Since its current world-beating bull run began in late 2015, bitcoin has surmounted a series of pitfalls that were supposed to kill the market. The list is remarkably long. The DAO hack. The PBOC crackdown. The ICO craze. The SEC’s rejection in March of two proposed bitcoin ETFs. And, most recently, the network split that spawned bitcoin cash. All were supposed to burst the roaring valuation bubble, yet in almost every example, a temporary pullback was followed by another leg higher.
Considering that it was the culmination of three years of acrimonious infighting among bitcoin core devs and the miners, the August split – particularly the market reaction – was surprisingly cavalier. Now, the faith of bitcoin investors is being tested once again as key players in the market are warning that another network split could create a third version of bitcoin as soon as November.
According to Bloomberg, bitcoin evangelist Roger Ver, better known as “Bitcoin Jesus,” said that some of the miners who supported the controversial software upgrade that triggered the split in August have withdrawn their support just as bitcoin core developers are preparing to implement the second step of the update. This could create a rift between what Ver calls “legacy bitcoin” and “the SegWit2x version of bitcoin.”
“There’s probably going to be another split between bitcoin legacy and SegWit2X version of bitcoin but that just gives me more coins that I can sell for the Bitcoin Cash version,” Ver said in an interview on Bloomberg Television at a conference organized by Bitkan in Hong Kong.
Ver was an early adopter of bitcoin. Since the split, he’s been a vocal supporter of bitcoin cash. Ver, who was born in the US but renounced his citizenship and is currently a citizen of Saint Kitts and Nevis, has also been denied visas to travel back to the states in the past. Of course, Ver has been badly wrong before. Back in the summer of 2013, he traveled to Tokyo to visit Mt. Gox shortly after customers started having issues withdrawing their funds, which the exchange attributed to unspecified "liquidity problems." Ver attested that Mt Gox CEO Mark Karpeles had shown him bank statements proving that the exchange's troubles were a result of being temporarily shut out of the traditional banking system, and that customers' assets were safe. Of course, this excuse was merely a ruse for a massive hack that resulted in the theft of tens of thousands of customer bitcoins.
To be sure, Ver isn’t alone in warning about another potential split. Samson Mow, chief strategy officer at blockchain startup Blockstream, also says a rift is likely as more miners and developers reject the pending upgrade to SegWit2X.
“Many developers, users, miners, and businesses have already stated they do not agree with the pointless 2x fork, so we’ll likely end up with three chains,” said Samson Mow, chief strategy officer at Blockstream, which has close associations with Core developers. “Long-term, only the main bitcoin chain which has the support of users and developers can survive.”
Bloomberg summarizes the circumstances that could lead to another split below:
“If another tear occurs in November, it would create a third version of the cryptocurrency and potentially further scatter capital and resources as three offshoots of bitcoin emerge.
SegWit2x refers to a compromise proposal developed to deal with the surge in transactions. In August, miners agreed to implement the first phase of the proposal, or SegWit. They were expected to increase the blocksize to two megabytes around November in a second phase.
Avoiding such a splinter requires miners to reach at least 92-percent consensus on supporting the second phase of SegWit2x, but that’s becoming increasingly unlikely, according to Wang Chun, co-owner and chief administrator of F2Pool, one of the world’s largest mining pools.
Even though SegWit2x garnered more than 93 percent support in July, miners and developers seem to be backing away from the proposal, a compromise that harbors characteristics disliked by extremists on both sides. Wang said he thinks the split will “happen, 100 percent.”
Many Core developers agree. Several have said they’d prefer to focus on writing code in the future for only the SegWit chain: currently the largest version of bitcoin at about $64 billion in market value.”
So, would the creation of a third iteration of bitcoin (and, we presume, the spontaneous generation of billions of dollars’ in “value”) be enough to trigger the great crash that naysayers like J.P. Morgan Chase & CO CEO Jamie Dimon and Bridgewater Associates founder Ray Dalio have warned is coming?
What say you?