convincingly close to and above $7800 in past 48 hours. Now, as per the most massive bitcoin exchange, Bitfinex, Bitcoin has crossed the $8000 to hit a new record high of $8040 and its latest price on the exchange shows to be $7837.55. Moreover, the word regarding the new twist in the plans of SegWit2x is yet to spread and we think and we think that there is every possibility we might see Bitcoin trading well above $8000 very soon.

In the meantime, just when the plans of cancellation of SegWit2x were announced, Bitcoins first derivate Bitcoin Cash was gaining the limelight as its prices rocketed to new highs above $1900 as a lot of miners shifted to the BCH blockchain.  Bitcoin has recently been hard forked to a new software upgrade in its Difficulty Adjustment Levels (DAA). Many believe that it has created a level playing field for mining activities between the BTC and BCH blockchains.

As the SegWit2x is approaching closer, we believe that there can possibly be a new fresh upward momentum to be seen in the Bitcoin prices. The SegWit2x is expected to improvise a lot of things on the scalability issues of Bitcoins.

November 10, 2017

Bitcoin Cash surges as businesses abandon legacy BTC

By Kai Sedgwick - November 10, 2017 (news.bitcoin.com)


Bitcoin cash is enjoying a new lease of life as major figures throw their weight behind the chain. In the wake of the abortive Segwit split, neither bitcoin nor B2x has prospered, with the latter failing to materialize and the former dropping below $6,800 for the first time in 10 days. BCH, meanwhile, hit $866 earlier today.

All Aboard The BCH Express


As the elation, anger, and acrimony over Segwit2x has started to settle, focus has returned to the seemingly intractable problems of bitcoin scaling and transaction fees. Given the difficulty of attaining consensus for developments of the bitcoin network, many have grown frustrated by the stalemate, with widespread Segwit adoption and Lightning Network implementation still months or years away.

With bitcoin currently unsuitable for small transactions due to high fees, various businesses and public figures have expressed their preference for a cryptocurrency more suited to everyday use. For some, this has meant looking to the world of altcoins, where the likes of Litecoin and Dash beckon. For those keen to stick with the bitcoin brand, however, bitcoin cash looks increasingly attractive.

One member of the Openbazaar team tweeted:

"Hearing lots of great things about @BitcoinCash $BCH today. Many developers and businesses seem better aligned with the vision now that 2x has failed".

The team running the P2P marketplace have every reason to be extolling the virtues of bitcoin cash, having announced that they’ll be accepting BCH on account of its cheaper fees along with zcash. As businesses have wrestled over what to do with a legacy bitcoin that’s becoming increasingly un-transactable, the BCH team have wasted no time in wooing defectors, stating:

"BTC’s utility continues to decline. Watch as businesses adopt BCH".

One public figure who has thrown his weight behind BCH is Pirate Party founder and bitcoin maverick Rick Falkvinge, who declared: “With recent developments, I’m putting all available dev resources to retool my software for #Bitcoin Cash. I suspect I’m far from alone.” He later added: “I’m moving my development effort to Bitcoin Cash, as Bitcoin Legacy now has hit a brick wall and needs to be dropped like a bad habit. I have no real reason to move the coins.”

One Coin to Rule Them All


The Bitcoin Cash market has surged over the last 24 hours, with volume exceeding $2.5 billion, 57% of which was trading against the Korean won. Much of the fevered interest in BCH will simply have been market sentiment, fueled by the growing consensus that the legacy bitcoin chain is ill-equipped to handle growing volume. It would be speculative at this stage to suggest that BCH is gearing up for its own version of The Flippening, when Ethereum believers thought their coin might actually overtake bitcoin to become The One True Coin.

Make no mistake though, if BCH’s most ardent supporters have their way, not only will bitcoin cash steal bitcoin’s market cap eventually but it will also steal its name. In the wake of the Segwit2x furore, there were hopes that the in-fighting which had driven a wedge into the bitcoin community would cease and work could resume on infrastructure improvements. Instead, the BTC/BCH debate has been ramped up, with supporters of both chains adamant that theirs is the best bitcoin.


Bitcoin legacy’s decentralized nature is both its greatest strength and its greatest weakness. The BCH team is wasting no time in rolling out network upgrades and implementing a clear roadmap. More than 1,500 businesses are already accepting bitcoin cash, a modest figure but one that is rising steadily.

Images courtesy of Shutterstock, Coincodex.com and Bitcoin Cash.



Kai Sedgwick

Kai "Segwit" has been assembling words for a living since 2009 and fascinated with Bitcoin since 2013. He's previously written white papers for blockchain companies and is particularly interested in P2P exchanges and DNMs.

November 09, 2017

SegWit2X - Rogue fork announced, Raises suspicions of trolling

By Christine Masters - November 09, 2017 (cryptovest.com)


Officially, the November hard fork was called off. Unofficially, a rogue blockchain has been announced by self-presented miner group BitPico.

The Bitcoin hash rate has been dwindling - and the account of BitPico has shown up, claiming ownership. In a Microsoft Cloud message, BitPico stated that a hard fork is coming anyway, despite the cancellation from the project's leaders sent days ago. 

In a categorical tone, BitPico wrote: 

"We are carrying out the fork regardless as everything is set in motion. Backing down the difficulty right now is a strategy. Wonder why 30% network hash-rate disappeared?  It’s ours; the miners that will continue what is set in motion... A handful of humans cannot stop what they have no control over..."

The Bitcoin hash rate has bucked the trend, expecting a record downward adjustment in difficulty in just a few days. This means that after the hard fork, the new blockchain created would operate at a low difficulty for at least 2016 blocks. 

But the recently created BitPico account, presumably for a group of miners, claimed a much lower hashing power in an earlier notice. Theories on the behavior of BitPico ranged from mere trolling to an attempt to manipulate the B2X futures markets. B2X futures dropped dramatically after the fork cancellation, losing more than 80% of their valur.


The Bitcoin difficulty will probably adjust downward by 30%, an unseen correction after the difficulty rose rapidly in the past months. 

US-based exchange Coinbase will be monitoring the proposal for a rogue hard fork, but so far abstains from a statement: 


Bitcoin enthusiast and founder of Civig Vinny Lingham also noted the potential rogue hard fork: 


At the moment, no one is certain if BitPico is a real entity that in fact commands the missing hashing power and slowed down the Bitcoin blockchain. The entity is related to a low-activity GitHub repository, and some believe the move is merely a distraction tactic. 

But since forking Bitcoin is easy, it is not impossible that an actual SegWit2X coin would be created. This time, however, it would not be able to strangle the Bitcoin chain.

The other hypothesis would be that the lowered hashing power would flow into Bitcoin Cash, which will soon have a smoother difficulty adjustment algorithm. 

The official cancelation of the SegWit2X hard fork for the foreseeable future managed to calm down the markets and caused a rally in altcoin prices.

November 08, 2017

NO2X: Next week’s Hard Fork has been “suspended” due to a lack of consensus

By Aaron van Wirdum, Staff Writer - November 08, 2017 (bitcoinmagazine.com)


There will almost certainly be no Bitcoin hard fork next week: the main organizers behind the SegWit2x project have “suspended” their efforts.

In an email to the SegWit2x mailing list, one of the main organizers behind the project, BitGo CEO Mike Belshe, explained that the proposed hard fork has not been able to gain sufficient consensus to proceed:

“Although we strongly believe in the need for a larger blocksize, there is something we believe is even more important: keeping the community together. Unfortunately, it is clear that we have not built sufficient consensus for a clean blocksize upgrade at this time.”

The New York Agreement was originally forged between a group of Bitcoin companies in May of this year. An initiative by Digital Currency Group CEO Barry Silbert, the project — later dubbed “SegWit2x” — was to combine activation of the Segregated Witness soft fork with a hard fork to double Bitcoin’s block weight limit. With Segregated Witness activated on the Bitcoin network this past summer, arguably helped by the SegWit2x project, the hard fork was scheduled to take place next week.

However, the hard fork part of the New York Agreement was always controversial for a number of reasons. As a result, a growing number of signatories dropped out of the agreement over the past weeks and months, while developers, user communities, public polls, future markets and more all indicated limited support for the effort. And as the hard fork date drew closer, it become increasingly clear that SegWit2x would in fact spawn a new currency rather than constitute an upgrade of the Bitcoin protocol.

And this was never the plan, Belshe wrote:

“Continuing on the current path could divide the community and be a setback to Bitcoin’s growth. This was never the goal of Segwit2x.”

Belshe’s email was also signed on behalf of Xapo CEO Wences Casares, Bitmain CEO Jihan Wu, Bloq CEO Jeff Garzik, Blockchain CEO Peter Smith and ShapeShift CEO Erik Voorhees. In a separate blog post published just before Belshe’s email, BitPay CEO Stephen Pair also called for cancelation of the hard fork.

While the New York Agreement was signed by even more companies (and some individuals), and anyone can still deploy the hard fork, it is unlikely that anyone will proceed with the hard fork in any meaningful way.

Belshe does, however, note that a hard fork to increase Bitcoin’s block weight limit might be needed in the future, writing:

“As fees rise on the blockchain, we believe it will eventually become obvious that on-chain capacity increases are necessary. When that happens, we hope the community will come together and find a solution, possibly with a blocksize increase.”

November 04, 2017

SegWit2x a Chain Split, ‘Not a Blockchain Upgrade’ - NYA Signatory Bitso

By Josiah Wilmoth - November 04, 2017 (www.cryptocoinsnews.com)


Another signatory to the New York Agreement (NYA) is having second thoughts about SegWit2x.

Daniel Vogel, co-founder and president of Mexican bitcoin exchange Bitso, sent an email to the SegWit2x mailing list on Thursday expressing hesitancy about the upcoming hard fork that is scheduled to activate in approximately two weeks. Vogel’s chief concern is that although the SegWit2x codebase is written as an upgrade, the hard fork is effectively a blockchain split.


“I would urge everyone to rethink the S2X code from a technical perspective. The code base was written as an upgrade to Bitcoin. I believe there is enough hard data out there to make it clear that S2X is no longer an upgrade.”

He noted that although the majority of the hashrate continues to signal for the hard fork, several pools have either withdrawn support or declined to support it in the first place and others have wavered in their commitment to mine the SegWit2x blockchain.“When do we stop and rethink?,” he asked. “When we get to less than 50% hashing power?”

He also pointed to the fact that no bitcoin liquidity providers — bitcoin exchanges, for instance — have stated they will abandon the incumbent blockchain, which is what happens when a hard fork is truly a blockchain upgrade.

"I ultimately think this is about users. We had ZERO users asking us to keep support for the now dead pre-Byzantium [ethereum] chain,” a hard fork that took place last month. “We have tons of users asking us to keep support for their ‘core’ BTC.”

Vogel said that Bitso signed the NYA to help activate SegWit but that the agreement has failed in its attempt to build consensus around SegWit2x.

“What’s relevant is that NYA has failed to bring the community together and provide a safe mechanism to upgrade Bitcoin as it had intended to do,” he continued, adding that “when asked about signing the NYA I definitely didn’t agree to it in order to further divide and cause mayhem, which is what NYA has achieved.”

Bitso is not the first NYA signatory to revoke its support for the agreement. Although SegWit2x project lead Mike Belshe has said “Things are looking good” ahead of the hard fork’s scheduled activation date, a growing list of businesses — as well as mining pool F2Pool — have reversed their support for the contentious hard fork for various reasons, ranging from a lack of replay protection to a dearth of support from their customers and the most active bitcoin developers.

“This is not a blockchain upgrade,” Vogel concluded at the end of his email. “This is a chain split and we are failing to address legitimate safety concerns for the users of this network.”

Featured image from Shutterstock.

Posted by Josiah Wilmoth

Josiah is a former ancient and medieval literature teacher. He has been writing about cryptocurrency since 2014, and his work has been cited in Business Insider, NPR, and Yahoo! Finance. He lives in rural North Carolina with his wife and son. Email him directly at josiah.wilmoth@cryptocoinsnews.com.

October 28, 2017

How Bitcoin forks influence Bitcoin price rise and fall

By Patrick Thompson - October 28, 2017 (cointelegraph.com)


Prior to the Bitcoin Gold fork two days ago, the market made some interesting moves.

Bitcoin price reached a new all time high on Oct. 20, 2017 - five days before the Bitcoin Gold fork -surpassing $6,000 for the first time and eventually climbing to nearly $6,200.

Those of you who have endured past chain splits are aware of what usually happens when there’s a split from the Bitcoin network. Ordinarily, the community complains, reddit.com, medium.com, and twitter.com become platforms for soapbox speeches, and a lot of trash is talked by factions within the community.

However, have you noticed the other events that are correlated with a chain split? Once a chain splits, you suddenly own a number of split tokens equivalent to the number of tokens you had on the Bitcoin network. This is because the new chain will be an exact copy of the Bitcoin Blockchain up until the point where the fork occurs.

If the wallet you use supports the forked chain’s software, you will be the owner of two digital tokens: Bitcoin and the Forked Chain Token. In our example we will use Bitcoin Cash (BCH) as the forked token. When the Bitcoin Cash chain forked off of the main chain, owners of Bitcoin became owners of an equivalent amount of Bitcoin Cash. This is because the chains were identical until the fork occurred. If you owned 10 BTC before the split, then you owned 10 BTC and 10 BCH after the split. 

This is where the slope becomes slippery.  People or organizations with unfathomable amounts of money can use forks as an opportunity to extort both the Bitcoin network and the forked network for enticing capital gains when a fork occurs.

Preparing for the fork


Let's say Randy owns 35,000 Bitcoins; at a value of $5,000 per Bitcoin, Randy’s digital assets are worth $175,000,000. Just like anybody with large amounts of money invested in a market, Randy pays attention to news that may affect his position (wealth) in that market. Randy learns that there will be a hardfork in the Bitcoin network and that the hardfork will create a new token, Bitcoin Cash (BCH).

On top of this, Randy learns that his Bitcoin wallet provider will support the forked software, so he knows that he will own Bitcoin Cash as well as Bitcoin once the fork occurs. Now, Randy expects to have 35,000 Bitcoin Cash tokens in addition to his 35,000 BTC after the fork.  If Randy was to increase his position by millions of USD worth of Bitcoin, he would be the owner of more Bitcoin than he previously owned.

However, he would also create a buy wall that drives the Bitcoin price up since he is such a large player in the Bitcoin market. When Randy increases the amount of Bitcoin he owns, he also increases the amount of Bitcoin Cash he will own once the fork occurs.

Because Randy is an educated investor, Randy decides to increase his position in Bitcoin so that he owns 50,000 Bitcoin the day before the fork. Randy did this because he would like to own even more Bitcoin Cash than the 35,000 he would have had if he did not increase his position in Bitcoin. Now when the fork occurs, Randy expects to have 50,000 BCH in addition to his 50,000 BTC.

What happens when a chain forks


When the Bitcoin Network forks, some of the value that was in the Bitcoin network splits into the forked chain. When Bitcoin Cash forked from the Bitcoin network, the value of Bitcoin went from $2800 to $2700 (July 23,2017).

As a result of the fork, Bitcoin Cash was created and was valued around $555 at the time of it’s launch. (July 23, 2017).




Now what does that mean for Randy?


When Bitcoin dropped from $2,800 to $2,700, Randy's digital assets (wealth in Bitcoin)  dropped from $140,000,000 to $135,000,000, a $5 mln loss. However, because of the fork, Randy now has 50,000 BCH worth $555 a piece. Because Randy is an educated investor and has no plans to use the Bitcoin Cash (BCH), he immediately sells his BCH for a profit the moment the option to sell BCH becomes available to him on his preferred exchange.

Randy sells all 50,000 of his BCH for a profit of $27,750,000. A nice $28 mln gain (rounded number) to make up for the $5 mln loss that he suffered due to the decline in the price of Bitcoin. At the end of the day, Randy profits around $23,000,000 from the chain split.

Keep in mind, there are other investors like Randy who are highly educated and extremely skilled at what they do. Furthermore, they may be executing a similar or even more efficient strategy as Randy regarding the hardfork; buy a lot of Bitcoin, anticipate a chain split where you are left with a number of new altcoins equivalent to the number of Bitcoin you own, quickly sell off the altcoin for a profit and then decrease your position in Bitcoin because it is overvalued.

Individuals like Randy are referred to as whales: individuals who hold positions so large in the Bitcoin market, that their bid and ask orders are capable of shaking up the market. Since it only takes a few big players using a similar strategy to drive the value of Bitcoin up or down, when an opportunity like this presents itself (a hardfork), the price of Bitcoin may not reflect the true value of Bitcoin.

Since educated investors know that the Bitcoin price may be artificially high due to big players like themselves implementing a hardfork strategy, the big investor(s) have an incentive to lower their position in Bitcoin once they have executed their hard-fork gameplan. This is because they expect the Bitcoin price to correct to a value that is closer to its true value once all the hard-fork affiliated nonsense subsides.

Because there are multiple people like Randy who have a relatively large position in the Bitcoin market, when these people decrease their position in Bitcoin to an amount that they are comfortable owning during a bear period (and that number may be zero) their collective ask offers are capable of creating a sell-wall that drives down the price of Bitcoin.

After the big sell off of both the altcoin - because investors find it virtually worthless for them to hold for the long term - and Bitcoin - because investors know the price is artificially high for the short term due to their market strategy - investors capitalize on the low price of Bitcoin from the massive sell-wall and they buy back the Bitcoin that they previously unloaded.

On top of the profit investors make from selling-off all of their altcoin, investors will experience capital gains from selling their Bitcoin at an artificially high price and then purchasing Bitcoin back once the price is lower. During the period where investors buy back Bitcoin, we tend to see the price stabilize for a short period of time.

Boom and bust


Investors may have stockpiled Bitcoin anticipating an equal amount of altcoin and then sold off a significant amount of both Bitcoin and altcoin - in our example Bitcoin Cash - to reap the massive capital gains available to them.

I can’t rule out the possibility that several other market factors had an effect on the Bitcoin price surge and subsequent plummet, but that being said, how plausible do you think it is that the whales set off the surge and fall of Bitcoin?

October 25, 2017

Bitcoin price struggles to recover beyond $5,500; Bitcoin Gold lacks community support

By Joseph Young - October 25, 2017 (www.cryptocoinsnews.com)


For the past two days, the bitcoin price has struggled to recover beyond $5,500, after surging above $6,000. Analysts have attributed to the recent decline in the price of bitcoin to the upcoming Bitcoin Gold hard fork, and the lack of support from the community.


Earlier today, on October 25, the price of bitcoin dipped below $5,400, dropping to $5,365. Since then, within a relatively short period, the price of bitcoin has rebounded to $5,500, but still, due to the Bitcoin Gold fork that is set to occur prior to the SegWit2x hard fork on November 16, the bitcoin price will likely remain in the $5,500 region, at least until the Bitcoin Gold development team adds strong replay protection.

Bitcoin Gold and its Negative Impact on Bitcoin Price


The Bitcoin Gold hard fork was abruptly introduced by Chinese miner Jack Liao earlier this month. Essentially, the long-term vision of Liao and the Bitcoin Gold team is to close the gap between ASIC mining and GPU / CPU mining, to decentralize the mining industry.


But, the bitcoin and cryptocurrency community criticized the BItcoin Gold hard fork, primarily because of its unoriginal and impractical idea, and also due to its plans to premine the cryptocurrency. In the cryptocurrency market, the concept of premining a cryptocurrency before its launch is not welcomed by investors, traders, users, and developers, because it leads to a centralization of funds and supply before the launch. Major cryptocurrencies like Dash were criticized for that reason in the past.

Additionally, the community has been fundamentally opposed to the Bitcoin Gold fork considering its lack of replay protection. Without it, bitcoin investors and holders prior to the fork will not be able to receive Bitcoin Gold in a 1:1 ratio, as it would danger existing bitcoins. As the Trezor development team explained:

“Bitcoin Gold’s codebase is, at the moment of the writing, incomplete. Most importantly, it lacks replay protection. For this reason, TREZOR Wallet will not support Bitcoin Gold yet, as it would endanger your bitcoins.  As Bitcoin Gold is a fork of Bitcoin, the transaction format, the signatures, etc. are the same. A transaction on one chain could be copied to the other chain and will be valid, possibly leading to unintended loss of coins.”

Consequently, as highly regarded bitcoin developer Jimmy Song explained, bitcoin investors have started to sell their holdings and temporarily move on to alternative cryptocurrencies (altcoins) to avoid the Bitcoin Gold hard fork.


Short-Term Price Trend


The Bitcoin Gold development team has announced that they intend to integrate strong replay protection prior to its hard fork. But, as leading cryptocurrency exchanges such as Bittrex noted, the codebase itself is not ready, and most of the Bitcoin Gold codebase has not been tested and audited.

Unless the Bitcoin Gold development team adds replay protection in the upcoming days, the price of bitcoin will likely suffer as a direct result. While analysts like Tuur Demeester predicted a similar trend with SegWit2x in mid-November, since SegWit2x has replay protection, it is likely that a sell-off will not occur.

Featured image from Shutterstock.

October 24, 2017

Bitcoin Gold - A chaotic first day

By Christine Masters - October 24, 2017 (cryptovest.com)

Bitcoin Gold forked- and met with nothing but problems. A DDOS attack stopped the site, and users flooded one of the main developers with hard questioning, as developer StarbuckBG revealed his identity.


Bitcoin Gold forked today- but did not launch. And that was only the first issue that came with this chaotic, strange hard fork. 

In a few hours, discontent mounted on the Slack channel, mostly pertaining to the pre-mine of 100,000 Bitcoin Gold coins. And soon after that, a DDOS attack was launched against the site, which the team admitted was not protected well enough. 

One of the developers of the project, known as StarbuckBG on GitHub, came out with his name, Martin Kuvandzhiev. It turns out he is a rather prominent member of the Bulgarian tech community, currently also working as lead iOS developer for Phyre. Per the GitHub comments thread, he has been actively working on the project in the past couple of weeks. 


Mr. Kuvandzhiev is also an instructor at the Software University in Sofia. And he is one of the few named developers to be linked to Bitcoin Gold. So far, the lack of a public team has made some exchanges to doubt the whole project.

The other issue was the timely creation of a replay protection module- with a 200 Bitcoin Gold coins bounty offered. Currently, the project only has a non-working version and they say they would complete it soon. Also, no wallet is available. It turns out that even the test network, or the main net have not been created- so after the fork, there is not even test mining, as promised. A user suggested a bounty of 650 Bitcoin Gold for creating a main net, which starts to look like trolling GitHub. 

And it is precisely this approach that is worrying- a project paying in still non-existent coins to anyone who would move in and actually build the project. 

But some exchanges have already offered a pricing mechanism by trading an instrument related to Bitcoin Gold, although no actual coins are currently held. 

The Korean exchange CoinNest was one of the first to list the altcoin, though coming with warnings. Indeed, beyond StarbuckBG(Mr. Kuvandzhiev), there is no information of who is the main developer. 



In a few hours of trading, the price fell more than 40% to 256,000 Korean Won, or around $226. 

Bitfinex is also among the exchanges trading a coin that has no actual live blockchain yet. And YoBit trades an instrument related to Bitcoin Gold, currently at a price range of 0.07-0.1BTC. 




Christine Masters

Business writer with a knack for bubbles and market madness. Has tracked it all: the financial crisis of 2008 and the implosion of Lehman Brothers; bank bailouts and peak gold and silver, penny stocks...and now Christine has moved to cryptocurrencies for fresh stories.

October 22, 2017

Seven Japanese Bitcoin exchanges announce Bitcoin Gold hard fork plans

By Kevin Helms - October 22, 2017 (news.bitcoin.com)


Seven of Japan’s leading bitcoin exchanges have announced their policies regarding the planned Bitcoin Gold hard fork of the Bitcoin network. The country’s largest exchange, Bitflyer, plans to distribute and trade the new cryptocurrency. Some exchanges will only distribute the coins, while others are taking a wait-and-see approach.

Bitcoin Gold Hard Fork


The Bitcoin Gold hard fork of the Bitcoin blockchain is expected to take place at block 491,407, which will likely occur on October 25. A new cryptocurrency, bitcoin gold, is expected to emerge from the fork. Over the past few days, major Japanese bitcoin exchanges have announced their plans regarding this hard fork and how they intend to deal with the new cryptocurrency.

Bitflyer


Japan’s largest bitcoin exchange by volume, Bitflyer, announced on Saturday that its customers will be credited with an amount of bitcoin gold corresponding to the amount of bitcoin in their accounts prior to the split. No suspension of service is scheduled. The exchange wrote:

"If the BTG [Bitcoin Gold] split is deemed by Bitflyer to be permanent and secure in regards to customer assets, on November 1 (tentative), users will be credited with BTG and purchase and sale of BTG will be made available on Bitflyer".

In addition, the exchange detailed “after sufficient observation of the stability in the BTG chain after the split, BTG deposit and withdrawal services will be made available on Bitflyer.”

Coincheck


Coincheck announced its plans for the Bitcoin Gold hard fork on Thursday. “We are planning to provide bitcoin gold if a Bitcoin Gold split occurs,” the exchange wrote. However, Coincheck explained that there are circumstances where it may not be able to provide the new cryptocurrency, including a lack of adequate replay protection, miner hashpower, or protection from other vulnerabilities. In addition, the coins will not be made available if Coincheck decides that the “listing of bitcoin gold is inappropriate.” Currently, no service suspension has been planned. The exchange wrote:

"We are planning to distribute bitcoin gold after we confirmed its security and stability. We haven’t determined the specific date and time yet".

Bitpoint


Bitpoint announced on Friday that “bitcoin gold will be given to customers according to the number of coins [they] held at the time of the split.” However, this can be delayed if the new blockchain is unstable or there is a risk of replay attacks, the exchange conveyed. No service suspension has been planned. Bitpoint added:

"Regarding the withdrawal and deposit services and the buying and selling of the newly generated bitcoin gold, since the security design of the newly formed blockchain has not been sufficiently confirmed, its handling is undecided at this stage".

GMO Coin


GMO Coin announced on Saturday that bitcoin gold will be granted to customers, but the timing has not been decided. In addition, the exchange will temporarily suspend bitcoin deposits and withdrawals around 20:00 on October 25. Furthermore, GMO Coin stated:

"There are no plans to offer services such as buying and selling of bitcoin gold".

Exchanges With No Plans to Distribute


Some exchanges have decided to take a wait-and-see approach.

Zaif


Tech Bureau’s Zaif exchange announced on Friday that “we have decided not to grant [access to] BTG, [including] deposits, withdrawals, and transactions at this time.” However, it added that “when all the possibilities of concerns have been resolved, the handling of BTG will be considered at our discretion just like other currencies.”

Furthermore, Zaif stated that it will neither move the new cryptocurrency nor exchange it for other currencies “for purposes other than storage.”

Fisco


Fisco made a similar announcement on Saturday that “we are not planning to grant, deposit, withdraw, or trade bitcoin gold (BTG) at this time.” In addition, the exchange warned that “there is a possibility of suspending the deposits and withdrawals of bitcoins (BTC) around October 25, 2017, when the split is expected (in that case we will announce again).”

Bitbank


Bitbank announced on Thursday that it will not initially grant bitcoin gold to customers, for several reasons including the incomplete state of Bitcoin Gold’s code. However, the company will take a snapshot of customer assets at the time of the split. The exchange also stated the situation may be “reviewed in the future.”

Images courtesy of Shutterstock, Bitcoin Gold, Bitflyer, Coincheck, Bitpoint, GMO, Zaif, Fisco, and Bitbank.


Kevin Helms

A student of Austrian Economics, Kevin found Bitcoin in 2011 and has been an evangelist ever since. His interests lie in bitcoin security, open-source systems, network effects and the intersection between economics and cryptography.

October 21, 2017

Money at risk? Mobile wallets become new battleground in Bitcoin fork debate

By Alyssa Hertig - October 21, 2017 (www.coindesk.com)


Mobile bitcoin wallets users might not realize it, but their money might be at a heightened risk this November.

While advertised as a tool bitcoin users can tap to achieve an experience more akin to a conventional financial product, mobile bitcoin wallets today send transactions to the bitcoin blockchain, though in a way that differs from the default wallet options. But come November this construction could cause turbulence, because that's when the bitcoin protocol is aiming to undergo yet another major change to its software.

Following this summer's activation of the code upgrade SegWit, a group of businesses are now seeking to trigger a hard fork to increase bitcoin's block size and further expand its transaction capacity. The code, part of a larger upgrade called Segwit2x, could lead bitcoin to split into two (again), that is, if not everyone decides to support the upgrade.

Still, the difference is that, unlike bitcoin cash, Segwit2x's developers are doing everything they can to keep all bitcoin users on the same blockchain.

Segwit2x lead developer Jeff Garzik told CoinDesk:

"The design goal of Segwit2x – just like [the latest] ethereum fork – is to upgrade bitcoin, not create a new currency."

To do so, developers backing the project also have made a couple of key (if controversial) design decisions that have to do with maintaining compatibility with "simplified payment verification" wallets, the technical term for smartphone-based bitcoin wallet applications.

But developers argue that there are pros and cons of how they are trying to accomplish this.

For one, it might not exactly be safe for mobile wallet users to make transactions immediately after the hard fork is enacted.

Attack resistance or convenience?


The first design decision is omitting so-called "replay protection."

A bit of a political term, it's meant to describe what happens when a blockchain splits in two, as users suddenly have equal value on both blockchains. This means that when users move tokens on one blockchain, the tokens also move (or "replay") on the other.

But this isn't visible to people who might not know that they have money on two networks during a network split. Worse case: users might lose some of their money and not even notice.

"It becomes unpredictable what money you're moving and when," Bread Wallet CMO Aaron Lasher explained in conversation with CoinDesk.

Since not everyone agrees with the Segwit2x hard fork – some are even going as far as to write up manifestos in opposition – it's likely to split into two competing networks, and this could be confusing for general users.

However, Segwit2x developers have a reason for leaving replay protection out: to keep Segwit2x compatible with SPV mobile wallets.

"'Replay protection', as you call it, splits the chain. It simply doesn't make sense. You'd suddenly be breaking [more than 10 million] SPV clients that otherwise work just fine. It is a goal of Segwit2x to help avoid this," BitGo CEO Mike Belshe wrote in an email debate between developers of the project.

In other words, replay protection would cause inconvenience for mobile wallet users who want to shift over to the Segwit2x blockchain, so Segwit2x developers don't plan on adding it.

Hard fork decisions


Mobile wallets are the subject of debate in another area as well.

Many providers of this wallet option, such as Electrum and Bread Wallet, rely on SPV. This does away with need to hold a full copy of the blockchain, making the data far easier to store on storage-strapped cellphones.

But, they have some drawbacks. (Coinkite co-founder CEO Rodolfo Novak went as far as to quip that "the 'V' in SPV stands for Victim.")

As implemented today, SPV wallets will automatically follow whatever version of bitcoin has the most miners backing it. So, if bitcoin splits into two, and Segwit2x attracts more computing power than the legacy bitcoin chain, then all of the SPV wallets will follow along. That's by design.

But some mobile wallet providers aren't so happy about this, as it's hard to explain to users what's happening.

"It's really tough for us because we are so direly affected," said Lasher.

This also has the potential to lead to some technical problems. If there are two bitcoins, mobile wallet software might get confused about which chain to follow, especially if miners switch between blockchains over time (as happened in the aftermath of the bitcoin cash fork).

"It could confuse SPV clients and result in clients switching back and forth between chains, making them lose money depending on which chain has more work at what point," Chaincode engineer Matt Corallo said.

Novak painted another scenario.

"With SVP you don't know if the node you are connected to is lying to you. For example, a Segwit2x node can spoof as a [bitcoin] node [on the other chain], this means that without replay protection your wallet may spend the funds in the wrong chain and lose them on the correct chain," Novak told CoinDesk.

Overall, developers paint an assortment of "if-then" scenarios. Lasher admitted as much, noting that it's unclear which ones will actually play out.

"It's really this decision tree of many, many things that can happen. And all of them are on the scale of somewhat annoying to downright dangerous," he said, adding that Bread Wallet plans to encourage users to stop making transactions during the hard fork, "if they can manage."

A solution?


But with disarray at the application layer, protocol developers have been arguing about how best to handle what might come.

Bitcoin contributor James Hilliard, well-known for helping to prevent a bitcoin split earlier this year, suggested a change to the Segwit2x codebase that he argues would give mobile wallets more control over the which bitcoin they ultimately land on.

Again, though, Segwit2x developers argue that this change would make it more difficult for users to transition to a blockchain with a block size increase – something they believe many users want to do, so that they can make cheaper transactions. (Garzik argued that is the most "neutral" metric for determining which chain SPV wallets should follow.)

But, again, others believe that this will confuse users and perhaps even lead those that are unaware of the situation to lose money.

Some developers even agree that there needs to be a block-size parameter increase, but simply disagree with some of Segwit2x's design decisions.

As such, the statements highlight that, while often portrayed as black and white, the scaling argument still has its shades of gray.

Lasher concluded:

"There might be some merits to a block-size increase. But we don't agree with the current way it's being pushed through."

Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which helped organize the Segwit2x proposal and has an ownership stake in BitGo.

Fishing net image via Shutterstock

October 18, 2017

Bitcoin Hard Fork is taxable income - What you need to know

By Tyson Cross - October 17, 2017 (www.forbes.com)

Less than three months have passed since the Bitcoin Cash hard fork and already two more Bitcoin hard forks are looming. In light of what seems to be a recurring event, questions still remain about the tax consequences of cryptocurrency hard forks. Although the IRS provided general guidance on cryptocurrencies back in 2014, the Service has remained silent on the topic ever since. US taxpayers are on their own to determine the proper tax treatment of cryptocurrency hard forks (among a myriad of other issues), and opinions vary wildly.

Free Money is Generally Taxable Income


The problem with the Bitcoin hard fork from a tax perspective is that every Bitcoin holder receives an equivalent amount of the new cryptocurrency for free. Bitcoin message boards and forums are already full of posters excited for the prospect of "free money."

Unfortunately for US taxpayers, the IRS has a long and successful history of treating "free money" as taxable income. Lottery winnings, game show prizes, and found property all qualify as taxable income in the eyes of the IRS. Even unwanted free money is considered taxable income. See Haverly v. U.S., 513 F.2d 224 (7th Cir. 1975) (holding that free textbooks sent unsolicited by a publisher to a high school principal were taxable income).

There's little doubt that the IRS has plenty of legal authority to treat the hard fork as taxable income. However, several factors make it difficult for taxpayers to accurately and reliably determine the amount of such income.

What is the Amount of the Taxable Income?


The first hurdle is determining the amount of the taxable income. To do so, the taxpayer will have to establish the fair market value of the newly created cryptocurrency at the time of the hard fork. "Fair Market Value" is generally defined as the price a willing buyer will pay to a willing seller. An obvious problem exists for determining FMV when there are no buyers and sellers. In the case of the Ethereum hard fork last year, the new cryptocurrency Ethereum Classic did not start trading on exchanges for several weeks. As a result, establishing the FMV for Ethereum Classic at the time of the hard fork was essentially just guess work.

In some cases, though, taxpayers may have other indications of FMV. For example, Bitcoin Cash had been trading on futures markets for weeks prior to its hard fork in August. The price on these futures markets was approximately $275 at the time of the hard fork on August 1, 2017, and that price was more or less confirmed when BCH began trading on cryptocurrency exchanges a few hours later. However, there is no way to tell whether the IRS will accept the use of futures markets to establish FMV, or what taxpayers should do if there is no futures market at all.

For the time being, Taxpayers should try to establish FMV with whatever method appears reasonable, and report that amount as taxable income. That likely means using the futures price of the new cryptocurrency if an exchange price is not immediately available.  Taxpayers who adopt the method that yields the lowest possible value should be prepared for the IRS to disagree. In either case, the FMV of the new cryptocurrency will be the taxpayer's cost basis of the new cryptocurrency going forward.

When Does the Taxable Income Arise?


Another hurdle for taxpayers is when to report the income from the hard fork. The issue is that not all Bitcoin holders will receive the benefit of the hard fork at the same time. Some users will have immediate access to their new cryptocurrency wallets, but others will not. Users who keep their Bitcoin on third-party exchanges like Coinbase will not be able to access their new cryptocurrency until the platform supports the new blockchain, which could be months or never at all.

Taxpayers in the first group almost certainly have taxable income on the date of the hard fork. But taxpayers in the second group can probably delay recognizing taxable income until they're actually able to claim the new cryptocurrency, whenever that is. These taxpayers might be able to use the value of the cryptocurrency on the date it becomes available to them, as opposed to the date of the hard fork.

The IRS is likely to say that neither group, though, can avoid the taxable income by simply "turning their back" on the new cryptocurrency. Under the doctrine of constructive receipt, an item of income becomes taxable as soon as it is credited to the taxpayer's account or otherwise made available to the taxpayer so that he or she can claim it at any time. See Treas. Reg. 1.451-2(a). Thus, it's irrelevant to the IRS whether the taxpayer actually claims the cryptocurrency, all that matters is that he or she could claim it. (Read: Is the Bitcoin Hard Fork Taxable? for more information on the constructive receipt doctrine.)

This raises a concerning issue.  Although most Bitcoin holders know of the pending hard forks, certainly some are completely unaware. Does the doctrine of constructive receipt apply to such taxpayers? If the taxpayer truly did not know of the hard fork, then the answer is likely "no," but that's of little comfort if the IRS decides to require proof of the taxpayer's lack of knowledge. Establishing actual knowledge (or a lack thereof) is exceptionally difficult from an evidentiary standpoint. Depending on how strict of a standard the IRS decides to adopt, the lack of knowledge defense could prove meaningless.

And what happens when taxpayer does learn of the hard fork, possibly years down the road? One option is to report the income in the year it was discovered, but it's possible that the IRS would require the taxpayer to go all the way back to the year of the hard fork and amend that year's tax return.  From the IRS's perspective, "unknown hard forks" create an opportunity for gamesmanship. Taxpayers could intentionally turn a blind eye to future hard forks and wait until its convenient for them to "discover" their new cryptocurrency - possibly years later. This would allow taxpayers to manipulate the timing of their income, which is exactly the type of behavior the constructive receipt doctrine is intended to curtail. So, the IRS is likely to take an aggressive stance on the issue of unknown hard forks.

The Bottom Line


Clearly, guidance is needed to provide taxpayers with a reliable way to determine the value and the timing of the taxable income from a hard fork, as well as clarification on the application of constructive receipt. Until then, taxpayers are left in the uncomfortable position of assuming the worse on every issue to avoid future conflicts with the IRS, and unfairly overpaying on their tax returns as a result. Of course, there's also the possibility that taxpayers will simply give up on trying to figure out the correct tax treatment and not report the hard fork income at all.  If the IRS wants to encourage voluntary compliance in the cryptocurrency universe, it should start by providing clear guidelines on issues like this one.

For questions about Bitcoin taxation, email me at tyson@bitcointaxsolutions.com. This discussion is not legal advice.

Tyson Cross , Contributor

I write about the tax treatment of Bitcoin and other cryptocurrencies. 

As a tax attorney and the founder of Cross Law Group, I help clients navigate the complex tax issues surrounding Bitcoin and other cryptocurrency taxation. I was first introduced to Bitcoin in 2012 and have been writing extensively on the topic since 2013. I hold an LL.M. in Taxation from New York University School of Law and am licensed to practice in Nevada and California. Lean more about me at www.bitcointaxsolutions.com or follow me on Twitter @tysonpcross.

October 17, 2017

Preparing for the Bitcoin Hard Forks: A step-by-step walkthrough

By Jamie Redman - October 17, 2017 (news.bitcoin.com)


At the moment there are two forks planned for the Bitcoin network, and cryptocurrency proponents are curious about taking the best preparations. One fork is called Bitcoin Gold which is scheduled for October 25, while the other hard fork Segwit2x (BTC1) will take place roughly around mid-November or block height 494784.

The Tale of Two More Forks


This past summer news.Bitcoin.com wrote a lot about preparing for a fork when the entire Bitcoin network and its participants experienced the August 1 blockchain split. Currently, there are two bitcoin forks scheduled to happen over the next few weeks. This means if splits happen to occur between all of them, there could be a total of four blockchains that share the same transaction history of the original Bitcoin blockchain created by Satoshi Nakamoto.

The Bitcoin Gold project is expected to fork the bitcoin network on October 25. However, the network will not go live until November 1.



The Bitcoin Gold (BTG) project aims to fork the network so they can create an Application Specific Integrated Circuit (ASIC) ‘resistant’ version of bitcoin. The reason they are forking the network is because the team thinks ASIC mining is too centralized. So BTG developers plan to make bitcoin mineable using Graphic Processing Units (GPU), by changing the original protocol’s consensus to an algorithm called Equihash. This hard fork is planned for October 25 the developers have stated, but the network itself won’t be live until November 1.

The Segwit2x project is expected to fork the bitcoin network at block height 494784




The Segwit2x hard fork is a technical compromise stemming from the New York Agreement (NYA) this past spring, between a vast majority of bitcoin miners and businesses. Some people believe the NYA compromise helped push miners to use their hashrate voting power to ultimately implement the Segregated Witness (Segwit) protocol. But the activation of Segwit came with the agreement that three months later a 2MB block size hard fork would take place. This hard fork will take place at approximately block height 494784 or roughly around November 18 depending on hashrate.

At the present time, both of these forks may or may not take place on the expected dates.

Before During and After the Forks


There are a few things bitcoin holders should know before, during and after the fork. Before the fork, users should make sure their funds are in the right place, at the right time. This means choosing to leave money on an exchange, which some folks like traders do, or hold the funds in a non-custodial wallet. Most people agree the best practice, to remain in full control of any amount of bitcoin holdings, is to maintain your own funds by possessing your own private keys. So before the fork, if users keep their BTC stash in a non-custodial wallet they should make sure they have their seed phrases or private keys available. If an individual possesses their private keys, they are in full control of their funds before and after the fork.

If a user chooses to keep funds on a custodial wallet or a centralized exchange then they should be fully aware the provider is in control. Trading platforms will cease deposits and withdrawals during a fork and may even stop trades temporarily. Users keeping money on an exchange must always know they will be ultimately subject to that business’s discretion.

During the fork, most people would also agree that sending bitcoin transactions while the consensus change is taking place is not the best idea. People should remain patient until 100 percent of the dust has settled before they transact with the bitcoin network. There could be confusion with the fork like blockchain re-organizations, replay attacks, and prolonged confirmation times.

After the fork, it is still a good idea to remain patient, and you can start investigating reliable infrastructure for both forks before using the split networks. From here you can research how to import your private keys so you can claim split tokens, as well as wait for splitting tools from wallet and exchange providers. For instance, many bitcoin wallet users had to wait for the app maintainers to create a tool or fully support the new network that was born this summer. Some people may have to wait a few days or even weeks before wallet providers and exchanges follow through with support and special chain-splitting tools.        

Replay Protection and Attacks


At the moment both of the planned forks, Bitcoin Gold and Segwit2x, do not have replay protection added to the specific project’s code. Segwit2x initially had an opt-in type of replay protection, but developers have since removed the protocol. Bitcoin Gold promises replay protection, but the code also has not been added to the Github repository. Both forks could add an opt-in version or a stronger means of replay protection before the forks happen. During a replay attack, it’s possible Unspent Transaction Outputs (UTXO) can be verified by miners on both chains making it easy for an attacker to manipulate or unknowing investors could make mistakes. Some individuals believe replay protection is necessary, while there’s also an argument against the implementation as well.  

Additionally, light clients, otherwise known as Simplified Payment Verification (SPV) wallets, follow the chain with the most cumulative proof of work. SPV wallets don’t check the rules and ultimately sync transactions with the longest chain headers. Those using SPV wallets will want to make sure they are on the preferred chain. While some wallet providers let users decide on which node they should tether to, other light clients will choose for you. If you don’t like the wallet startup choosing for you, then it is probably best to move your bitcoin to a client that allows choice or is tied to the chain you prefer. You can also choose to use other wallet options like paper, hardware, and full node clients.  

Hardware Wallets, Exchanges, and Full Nodes


Some people believe that hardware wallets and paper wallets are better places to keep funds during a hard fork. With paper wallets, an individual can obtain or spend their funds whenever they want after the fork on both chains. With a hardware wallet, you may have to wait for a tool to be released as hardware companies like Ledger, and Trezor had to launch firmware updates for their users regarding bitcoin cash.


Users can also choose to side with a chain of their choice by downloading a full node client. Full nodes will enforce the rules on the specific chain they are tethered to, and these types of wallets have keys that can also be imported to retrieve split tokens at a later date.

As explained above, leaving funds with an exchange during and after a fork exposes users to the will of a company’s decisions. The business may not let you deposit or withdraw between a specified period. So if you need access to funds that are on an exchange, you may not get them right away. Additionally, some exchanges may not release support for split tokens right away, and again you will have to wait. For instance, the exchange Coinbase has not yet released bitcoin cash (BCH) holdings to their customers who kept funds on the trading platform prior to August 1 and the firm aims to release the BCH in January 2018.   

Keep Calm and Bitcoin On


Over the past few weeks, wallet providers and exchanges have been releasing their contingency plans, and more will likely follow shortly. News.Bitcoin.com has been covering nearly every popular bitcoin service’s contingency plan, and we will continue keeping our readers informed every step of the way. Further, our team will provide information regarding these forks before, during and after each event so users can be sure they know what’s happening throughout each period.

Lastly, we need to reiterate further that keeping private keys yourself is truly the best way to proceed during a fork, and also being patient during a blockchain split event by not sending or receiving transactions will ensure losses won’t happen.

Images via Pixabay, Bitcoin.com, and Crypto Hustle.


Jamie Redman

Jamie Redman is a financial tech journalist living in Florida. Redman has been an active member of the cryptocurrency community since 2011. He has a passion for Bitcoin, open source code, and decentralized applications. Redman has written hundreds of articles about the disruptive protocols emerging today.