Cryptocurrency custodian BitGo will no longer support Bitcoin SV (BSV) following the Genesis protocol upgrade in February 2020. The reason: BSV is phasing out the obscure pay-to-script hash (P2SH) feature.
nChain’s team offered to do key parts of necessary development work for BitGo, except for the integration work itself. Nevertheless, BitGo still demanded a large amount of guaranteed revenue in order to support the Genesis hard fork (removing P2SH), but interested BSV stakeholders found BitGo’s approach to be unsavoury and declined to meet BitGo’s monetary demand.
P2SH was a standard script introduced by then Bitcoin Core developers in 2012 that allows users to lock Bitcoins to the hash of a script, essentially for creating custom “redeemable scripts” that can be shared with other people.
The feature, which was added to the Bitcoin protocol after Satoshi Nakamoto left, sought to address the issues brought on by bare multi-signature transactions. However, it became clear that P2SH came with its own set of issues—privacy and security related—in addition to breaking the smart contract capabilities and transparency model of the original Bitcoin design.
P2SH allows users to hide the contract details until after the coins associated with that script have been moved—a murky method that removes the visibility and legal enforceability of smart contracts in Bitcoin.
The upcoming Genesis upgrade brings Bitcoin SV as close as possible to Satoshi’s original design, and will help lock the protocol down to create stability so developers and enterprises can build upon it. Part of this is correcting misguided ways and removing any potentially damaging feature that have been unwisely added to the Bitcoin protocol before greater adoption takes place. In the case of P2SH, the Bitcoin Association explains:
Going forward, P2SH is no longer necessary in BSV in order to create multi-signature transactions, and indeed needs to be deprecated in order to discourage improper use. This also promises to make multi-signature transactions easier to implement on mobile devices, as the current P2SH method requires the redemption script to be kept by the future spender indefinitely, which is difficult to ensure.
BitGo’s decision to stop supporting BSV will affect not just its customers, but also enterprises that are on the lookout for a custodial solution for BSV. The good news, however, is that there are a number of wallet projects already in development that “will support the new more secure multi-signature model which will be unique to Bitcoin SV,” according to the Bitcoin Association. Currently, custodial service providers Kingdom Trust and Prime Trust support BSV, and the association said it is already “in discussions with additional options.”
Bitcoin Association Founding President Jimmy Nguyen said, “We do not expect BitGo’s decision to materially affect current BSV liquidity with exchanges because BitGo indicated to us that its customers had relatively small amounts of BSV transaction volume. Exchanges which more of BSV’s trading volume presumably use alternatives to BitGo’s custodial services.”
The association is encouraging developers and groups that have a replacement technology superior to P2SH to reach out to nChain for assistance.
Read the Bitcoin Association’s full statement on BitGo’s announcement here.
New to blockchain? Check out CoinGeek’s Blockchain for Beginners section, the ultimate resource guide to learn more about blockchain technology.