Bitcoin consensus unravels: Bitwala backs out of New York Agreement

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The agreement that promised to resolve bitcoin’s scaling issue has started to fall apart.

This week, payment service provider Bitwala announced that it will not support the so-called New York Agreement (NYA), despite being a signatory of the said consensus.

Bitwala was one of the companies that agreed to a plan in May to deploy Bitcoin Core’s Segregated Witness (SegWit) proposal along with a 2MB hard fork within six months. At the time, Barry Silbert’s Digital Currency Group said the proposal was supported by 56 companies in 22 countries, representing 83.28 percent of bitcoin’s hashing power, 20.5 million wallets and $5.1 billion of monthly transaction volume on the bitcoin network.

Customer first

Bitwala, however, decided to put its customers first.

In a blog post, the payment service provider said that as much as it would like to honor the agreement, Bitwala is “a service company that has and will always follow what our customers use and want to use.”

“We partially rely on third-party payment processors and exchanges to convert our cryptocurrencies and must build our products on what they support,” Bitwala wrote, noting that it will not “fork away from” the bitcoin chain supported by the Core development team, although it will “review which coins to natively support.”

SegWit2x in trouble

Bitwala’s announcement may spell trouble for consensus, which had elicited questions from the community on what it means exactly and how it will affect bitcoin’s technical direction.

The NYA was based off the 2016 Hong Kong Agreement, which originally committed to activate the SegWit code upgrade and execute a 2MB hard fork by 2017. Bitwala said the agreement “helped surpass Segregated Witness activation thresholds prematurely so that the necessary soft fork went over without so much as a hitch,” but it also paved the way for the creation of Bitcoin Cash, which removed SegWit from the chain while also supporting a block size increase of up to 8MB.

“Many users and many parties of the NYA ask when the promised hard fork to 2MB block size will happen. Sadly, while the NYA included many industry leaders and miners, none of the Bitcoin Core developers subscribed to it (which makes the NYA distinctly different from the HKA). Instead, you could argue that most Bitcoin Core developers are actively opposed to larger blocks of any size,” Bitwala said.

Bitwala’s withdrawal from the agreement could set off an exodus of NYA signatories and miners, especially now that they have seen SegWit activated and thus may no longer have any incentive to follow through on their promise of a blocksize increase.