The truth about Bitcoin forks
Here we go again.
It seems that not a month goes by without confused messages about yet another Bitcoin fork. In 2017 alone, we wrote articles about the proposed Bitcoin Unlimited and SegWit fork, then the (actual) Bitcoin Cash fork.
We’re running out of images for “split”, “branch” and “fork” here
What are Bitcoin forks?
Bitcoin is an exciting and open technology, built on a model of consensus. There are various parties — miners, developers, users and platforms— that all have some authority and input as how they want Bitcoin to operate, but none with ultimate authority. Any change needs approving by over 50% of the network.
The Bitcoin network is constantly improved through proposals and updates. Occasionally, some of these parties may disagree about a change. They may agree on the problem, just not on the solution.
Bitcoin is software. This means developers can fork from the current software branch, and bring a new version into existence, which will operate by a new set of rules. If you had one Bitcoin before the fork, you’d have one Bitcoin and one newly created coin after the fork. This happened with Bitcoin Cash in 2017.
This isn’t unlike the way you can create your very own currency with a printer and few sheets of paper at home. It might be a simple technical task, but things stall when it comes to branding, distribution, trust, security, improvements and acceptance.
Will Luno support any upcoming forks?
Bitcoin is an ever-evolving technology and we can’t say what the future will hold. Below are the notable fork proposals and Luno’s position on them. We’ll update this table if there are any changes.
|Bitcoin Unlimited||~Apr 2017||Lost support. No fork|
|SegWit||Jul 2017||Majority support. Implemented without fork|
|Bitcoin Cash||Aug 2017||Forked. Luno added BCH withdrawal & sellability|
|Bitcoin Gold||~25 Oct 2017||Lacking sufficient community traction, security and other concerns. Luno will not support the fork|
|SegWit2x||~Nov 2017||Fork suspended|
Why won’t you support [insert new fork name here]?
Since we’re inundated with queries about proposed Bitcoin forks, we’d like to repeat that our priority is keeping our customers’ money safe. Many forks come with security risks.
Second, we have a vision (and responsibility) to make it safe and easy to buy, sell and learn about Bitcoin. Most of these fork proposals don’t add significant value and just add complexity and confusion to the market. The opposite of easy.
These are distractions that complicate the industry and divert limited resources, such as:
- Engineering resources needed to add the ability to buy, sell, send, receive and store the new tokens
- Internal processes in storing and securing the tokens in hot and cold wallets etc.
- Design resources, adding more complexity to products
- Community support resources needed in helping customers use, understand and fix issues related to each new token
Lastly, there are thousands of alternatives to Bitcoin, known as altcoins. Many of the proposed Bitcoin forks ultimately create just another altcoin with low or no value. Customers who want access to these should move to a compatible platform. We can’t make recommendations for these third-party platforms, but please do your research and stay clear of fraudsters.
Note that you don’t “double your money” during a fork. Just because you have some newly forked tokens, doesn’t mean that they will ever have any value.
If a new fork is announced, we observe how the community reacts.
For example, in the case of Bitcoin Cash (BCH), there was significant interest. It was listed on multiple exchanges, and the price traded above 0.1 BTC for months. We provided the ability to withdraw or sell on Luno.
However, if there's a fork that isn’t embraced by a significant subset of the community, and is not listed by reputable exchanges, we won’t provide support for it. Our goal is to ensure our customers don’t lose value.
The future of Cryptocurrencies
All technologies move along a long, winding road. They’re constantly evolving. Bitcoin may one day become a widely-implemented, international payment mechanism. It may also (remain to) be used as an alternative asset class, a store of value that is easy and cheap to send.
Only time will tell. In the meanwhile, we remain committed to being the bridge people cross to the future of finance.