How To Get Prepared For Segwit2x and BIP148 : Secure Your Bitcoins

June 19, 2017 by
Secure bitcoins

 

(For basic information about Segwit2x and BIP 148, refer to our previous article on BIP 148 and Segwit2x Explained : Major Change To Come In Bitcoin)

A fork in the chain

1st August 2017 is bound to be a historical day for anybody who is even remotely associated with the blockchain technology. Bitcoin Core’s trump card, Segregated Witness (SegWit), has declared that they would be rejecting any Bitcoin blocks that do not signal support for them. The BIP 148 draws together a segment of Bitcoin users who are in full support of the UASF (User Activated Soft Fork), which brings us to our literal fork in the chain, for there is a chance that this will lead to a block-chain split on August 1st.

If SegWit doesn’t obtain the support of the majority of miners (counted by hash power) through BIP 148, two types of bitcoin tokens will begin to exist in the market. For the comfort of organized nomenclature, purely for our referring purposes, let the coins on the soft fork, created byBIP148 be New BTC and the other half, Old BTC (The old version).

How to prep for D-Day?

This chain split could be the best or the worst thing for you and your bitcoins, depending on how you wade through these rocky waters. The better half of the tale is that each bitcoin would be effectively copied to both the chains, the worse half however is that this coin split can be risky and might even lead to a cyber breakout. So if you’re not too careful, you might lose funds (which is precisely why we are here to help you).

Know This :

A chain-split can create high risk situations like cyber battles between the two sides, BTC Exchange Rates dropping by large amounts (maybe even to zero) and this might lead to your subsequent loss of funds. Know the amount of loss you can sustain, and be utterly sure of the value in bitcoins that you are willing to lose.

Do This :

Once you’ve decided how many bitcoins you want to hold to, there are only three mantras that you need to follow:

1. Control your own Private Keys
2. If you have stored any bitcoins on exchange platforms say in a custodial wallet, or any service that holds your private keys for you, create your own wallet, move your bitcoins there and control your private keys.

3.Back up your keys. This is THE most important mantra of all.

The second point you may realize, is just a means of achieving the first. But it is essential because exchange services like Coinbase, Circle or Xapo aren’t well equipped yet to handle the split. Their lacking might result in you not receiving any coins on both ends of the chain. For so far, no exchange service has given any sort of guarantee with regards to token distribution.

Hence, the best way is to create your own wallet and send your tokens to one or several BTC Adresses in this new wallet. The kind of wallet you use is entirely based on your preference. You can choose from these or look for more options:

1. Bitcoin Core or Bitcoin Knots

These are full node wallets verifying all protocol rules. The only issue is that they usually become a bit resource intensive to use. Start using one here.

  1. Paper Wallet
    Now if you’re not bothered with bitcoin transactions (with either of the tokens) anytime soon, and you’re mostly concerned with keeping them as a long-term investment, printing your private keys on a paper wallet will b e perfect if you take the right security measures. Learn all security precautions for a Paper Wallet here and then make your own wallet here.
  2. Hardware Wallet
    You can also store your private keys in any of the hardware wallets listed on bitcoin.org. Just keep in mind that hardware wallets are only about as secure as desktops or mobile phones are, which is obviously not the best security level you can get, hence these are not ideal for large amounts.

 

For D-Day and for (perhaps) hours that will linger on

In case a clear majority of hash power signals support for SegWit through BIP 148, before D-Day, the protocol will upgrade smoothly. This is the only case in which even if you didn’t prepare for the split, you will be fine, because all existing tokens will transform into New BTC.

Now only if we lived in a world with such harmony, but since we don’t, we have to be open to the possibility that a majority of hash power will not support that UASF, in which the chain will be bifocated into New BTC and Old BTC . And only those who hold their own private keys, will be privy to both these tokens.

(Probable) Split Scenario you need to be on the lookout for (and what to do in them)

Honestly speaking, we can only assume the number of ways such a chain-split could drive us towards.

If at any point after D-Day, the New BTC chain becomes the one with the most accumulated proof of work, the Old nodes would dissolve into the New BTC chain, leaving only one effective chain. In this case, the split would only temporary and the tokens would go back to being merely Bitcoins instead of New BTC and Old BTC and can use Bitcoin as usual.

The theoretical risk that Old BTC might be overtaken and discarded should perhaps decrease as time goes on, but will realistically exist for hours, days and maybe even longer – even if no the New BTC chain ceases to have any blocks on it.

Hence, buying or accepting Old BTC post-split has potential risks attached to it. If the New BTC takes over, these bitcoin tokens can quite literally disappear in that case. Thus, we at itsblockchain advise against buying or accepting any Old BTC, and if you do – be aware of the risk that your money could vanish into thin air.

Since BIP 148 nodes will never acknowledge the Old chain, and vice versa, these will not switch regardless of the chain with higher hash power.

It isn’t that buying and accepting New BTC is free of risks. Slow mining, difficulty adjustments and a potentially hostile environment give no guarantee that New BTC will continue to be used. It is only that the continued possibility for SegWit to activate on the New BTC chain is more probable than for it to do so on the Old Chain. Again, block confirmations may be very slow post the split, hence it would transactions very difficult if not impractical on the whole.

To accept New BTC, you need to be sure to run a BIP 148 full node as a wallet. Find out more about here.

The biggest risk we are yet to face :

Beyond the jeopardy of potential withering away of a chain, the biggest risk that we need to wrap our heads around is one of the Replay Attacks.

A replay attack occurs when a transaction will be picked up by both of the chains, because the receiver might have retransmitted it, which leads to the validity of the transaction on both sides of the identical chains – New BTC and Old.

What this means is that, spending coins on side of the chain would automatically lead to expenditure of an equivalent amount on the other chain as well.

What Can You Do?

Understand that New BTC and Old BTC might initially be stuck together. And in this case, patience is the only virtue. Wait until the post-split situation is clearer to everybody. And only move ahead with any transactions only once the dust has settled.

The cryptic world after D-Day

It is fairly hard to predict what would become of the cryptocurrency world long after D-Day. New BTC might become the only chain to survive the split, on basis of more accumulated proof of work, and then all would simply return to basic bitcoins.

But if that doesn’t happen fast, and even if the New BTC chain appears as non-active, the split could linger on for a while. Miners could start mining on that chain, and that might lead to an eventual wiping out of the Old Chain.

The co-existence of two chains is an unlikely but possible scenario. In fact at this point, the emergence of more than two chains can’t be taken out of the equation either! In this case, you will have coins on both (or all) sides of the fork.

But as we explained above, replay attacks will make it spending of coins on a single chain tricky. And splitting these coins can be trickier.

But all’s not about of the frying pan, into the fire scenario – the good news is that some exchanges are more than likely to set up coin splitting services taking care of the complexity behind the screens. After this, you would be able to sell or trade coins with ease.

Now if the split lingers on, wallets for both tokens should come soon enough. These would obviously require you to upgrade your exiting wallet or install new ones when the time is right. We would strictly advise steering clear of any transactions before you are through with all of this.

Lastly, itsblockchain will continue to update you  on the latest news of the cryptocurrency world and will be there to guide you through these rocky paths. Stay in touch with the mantras we’ve mentioned above and stay tuned for more on the post-fork situation!

Originally written By:

Kripi Badonia

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