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SegWit2X Called Off, Bitcoin Consensus Prevails

2 29

2x Block increase gets cancelled for an indefinite period of time

In an epic and inspiring email from Mike Belsh (co-signed by Wences Casares, Jihan Wu, Jeff Garzik, Peter Smith and Erik Voorhees) the Segwit2X supporters announced that, even though the 2x proposal has been crafted to improve Bitcoin, it has not reached consensus and only puts the ecosystem in danger – and they are calling it off!

Here is the full email text:

The Segwit2x effort began in May with a simple purpose:  to increase the
blocksize and improve Bitcoin scalability. At the time, the Bitcoin
community was in crisis after nearly 3 years of heavy debate, and consensus
for Segwit seemed like a distant mirage with only 30% support among miners.
Segwit2x found its first success in August, as it broke the deadlock and
quickly led to Segwit’s successful activation. Since that time, the team
shifted its efforts to phase two of the project - a 2MB blocksize increase.
Our goal has always been a smooth upgrade for Bitcoin.  Although we
strongly believe in the need for a larger blocksize, there is something we
believe is even more important: keeping the community together.
Unfortunately, it is clear that we have not built sufficient consensus for
a clean blocksize upgrade at this time. Continuing on the current path
could divide the community and be a setback to Bitcoin’s growth. This was
never the goal of Segwit2x.
As fees rise on the blockchain, we believe it will eventually become
obvious that on-chain capacity increases are necessary. When that happens,
we hope the community will come together and find a solution, possibly with
a blocksize increase. Until then, we are suspending our plans for the
upcoming 2MB upgrade.
We want to thank everyone that contributed constructively to Segwit2x,
whether you were in favor or against. Your efforts are what makes Bitcoin
great. Bitcoin remains the greatest form of money mankind has ever seen,
and we remain dedicated to protecting and fostering its growth worldwide.
Mike Belshe, Wences Casares, Jihan Wu, Jeff Garzik, Peter Smith and Erik
Voorhees

This is a huge victory for Bitcoin, because it is a consensus-based technology. The situation was so volatile that the 2x supporting companies and their services presented a clear danger to Bitcoin users’ funds they stored. Many companies changed their post-segwit2x plans so often that it became confusing to follow them, let alone trust your funds to them.

“Satoshi Nakamoto himself” triggered the Segwit2x Cancellation?

Interestingly enough, the closer the Segwit2x was coming the more people were backing out of it. All the core devs were against it, and, just one day prior to that, Nick Szaboadded a “[NO2X] ” snippet to his Twitter handle:

According to Charlie Lee, “Nick Szabo is the closest we have to Satoshi, if not Satoshi himself”. Could Szabo’s signaling against the 2x fork have been the final drop that made 2x supporters turn around? We might never know the internal motivation of everyone who signed the email above, but they definitely did the right thing following the consensus.

No more free fork cash

There is a downside to the Segwit2x cancellation: no one is getting their Bitcoin balance doubled up. The fork would’ve given every Bitcoin holder an equivalent balance in the forked coin, accessible with the same private key. Many were planning of “cashing out” of the new coin immediately, and that is the reason Bitcoin was growing in demand and, respectively, price pre-fork.

The move back to altcoins and drop in Bitcoin price

Since people were expecting free coin after the fork, many were closing their altcoin positions and accumulating as much Bicoin as possible so the exchanges would double their balance during the fork.

Right after the 2x cancellation the reverse movement began: traders sold some of their 2x-intended Bitcoin back for alts, causing BTC trading volume increase and price correction:

segwit2x cancellation effect on bitcoin price

The consequences of the Segwit2x cancellation for the Bitcoin price will probably be observable for the rest of the week, but so far it seems that postponing the fork stopped the rapid Bitcoin price growth.

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