Bitcoin Investors Should Not Fear in 2021 first Chain Split
In less than half a year Bitcoin is expected to go through one the most significant upgrades in its history. Some of the market members express concerns about the potential negative impact of Bitcoin’s Taproot upgrade on the network, presuming its potential chain split in case anything will go beyond the scenario. Hence, it’s important to outline the major questions under Taproot discussion among stakeholders and outweigh the potential risk of chain split.
What is Bitcoin’s Taproot upgrade?
Let’s start with some terminology. The Bitcoin network is decentralized in its nature, which means that its upgrade cannot happen at any time as its stakeholders have to agree about it. As you understand BTC network includes plenty of personas: developers, miners, users, etc. and the agreement between them has to take time.
Taproot is an important upgrade as it will increase the privacy of the network, its security and scalability. As you understand, anyone can monitor the BTC transactions in real time and this lack of anonymity is a concern for many. The thing is that the network itself suffers from this inefficiency as BTC is still not considered a good form of payment as many other cryptos like ETH or ETN. Many organizations and individuals think more about how many btc to etn they can convert to perform anonymous operations than about performing these operations through BTC itself.
What is the problem of Taproot upgrade?
Taproot itself can be described as a “soft fork” meaning that this change is compatible with the previous versions of the software. Hence, the network does require to establish some new rules for its functioning, making this upgrade relatively easier for the stakeholders. Regardless of its nature there is still an ongoing debate whether node operation should have a right to activate Taproot if a majority of miners will not support the upgrade or not.
This measure was used in 2017 during SegWit upgrade and has pressed the miners towards its activation. The other option is not to use this feature at all. These two options are called Bitcoin Improvement Proposal (BIP) options and in this particular case we’re dealing with option BIP8 (true), also known as LOT=100 and option BIP8 (false), known as LOT=false.
At the moment opponents to the forced upgrade believe that this measure is completely irrelevant taking into account that Tapgrade is not likely to fail. The reason for that is that the community has currently made a decision to upgrade and is not likely to change its decision. The miners being a part of the community support it as any other members. The opponents who are not quite risk-savvy still care about the possibility that something might go wrong. That’s the point where potential split of BTC chain can happen
Is it possible that Taproot will cause a BTC chain split?
Stakeholders with a status BIP8 (true) believe that the feature allowing the forced upgrade has to remain in place to avoid the potential chain split. Like the supporters of this idea mark, that the role of the forced upgrade will not cause the chain split, its most important role is to prevent it under any circumstances. The tricky thing here is that in case of forced upgrade the chain will split anyway. The reason why BIP8 (true) supporters vote for this option is their belief that miners will do their best to avoid the split not to lose their earnings like it was in 2017. The question is whether this scare tactic is really necessary in the current situation.
The recent debate on the topic, which took place on February,16 shows that the favor of the community is on the side of BIT8 (false) as no one wants to add additional steps to the upgrades and nearly 90% of stakeholders support it. The other important moment is that BIT8 (true) will mean that developers are forcing the change to the community, which is not a good thing for the market. The start of the BIP8 procedure is scheduled for March, hence in the nearest future, the market will know the answer about the chosen procedure. The market leaders believe that until that period the BTC community members have to express their attitude to the issue again and reach the consensus to make July’s Taproot upgrade as smooth as possible.