Open Letter to SegWit2X Supporters: Don’t Be On The Wrong Side of Bitcoin History

Dear NYA Signer:

I’ve been in bitcoin for a while. In 2011 I wrote one of the first bitcoin price bots on IRC for ##economics, which I still am an op in to this day. I made my earliest trades on #bitcoin-otc on Freenode.

Over these years I’ve seen bitcoin go through all kinds of drama. In 2013 when ASICs hit the scene, the community was abuzz about how it would destroy the protocol. I know people still today who left bitcoin and never looked back because they thought miner centralization from ASICs destroyed it.

I was using bitcoin back when it was still permissible to say it was “instant and free”, before the mempool was flooded with spam, before China discovered bitcoin, and now after China has banned bitcoin for the 100th time.

The main threat we always worried about in bitcoin early on was that malicious miners (usually the fear was state actors) would be attacking our chain and forcing us to fork the proof-of-work algorithm to deflect it. This is the single biggest theoretical hole in bitcoin that is a legitimate existential threat. After all, we are cypherpunks who just want value transfer that is mathematically sound and outside the control of the state and banks.

Brief History

Recently I’ve been reflecting on how it is we got to this whole mess. Why and how the scaling debate got so out of hand.

Miners had blocked the activation of SegWit which has offered more space for leaner transactions with the signature removed, addressing malleability and setting the foundation for trustless offchain payments on VISA-volume level with protocols like Lightning Network. There was growing demand by a minority of the community for a blocksize limit increase, requiring a hardfork.

These scaling issues were attempted to be addressed in a compromise agreement in Hong Kong in early 2016. However, the agreement collapsed over what order Segwit and the 2MB hardfork should occur.

Here we are now in 2017. We have significantly centralized mining, located in an authoritarian state, and there is an open agreement for a majority of this centralized hashing power to shift to a new chain. This so-called New York Agreement(NYA) of May 2017 was meant to be the ultimate compromise, succeeding where Hong Kong Agreement failed.

However, the agreement was put together mostly between a few business interests and the Chinese mining cartel. Whether this is representative of the interests of the bitcoin community is in question. The vast majority of the community has supported Segwit, but Miners had refused to activate, signaling only 25%.

Bitcoin users had a different idea in mind: if miners are refusing to activate Segwit, then we will: User Activated Soft Fork. Written in March 2017 (before the NYA), UASF (in form of BIP148) committed to rejecting any blocks mined which were not signaling segwit by August 1. This would potentially orphan the blocks if Chinese miners were mining non-segwit.

The Chinese suddenly seized the opportunity to save face by adopting SegWit under the NYA, in a separate codebase led by Jeff Garzik called “BTC1” or “SegWit2X” codenamed by Mike Belshe, the project lead. This made sure they would notS be orphaned by UASF supporters who wanted the Segwit, but not so much the 2MB hard-fork.

The end result of this UASF vs Segwit2x event on August 1st was that Bitcoin stayed in one, and a “User Activated Hard Fork” created an altcoin called Bcash which had full replay protection and did not create any network issues despite 5–10% of BTC’s hashrate moving over to BCH.

The SegWit2X Menace

The bitcoin community survived August’s scare. There was a chance that Miners would be mining non-segwit blocks and be incompatible with a significant minority of nodes running BIP148 (UASF). This would have potentially led to an altcoin being created by those rejecting blocks, as miners would be mining non-segwit incumbent chain.

But now there is a new scare. The Segwit2X team has decided to continue the push for a 2MB hardfork. This is despite the fact that Bitcoin has Segwit now, and big-block minority of Bitcoin now have an altcoin that serves their need with 8MB blocksize limit (BCH).

Bcash would not have survived were it not for Chinese miners, associated with ViaBTC, owned partly by Bitmain and supported fully by Jihan Wu, founder of Bitmain. This represents a violation of the New York agreement to keep Bitcoin united. This essentially makes the New York Agreement null and void.

Replay Protection

Segwit2x clearly wants a hard-fork for a mere 1MB increase in blocksize limit, so there’s three ways with which they can do it:

1. No replay protection whatsoever. Meaning that when someone sends a transaction on BTC, then the 2X coins are at risk of being stolen. The coins can still be technically secured on both chains using nlocktime and RBF.
2. Opt-in replay protection. Meaning users have to take special action to protect their coins on forked chain upon moving them on main chain.
3. Mandatory replay protection. Meaning transactions are distinct on both chains and there’s no risk of replay protection losing coins on the forked chain.

The Segwit2x organizers insist that it is outside of their mandate to implement (3), “Segwit2x by design does not change the TX format”.

(2) and (1) are basically the same, since in all cases, the coins can still be secured on both chains. And (2) requires a similar degree of technical sophistication to (1).

This means that Segwit2x orgainzers are deliberately going to hurt unsophisticated bitcoin users by engaging in a technically unnecessary contentious hardfork.

The current state of the code of Btc1 has opt-in replay protection coded, but it is not pushed so they are going with (1) above, no replay protection.

My 2X Hard Fork TimeLine Prediction

My prime prediction is that the 2X agreement is going to collapse, miners will drop support, and all the businesses who have been signaling support will retract until it is negligible, leading to the project being deserted entirely.

However, here is the reality of how the split is going to play out, if the Chinese do not end up shirking on the agreement:

1. BTC will stay BTC, the incumbant chain will retain the symbol and the chain will not die, since it does not have reorg risk.
2. SegWit2X hardfork is going to be an altcoin listed as B2X. Bitfinex’s stated policy is to name the fork differently and even Coinbase, a signatory, will likely have to list the incumbent as BTC.
3. Even if, say, 95% of miner hashing power moves to the B2X chain, this doesn’t “kill” Bitcoin (BTC), it merely makes the blocks take slower to confirm, and gives time for users and the market to adjust.
4. Miners are rational profit-hungry actors. If the users and market choose 2X and trade the price significantly higher than Bitcoin, then this would be in line with NYA. However if BTC starts to trade higher than B2X by users/traders, then the miners’ commitment to mine 2X would become at odds with the community and, more importantly, their own economic incentives.
5. As miners start to move back over to Bitcoin, 2X price will continue to plummet, and only a handful of miners will continue supporting it. It is unclear how much hashing power it could retain, but potentially 5% (less even than Bcash).

The end result: B2X becomes an altcoin that is worth less than even BCH in market value, and BTC reigns supreme.

BTC > BCH > B2X

Is how this whole saga ends.

NYA Supporters: Repent

The bad news for 2X/NYA supporters is that this means you supported an effort to hijack bitcoin and lost, and ended up on the wrong side of history.

Those of you who are supporting 2X are going to have egg on your face once your chain fails. Bitcoin will succeed as BTC and your project will historically be seen as a malicious attempt by miners and business interests to define bitcoin as theirs.

The good news is it is not too late to repent and prevent the whole scene.

The immediate step you can take is to shut off your 2x nodes and make a public statement retracting support of New York Agreement. If you must, then you can insist that SegWit2x implement STRONG REPLAY PROTECTION, just like Bcash, so that it causes zero network disruptions.

But really it is better if you just advocate dropping the whole project itself. Segwit is on Bitcoin, Bcash exists for on-chain scaling and was a de facto violation of NYA, so why rock the boat with a third chain claiming to be bitcoin? This is a contentious hardfork that is continuing to divide the community and it behooves you to do what you can to stop it.

Repent and drop support of 2x, it’s not too late!

Sincerely,

A bitcoin user who has been around a while.