Bitcoin has been going through a bit of a civil war with regards to how to handle transaction speeds. It’s currently very limited by its block size, which is capped at 1MB and is almost always full, leading to slower than normal transactions even when paying fees. This has created a split between Core and Unlimited, who have different views of how to handle the situation, with Unlimited pushing for a hard fork. But what will happen if this does end up occurring?
What is a Hard Fork?
A hard fork is essentially a split of the blockchain into two legitimate parts (chains). Miners are then forced to choose which one they want to build on top of, and you end up with two separate copies of the chain from the period where the fork happened and prior. All transactions and balances up until that point are identical on both chains, but due to building on to them separately, everything is different from that point on. A great example of this happening would be Ethereum, who went through this after an exploit was found in its network that allowed someone to amass a large number of ETH. Some sites and exchanges accept one of the chains and a few accept both, all depending on how the site owners feel about each of the sides.
What Happens to Your Coins?
A great way to illustrate this as by treating it like a business that is spinning off into two separate companies. When the hard fork occurs, you will own an equal amount of both coins, so every 1 BTC you have will turn into 1 BTC and 1 BTU. There is zero loss in the coins themselves – however, the market will undoubtedly go through some changes to help account for this split. This is more than likely going to cause a rollercoaster for a while between the two as the market finds its new foothold. Over time, everything should stabilize, but the beginning is going to be where the big gains (and losses) are found.
Pricing in the Split
One of the hardest things to do at this point is price in the split between BTC and BTU. Some have theorized that BTC will drop down to the $700 range (and as of this writing, it is in the low $900 range), with BTU taking over the difference. Others feel that BTU will not catch on and will become almost valueless, with BTC still remaining the champion of cryptocurrencies. Even so, the price decline has already started, and there is really no way to tell how it is going to end up yet. While the majority of miners are not supporting Unlimited as it is, a hard fork could easily sway many to swap over to the new chain for profit and/or support. At the same time, it could flop right away or in the near future.
Negative Effects On Bitcoin
Should this hard fork go into effect, it could have disastrous effects on Bitcoin. Bitcoin Unlimited, despite being different than the normal chain, will still be seen as “Bitcoin” to most outsiders. If any further complications occur as a result of the fork, such as the previous bug that allowed people to crash BTU nodes, it is not far-fetched that the average person will view that as a sign that Bitcoin is bugged. Furthermore, it is fragmenting the community, such that it removes support of the overall project and pushes people to pick one or the other as their main. Especially with Bitcoin’s already mounting issues with regards to regulation, a failed Bitcoin ETF, and multiple attacks on the blockchain, this is only going to serve to slow things down even more, offering help to neither side. It is turning into a battle that nobody can win.
Approval Rate and Future
BTU has had a very low approval rate so far, going down as low as 3% on some polls. Miners are also largely with Core right now, but most people are in agreement that some changes are needed. Whether it’s the Lightning Network or SegWit, Bitcoin certainly has a way to go and needs to start getting more agreements and less arguments with its potential changes.