Bitcoin Startups Advise Caution as Scaling Proposals Collide
With a number of developer proposals set to collide in the coming days, exchanges are issuing policy updates for bitcoin users.
With a major inflection point for bitcoin just days away, some users are beginning to wonder about the safety of their holdings on major exchanges.
At issue is that several scaling proposals are set to come to a head on or around August 1, and depending on which end up gaining support, there is a risk that bitcoin could split into two competing currencies running on two different blockchains.
In the face of this concern, and the painful lessons learned from past blockchain forks, some exchanges are stepping up to make users aware of possible issues and how they can protect their assets.
Below, we're keeping a running list of major exchanges and their remarks.
One of the world's largest cryptocurrency exchanges, Bitfinex has yet to issue a blog post on the topic. However, we have some clues to their potential views, because Bitfinex was part of an exchange coalition which sought to address a split in March.
At the time, Bitfinex said it would refrain from halting its operations, and provided context on how it would name each coin.
The firm has not responded to requests for comment as to whether its policy has since changed on the issue.
At press time, bitFlyer has yet to issue an update on its strategy.
The Japanese exchange was one of the signers of the Segwit2x proposal on May 23.
One of South Korea's largest exchanges, and the victim of a recent hack, Bithumb has yet to issue guidance.
China's oldest bitcoin exchange, BTCC is putting its full support behind Segwit2x.
Actively testing the code, the exchange said it's upgrading its exchanges and pool wallets to the new software. It expects to have upgrades complete by July 21, and it will continue signaling support.
"We hope that the community will reach consensus around this implementation of the bitcoin software," the post continued.
Should the network split, BTCC said it will consider the longest chain, which would be the one with the most hashing power, as bitcoin (BTC). BTCC customers that want to move to the minority chain will be given access to their tokens.
The exchange also said it's working to put in place strong "replay protection" (aimed to stop bitcoin transacted on one blockchain being broadcast on the other) to protect user funds in the case of a hard fork.
One of the largest and best-funded US exchanges, Coinbase signed the SegWit2x agreement back in May.
While the startup has yet to issue remarks on how its consumer wallets would handle a split, its exchange product, GDAX, was among the first to offer details in a July 13 Medium post.
The exchange sees two possible outcomes, writing:
– One blockchain becomes dominant, resulting in the other blockchain having low community adoption and value.
– Both blockchains are adopted, co-existing and operating independently of one another with roughly equal community adoption and value.
Because of this, the exchange said it may suspend deposits and withdrawals for bitcoin temporarily, and it might also pause trading.
According to the post: "This decision will be based on our assessment of the technical risks posed by the fork, such as replay attacks and other factors that could create network instability."
The South Korean exchange has issued a blog post on its website mentioning the current scaling war, but it has not disseminated any statement on its policies for a potential split.
On July 19, Gemini updated an older blog post on a possible split with new information regarding the scenario.
"In the event of a hard fork, we will carefully consider our response and how to move forward. We understand that our customers have diverse opinions on this subject, and we will do our best to incorporate your suggestions," the blog post said.
It continues to say that, if a hard fork is anticipated, Gemini will suspend deposits and withdrawals.
While the exchange said it was still weighing its options, the current plan is as follows:
One of China's largest bitcoin exchanges, Huobi said it is preparing for the potential of a bitcoin fork with several policies:
1. Around the potential fork time … the exchange will suspend bitcoin deposits and withdrawals due to potential technical risks such as replay attacks and other issues that may cause network instability.
2. If there is no fork, and the network is stable, we will resume bitcoin deposits and withdrawals.
3. If bitcoin is split into several blockchains, Huobi will give users their rightful ownership of their digital assets. Once the potential bitcoin forks happen, Huobi will take steps to support trading for every type of bitcoin.
4. If you can't be 100% sure [that] your wallet has the function of anti-replay attack, we strongly suggest that you deposit your bitcoin in Huobi, and we will handle all resulting technical issues related to the potential bitcoin forks. If you have bitcoin in your Huobi account, please don’t worry about your asset's safety.
5. Huobi … will support all type[s] of bitcoin after the fork right away. If you need to trade any type of bitcoins, please deposit bitcoin in advance.
Another South Korean exchange that supports Segwit2x, Korbit hasn't updated its website or blog.
The exchange responded to requests for comment, but has yet to offer details on its policy regarding a potential split.
OKCoin’s policies, outlined in a July 18 blog post, are similar to Huobi's in that they will suspend bitcoin deposits and withdrawals close to the event. For OKCoin that's from July 31 through August 2.
They advise customers to deposit coins in advance in an effort to not affect their trading. If there is no fork, operations will continue as usual, but, if there is, every blockchain user will be given their rightful ownership of coins, and they will support every type of bitcoin on their trading platform.
Yet, OKCoin lists two further actions it will take:
"In all these circumstances, the easiest way for uninterrupted trading is for users to deposit bitcoin in advance, and OKCoin will handle all resulting technical issues related to the potential bitcoin forks.
If unexpected events occur during the potential bitcoin fork period, OKCoin may temporarily also suspend bitcoin trading.
If we deem someone has maliciously manipulated the market during this period, OKCoin may take measures including the suspension and roll back of trades."
The crypto-only trading and lending platform has yet to publish details on its policies leading up to the possible August 1 divergence.
The exchange did, however, comment on concerns in a March blog post on what its policies might be should a split occur, stating any hard fork must have replay protection.
"Without this, exchanges cannot continuously and properly operate," the post said.
Poloniex went on to say it would "support Bitcoin Core continuously as BTC," nodding to the cryptocurrency's open-source developer group, which has roundly rejected the Segwit2x proposal.
Poloniex has not responded to requests for further comment.
Hardware wallet provider Trezor said it has received an increasing number of questions regarding potential outcomes of the scaling proposals and the possibility of a split.
In a July 18 blog post, the company acknowledged it is unclear how the network will develop, but assured users that its wallet is the "safest place" even for an event such as a bitcoin split.
The bitcoin wallet and vault issued a blog post on July 20 explaining what its customers can expect in the event of a bitcoin fork.
Until they can confirm transactions can be done safely, Xapo may temporarily halt outgoing and incoming transfers from the bitcoin network, and may also suspend conversion from dollars and other currencies to bitcoin and vice versa through the Xapo Debit Card.
In the event of a split, the company will support the one with the "most accumulated difficulty." Although, the company will give users the choice to withdraw their coins in the secondary blockchain, or let Xapo sell the coins in the secondary blockchain and add the value they receive to the user's account on the supported blockchain.
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Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which helped organize the SegWit2x agreement and has an ownership stake in bitFlyer, BTCC, Coinbase, Korbit and Xapo.
Chart image via Shutterstock
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