Our position on Bitcoin forks
Here we go again.
It seems that not a month goes by without confused messages in the Bitcoin community about yet another Bitcoin fork. In 2017 alone, we wrote articles trying to help you make sense of things like the proposed Bitcoin Unlimited fork, the proposed SegWit fork and then the (actual) Bitcoin Cash fork.
What are Bitcoin forks?
As our previous articles explained: Bitcoin is an exciting and open technology, built on a model of consensus. There are various parties — Bitcoin miners, developers, users and platforms— that all have some authority and input as how they want Bitcoin to operate, but none with ultimate authority.
The Bitcoin network is constantly improved through various software proposals and updates. Occasionally, however, some of these parties may disagree about the implementation or non-implementation of certain proposals.
They might even agree about a problem — say, fixing slow Bitcoin transactions— but disagree about how to solve it — larger blocks (and just how large), dynamic blocks, changing how the information is stored, transmitted, and so on. This means that there will probably always be many different proposals of how some people think that Bitcoin should work.
Bitcoin is software. This means developers can simply fork from the current Bitcoin 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 is what 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 generally 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 definitively 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 & sell ability|
|Bitcoin Gold||~25 Oct 2017||Monitoring. Currently appears to lack sufficient community traction|
|SegWit2x||~Nov 2017||Monitoring. Significant miner & platform support. Luno will give customers access to both chains|
Why won’t you support [insert new fork name here]?
Since we’re getting inundated with queries about many proposed Bitcoin forks, we’d first like to repeat that our number one priority is keeping our customers’ money —local and digital currency— safe. Many forks come with various security risks, which could result in the loss of funds.
Secondly, we have a vision (and a responsibility) to make it safe and easy to buy, sell and learn about Bitcoin. Most of these Bitcoin fork proposals don’t add significant value to the ecosystem and generally just adds complexity and confusion to the market. The opposite of easy.
These are distractions that unnecessarily 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 any of those new altcoin chains should move their Bitcoin to a compatible platform. We can’t make any recommendations for these third-party platforms, but please do your research about the security of the new chain and stay clear from fraudsters.
Note that you don’t “double your money” during a fork. Just because you have some newly forked tokens, doesn’t necessarily mean that they will have any value, now or in the future.
If a new fork is announced, we will observe its market adoption and provide a level of support accordingly.
For example, in the case of Bitcoin Cash (BCH), there was significant interest from the community. It was listed on multiple reputable exchanges, and the price traded above 0.1 BTC for months. We, therefore, provided the ability to withdraw or sell BCH.
However, if there is 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 always to ensure that customers don’t lose value associated with their funds.
The future of digital currencies
All money and all technologies move along a long, winding road. They’re constantly evolving over time. Bitcoin may one day become a widely-implemented, international payment mechanism. It may also primarily (remain to) be used as an alternative asset class, a store of value that is relatively easy and cheap to send around.
Only time will tell. In the meanwhile, we remain committed to being the bridge people use to cross to get to the future of finance, helping people switch between local and digital currencies, and make the entire process as simple as possible.