Jiang Zhuo’er: My Thoughts on UASF(BIP148) and UAHF(BCC)
This article was originally published on July 24th, 2017. As predicted in this essay, the BCC fork happened smoothly and the price has not experienced an extreme drop.
Recently, Bitcoin users have encountered confusion concerning the two scaling attempts, UASF and UAHF.
Chapter One: UASF(BIP148)
On July 12, 2017, Core developers warned that there might be a chain split when BIP148 gets activated on August 1st. They noted that if the BIP148-chain gained enough hashrate, it could overwrite all transactions on the legacy chain (a chain re-org), which would cause transactions to be reversed and users to lose money.
The warning successfully caused panic among users and the bitcoin price dropped 39% from 21,200 CNY to 12,900 CNY on July 16.
Were they telling the truth? Actually, the bitcoin community (representing 85% of the network hashrate) had already agreed on SegWit2X and decided to activate SegWit first, to be followed by a 2M hard fork three months later. With the activation of SegWit, a network split is avoided.
But why did Core choose not to mention any of this in their warning? Why did they deliberately make people afraid of a fork? The New York Agreement is just a restatement of the Hong Kong consensus, where they had previously agreed to activate SW first and then increase the block size limit to 2MB a year later.
Bitcoin miners have long been demonized for wanting to “fire” Core. The truth is that Core is welcome to continue developing Bitcoin protocol code, but if they refuse to raise the 1MB limit, they should not be surprised when the community looks for other options.
Satoshi himself made it clear that Bitcoin’s block size must grow with demand, and he even offered a very simple example of the code logic that could be used to accomplish this without network disruption. He pointed out that more free space can be achieved by pruning unnecessary data.
I believe that miners are willing to support any technical upgrades that are able to attract more users and make bitcoin more valuable, namely SW and Lightning Network. The miners have twice agreed on Segwit first and 2MB one year later.
The Hong Kong consensus was, at the time, believed to put an end to the dragging scaling problem. Sadly, Core and BTCC later refused to uphold the agreement they had made. And in the past 15 months, the market cap of bitcoin dropped from 80% to 40%. In this context, the community arrived at the New York agreement without the support of Core.
Jeff Garzik worked with other developers on the code of SegWit2X. I see the NYA as a great improvement for decentralization. It shows that the bitcoin community has the ability to set up a development team when the Core developers ignore the needs of bitcoin users. As such, Core avoided mentioning the agreement.
Chapter Two: UAHF
UAHF is the contingency plan against UASF, or DASF — developer-activated soft fork. Core developers made up their minds to activate SegWit on August 1. If you don’t support it, then there will be a chain split, they said.
Didn’t they spend years stirring up fears of a bitcoin price crash if there is a network split? The fact is that many of the Core team suffered huge losses when Mt. Gox imploded. Now they have no bitcoin, no mining rigs and no good understanding of why bitcoin works.
Bitcoin is more about economics and currency, and less about the underlying technology, which is already well-established by now. Core developers believe they understand Bitcoin because they are familiar with the codebase, but that’s hardly the truth.
The biggest risk posed by the UASF was that users stand a chance to lose all of their coins in a blockchain re-org. Therefore, the Bitcoin ABC team came up with the contingency plan of UAHF.
Chapter Three: Bitcoin Cash
Bitcoin Cash, or BCC, is an altcoin cloned from bitcoin. Unlike ETC, BCC was never meant to compete for the brand of Bitcoin.
BCC leaves no room for Segwit and simply increases the block size to 8MB. Plus, the BCC developers have added replay attack protection and made the difficulty automatically drop 20% if fewer than six blocks are generated within a 12 hour period. BCC will likely add LN and Rootstock. (SegWit is not a prerequisite for Bitcoin to add new technical features.)
Where does the free money come from?
You’ve probably been taught that there is no such thing as free money. But BCC is indeed free money. Where does the money come from? Why does BCC have value?
Core believes that Bitcoin cannot work as cash, and they want it to be a settlement system for high value transfers instead. According to Adam Back, even a $100 fee for each transaction would be acceptable. In other words, Bitcoin will lose the payments market to altcoins.
But BCC promises a great future for the payments market and that’s where it gets its value. If the price of Bitcoin is 16,000 yuan and the price of BCC is 3,500 yuan, then the total value of Bitcoin will become 19500 yuan. It’s real money.
My position on BCC: I neither support nor oppose it
Why I don’t support it: I don’t think the timing is the best. BCC will distract the part of the community who support the 2MB part of SegWit2X. Plus, BCC is likely to make the bitcoin price more volatile at this crucial stage.
Why I don’t oppose it: There will always be one Bitcoin and the total amount of Bitcoin will always be 21 million. BCC is a competitor of BTC that wants to do better than Bitcoin, not kill it.
Competition is always welcome in a free market. If BTC competes with fiat money, then why is BCC not allowed to compete with BTC?
Currently, nobody is 100% sure if SW has any deadly bugs. But we cannot deny that a large part of the community doesn’t want it. As such, it’s necessary to have a non-SW coin like BCC.
Possible Future for BCC
If SegWit2X can be successfully deployed
BCC will become the shadow coin of Bitcoin. It will become a testbed like how SW was first activated on litecoin. It will become a backup for bitcoin in case a horrible technical failure occurs.
It will become an alternative investment to bitcoin. Just like people who believe in Bitcoin have bought Litecoin, they will also buy BCC because they believe there is a huge potential for it to grow. And BCC might replace litecoin in this specific aspect.
If SegWit2X gets aborted
In this case, BCC will become the only coin that attracts proponents of on-chain scaling. As it is the coin that carries forward the original properties of BTC and delivers a better user experience, BCC will be well-positioned to compete with BTC and even surpass it.
I can’t teach you how to invest in BCC, but I strongly suggest that you should hold on to both BTC and BCC.