The proposed chain split on 1st August still isn’t definite, but a significant number of Bitcoin users are committed to activating a soft fork on that date. From that point forward, they will reject any blocks that don’t support Segregated Witness, or SegWit.
- What is SegWit? – SegWit is, in its simplest terms, an update to Bitcoin software. It fixes problems in a similar way to software patches to your computer operating system, making it more secure. In short, rejecting blocks that don’t support SegWit, means rejecting blocks that might be unstable or otherwise insecure.
- What will happen? – at this point, the Bitcoin blockchain will split in two, and there will be two types of Bitcoin tokens; 148 BTC on the soft forked chain, and Legacy BTC on the non-forked chain. Bitcoins will, in effect, be copied to both chains, so you will find that you have both 148 BTC and Legacy BTC should the split take place.
- Can anything go wrong? – in short, yes. You could find that you’re missing funds after the split, so read on for how to safeguard your investment and make sure you’re ready for the soft fork.
What to do next
This is aimed more at the novice Bitcoin investor than those with more experience, but it’s worth everyone making sure that they know the risks. As with all investments, you should never hold more than you are willing to lose; there is a slim chance that the Bitcoin exchange rate may drop dramatically and you could lose your money. If you are confident to hold onto your Bitcoins, make sure you control your own private keys.
If your Bitcoins are stored on an exchange, then you would be well-advised to create your own wallet, so that you hold your own private keys. No exchange has yet given a guarantee that there wouldn’t be a scenario where your coins might disappear completely (although the best case scenario would mean your coins are safe).
What kind of wallet you create depends on how you intend to use your investment in the immediate future, and how confident you are about the security options on offer. The best solution is to visit www.bitcoin.org and choose one of the options listed there. If you hold a relatively small amount of bitcoin – and you are confident about being able to maintain security on your computer or mobile phone – then that could be the best way for you to store your private keys.
What to check after 1st August
The first thing you will need to do is check if your chain has split or not (remember, this is still something that might happen rather than will definitely happen!). There is a slim chance that the Legacy BTC will simply be discarded, as all nodes will have moved to the 148 BTC chain. If this happens, and you kept hold of your private keys, you can continue to use Bitcoin as normal. The worst case scenario is rather messier; for example, it’s not impossible that you might find yourself making a payment from one side of the fork, and finding you’ve made it from the other side as well.
The simple answer here is to avoid transactions in the first few days of August. It’s unlikely that exchanges won’t make provision as and when required to cover any problems, and if there appear to be two forks ongoing, then the simple solution is to split your coins into two wallets.
In summary, keep an eye on Bitcoin news, and follow the advice above to secure your investment.