What is going to happen on the 1st of August?
Core supporter’s desire to implement Segregated Witness on the Bitcoin chain takes a new turn with BIP 148. This ‘improvement’ proposal is rather unique and ventures into unchartered territory, where it is hoped that the users, that is, the majority of the Bitcoin eco-system, choose to enforce Segwit, effectively orphaning any blocks from miners that do not support Segwit.
There is a major assumption here however – and that is, that the miners will jump on board the Segwit train should a majority of exchanges, wallets and users change. Needless to say, this is highly contentious. Ironically, not long ago, Core were attacking BU for pushing for a “contentious hard-fork.” (Wallets, non-mining nodes, do not create blocks, so they would not have any impact).
This idea is very much fraught with danger, and any business with the interest of self-preservation operating with Bitcoin would want to protect their own interests. To potentially cause a chain split can mean devastating consequences. It is for this reason I believe that the UASF will fail.
If the rest of the Bitcoin eco-system opts for BIP148 via a UASF, and the majority of miners keep mining on the original chain, then we would have a forked chain, with the majority hash-power and security, being on the original, and a weaker chain operating with Segwit. Again, this is not a scenario that is pleasant.
I also believe that Core are well aware of the risks and consequences of this move, and it is for this reason they have not ‘officially’ backed BIP 148.
Take the following into account, “theymos”, moderator of r/bitcoin, and an early supporter of Bitcoin, and Core, recently stated
“While I would be very happy if BIP148 succeeded, I really doubt that it will, so I can’t recommend running BIP148 software. Doing so will likely cause you to break away from the real Bitcoin currency on the flag day, create a mess of your datadir which you’ll need to manually clean up….” – Theymos – source
Although Core devs are not openly throwing their backing and making an official stance, there certainly seems to be a lot of activity and discussion concerning the UASF from their respective chambers.
But technical aside, the UASF is a threat to the miners, and in an eco-system that is already on edge with straining relations, making enemies of miners is not the right way forward.
Jihan Wu, co-founder of Bitmain, and supporter of BU recently tweeted:
“You will find that the canonical block is less than 1MB but your tx fee is so high, after SegWit is activated. SegWit tx is unfairly cheap” – Jihan Wu
Jihan is referring to the miner incentives here. Indeed should miner incentives drop, so will the hashpower, and therefore the security of the network.
UASF is a departure to Bitcoin’s consensus model. Changing Bitcoin’s consensus mechanism in this way is indeed fundamentally changing Bitcoin itself.
Inventor and creator Satoshi Nakamoto once stated:
“As long as a majority of CPU proof-of-worker is controlled by nodes that are not cooperating to attack the network, they’ll generate the longest chain and outpace attackers.” – Satoshi Nakamoto
By Satoshi’s own definition, UASF is an attack on the network. Accordingly, hash power is king and drives consensus on the Bitcoin network.
There are many countless reasons why it is not in the interest of any major player in the eco-system to enact this UASF, but ultimately leading to one conclusion:
What will happen on August 1? Probably nothing.