SegWit2x – What is It and How Does It Work?

SegWit2x (“B2X” or “S2X”) was a failed controversial Bitcoin hard fork effort aimed to double the block size limit. Some people in the BTC community went as far as to label this proposal as a “Corporate Takeover”.

Over 80% of miners supported SegWit2x, but the community could not agree on the upgrade. There are several things we can all learn from this story, as we will explain in the article.

The difference between a “Soft Fork” and a “Hard Fork”

Before dwelling into SegWith2x, you must first grasp the difference between hard and soft forks in blockchain. A hard fork is a change to the rules that govern the blockchain.

It’s a significant modification in its architecture: the older software doesn’t recognize legitimate new blocks. A hard fork causes the blockchain to divide into two parts, with no coming back.

On the other hand, soft forks produce blocks that the earlier software can recognize. They are therefore backward-compatible.

As cryptocurrency adoption is growing, so is the congestion of blockchains. This bottleneck effect has threatened to hamper the success of cryptocurrencies, starting from Bitcoin.

While developers and crypto enthusiasts have sought to remedy this issue, we are still far from a definitive solution. Specifically, the argument over effectively scaling the network has led to a heated debate.

SegWit2x is an excellent story to explain the stance of the Bitcoin community on the matter.

Understanding SegWit2x starting from SegWit

Before SegWit2x, the market saw the appearance and implementation of SegWit (“Segregated Witness”). SegWit attempted to solve Bitcoin’s scaling issue through a soft fork. Pieter Wuille, a Bitcoin Core developer, proposed it in late 2015.

SegWit’s technique separated signature data from other transaction information. The purpose of the operation was to make the transaction validation process lighter. SegWit’s aimed to enhance total transaction capacity via a soft fork that didn’t cause a split.

Since the SegWit proposal, the Bitcoin network has seen various talks and splits. For example, in August 2017, a hard fork created Bitcoin Cash (BCH). This hard fork raised block size eight times without using the SegWit mechanism.

Unlike SegWit, SegWit2x was a hard fork proposal. SegWit was the first part of a two-stage procedure that caught the attention of the BTC community.

The “New York Agreement” procedure required the SegWit2x implementation to reach its true purpose: increasing BTC block size.

Proponents of the protocol aimed to reduce transaction fees by raising block size. Specifically, SegWit2x intended to double the BTC block size (from 1MB to 2MB). As a result, node operators would have had to store more data.

SegWit2x would result in a hard fork to expand the block size, similar to the previous forks. However, unlike its predecessors, SegWit2x aimed to maintain all Bitcoin users on the same blockchain.

Lack of consensus in the community

Miners and startups were among the most active advocates of SegWit2x in the run-up to its implementation. They frequently claimed that Bitcoin’s passivity allowed rival cryptocurrencies to grow in the sector. 

According to them, existing modifications were insufficient to address the issue.

On the other side, developers and node operators were frequently hostile to SegWit2x adoption. They believed the new protocol’s risks exceeded its potential advantages.

Furthermore, the whole operation led critics to talk about a “corporate takeover” of BTC, as previously mentioned. According to pundits, the protocol would favor miners and corporations disproportionately.

The hard fork deadline was November 16, 2017, but developers could not agree on SegWit2x implementation. Due to continued disputes and a lack of broader consensus among participants, the SegWit2x movement fell apart on November 8.

A failed independent hard-fork attempt

Some participants planned to carry out the hard fork despite the official decision. On November 17, however, the market found out that the operation had followed the wrong setup. The SegWit2x nodes had separated from the network one block sooner than expected (#494782 instead of #494783).

While it is unclear what caused the mistake, its consequences are now rather famous in the BTC community. SegWit2x nodes waited for the new larger block to commence the chain fork in the wrong position.

Block #494783 saw the application of the old and new systems simultaneously. In practical terms, it had to be larger than 1 Mb and smaller than 1 Mb, an unsolvable problem.

The technicality represented the final page in the failure of SegWit2x, and developers halted this attempt.

What can we learn from the SegWit2x story?

We often hear people talk about “the crypto community” as a large unidentified entity. What SegWit2x reminded us is that there is no such thing as a “single thought” in a group of people.

We can find investors, speculators, miners, node executors, and many other categories in the Bitcoin community. The “community” word may stress the idea of a group of people working in constant agreement, which is an unlikely scenario.

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It would probably be better to speak of “Bitcoin stakeholders”, precisely as we do in the corporate world. Each group of people has a different interest, and Bitcoin investors learned this the hard way with SegWit2x.

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