As Bitcoin hit a new record high less than two weeks ago, long-time “hodlers” (an inside joke in crypto based on a typo in a drunken Bitcoin Talk forum message in 2013) celebrated on Twitter and Reddit with jokes about buying Lambos, and a clip from Wayne’s World where the main characters frolic and chant, “We’ve got $5,000! We’ve got $5,000!”

On Saturday, the price surged to yet another all-time high, $6,194.88, according to Coinmarketcap.com, and the market capitalization briefly exceeded $100 billion.

The reasons for the jumps are unclear, but unless there’s negative news, every day, at minimum, the price is likely to rise because of new money coming into the system. Every day on Coinbase alone, about 35,000 new accounts open – a figure that sometimes reaches 50,000 – and thousands of people in South Korea and Japan, two countries where Bitcoin has taken off, are also bringing new fiat money into the system.

But the market’s rosy outlook is in stark contrast to the prognosis many insiders give to Bitcoin right now: The almost nine-year-old cryptocurrency is facing its gravest test yet. Whether or not it will survive, or in what form, is anyone’s guess.

On or around November 16, Bitcoin, the original cryptocurrency created by a novel technology called blockchain — a masterpiece of game theory, cryptography and, of all things, the age-old ledger — will split into two chains, each with its own set of coins. Hodlers should be happy about suddenly owning double the number of Bitcoins except for the fact that the question of which of these will be called the true Bitcoin is, for now, up in the air — and that could create turmoil in the market. Anyone willing to bet their money by selling one set of coins for another stands to take a financial hit — either because they’ve picked the wrong side, or, for technical reasons, because selling one set may actually cause a sale on both sides of the chain. [Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment. Disclosure: I own some Bitcoin.]

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To be sure, Bitcoin has undergone such an event before. In August, a group split the chain to create a new form of Bitcoin that they called Bitcoin Cash. The two blockchains shared a transaction history up until the time of the split, giving anyone who held any number of Bitcoins until the so-called hard fork the equivalent number of Bitcoin Cash on the new fork. (A hard fork is a software change that runs the risk of splitting the blockchain into two, particularly if the community disagrees about it. If you follow Ethereum or cryptocurrency, you may have heard that Ethereum split into Ethereum and Ethereum Classic after a contentious hard fork.) However, many people who didn’t support Bitcoin Cash dumped their coins quickly, and, after initially spiking up to $900, the price has now deflated to about $300. But because Bitcoin itself didn’t suffer much from the split, many people believe that hard forks are no big deal. This one is different.

“At the last fork, it was very clear which fork was the minority chain,” says Olaf Carlson-Wee, founder and CEO of Polychain Capital, a $250 million crypto hedge fund. “With this fork, there is a battle over Bitcoin — the name and brand and which chain is the true Bitcoin. And no one is backing down.”

Since it became clear this hard fork would occur, Bitcoin Twitter has been a toxic stew of name-calling, trolling, bullying, blocking and threats, with some altercations spanning months with replies numbering in the hundreds. No tweet or Bitcoin Talk comment made by anyone is too old to dredge up and hold against them, no quote from Satoshi Nakamoto too out of context (or fictional) to be used to bolster one’s argument. The two Bitcoin subreddits — “hard forked” politically and ideologically long ago by censorship — espouse such different views, switching between them is like passing through the looking glass. In one forum, one side of the hard fork will certainly triumph, and the backers of the other side are vilified; in the other subreddit, the opposite chain will come out on top, and the first subreddit’s villains are heroes. Each side is so convinced it will win that a few insiders made a $4 million bet — though, being denominated in Bitcoin, the amount on the line now is $6 million.

How the first cryptocurrency reached this cliffhanger in its journey is a story that has been many years in the making and finally pits against each other what were strange bedfellows anyway: the cypherpunks who, years before Bitcoin even existed, developed the various technologies that finally resulted in the first true digital asset and the Silicon Valley types who popularized the cryptocurrency that now has at least tens of millions of users and a $100 billion market cap. Whether one side will prevail or their death match will destroy Bitcoin is anyone’s guess.

What Are They Fighting About?

At its most basic level, the question that divides the community is a seemingly trivial one: how to upgrade the network to accommodate more transactions at any given time. It has produced a contentious divide because the various ways to go about it all result in tradeoffs — and which compromises the different sides are willing to make reflect deep philosophical differences. Throw in accusations of censorship, racism, hypocrisy, corporate takeovers and deal-making behind closed doors, and the three-year-long battle has become a geek’s version of a soap opera — if soap operas were mostly about and watched by men.

Bitcoin transactions are grouped into blocks that get processed every 10 minutes. The amount of data that can be included in any given block is limited to 1MB — an arbitrary cap instituted early on to prevent spam on the network. However, transaction volume has been growing, making blocks full, pushing up transaction fees as people compete to ensure that their transaction makes it into the next block or one soon after. While everyone agrees the number of transactions that can be processed at any given time needs to be increased, there is no consensus around how.

If you’re newer to Bitcoin (like if you came here because of Scott Disick’s tweets or you’re a Wall Streeter newly interested in Bitcoin), you can think of the two most-discussed ways to increase the network capacity as two different proposals for enabling more stuff to fit in a house. One side says: Let’s organize the items in it more efficiently. Not every single thing in this house needs to be here. We can put some of it outside in the shed and better organize the objects that need to remain inside. (For future reference, in Bitcoin terms, this proposal is called SegWit.) The other side says: Let’s just make the house bigger. (This solution has gone by different names in the past depending on the size of the increase being suggested, but broadly, it’s known as bigger blocks, and is now most commonly denominated by the block size currently on the table: 2MB or 2x.) Both sides agree that eventually they need to build other, more technically challenging solutions, such as enabling people that want to use the house to whip up and close down temporary shelters for less important items but putting the most important ones in the house. (These are called second-layer or layer 2 solutions, with Lightning Network being one example, that use the Bitcoin blockchain as a settlement layer for transactions.) But these other solutions are still in development.

However, the two proposals presented above aren’t the exact ones the community faces now. The first is the same as the first description above (SegWit), but the second is a compromise solution. That plan says, sure, we can organize things better but that’s only going to help us for so long. So, let’s better organize it and make the house twice as big. That will buy us the time we need to build the second-layer solutions. This plan is SegWit plus a 2MB block; hence, SegWit2x.

But because we’re talking about Bitcoin, we’re not just building one house. We’re making one house roughly every 10 minutes. And it’s not the same person or organization producing each house. The constructors can be anyone who buys the right equipment (in Bitcoin, these are called miners and are the people who own the equipment designed to solve the math problems that enable someone to add a new block to the blockchain) — and they can be located anywhere in the world, because after all, these “houses” (blocks of Bitcoin transactions) are virtual and live in the cloud.

The Philosophical Divide: Cypherpunk Vs. Silicon Valley

Here’s where the philosophical differences start to come in: The first group says, actually, if we make the houses bigger, then it’s going to be a bit harder for the many people who make them. We might end up with fewer builders overall, which would be dangerous, because then the power of constructing these houses will become more centralized into the hands of fewer players. And if that happened, not only would they have too much power, but then a government or other hostile actor could target them in order to stop us from building houses altogether.

The second group says, but to go from a minuscule-sized house to a tiny one isn’t going to make it that much more difficult for the builders. Plus, organizing better will only give us more space gradually over time, while doubling the size of the house will give us space we really need overnight.

This is the debate that’s gone back and forth for at least three years. The efficient organizer side includes the cypherpunks who envision a world in which the barriers to anyone running their own Bitcoin node (like running your own email server instead of using Gmail) are low, keeping the network as decentralized as possible and therefore further beyond the reach of any government or control by any entity or group of entities. One of the people aligned with this group is Dr. Adam Back, CEO of blockchain-focused technologies company Blockstream. Back in the 1997, he created a precursor to Bitcoin called Hash Cash that employed an algorithm called proof of work (also used by Bitcoin) to help prevent spam on early versions of Internet discussion forums. Back became interested in subsequent versions of digital money that were released, including Digicash, which was programmed to only have one million units. Soon, he saw users “bootstrapping” a value onto it by selling T-shirts and other items whose prices were denominated in Digicash. However, it was dispensed by a central server and when the company went out of business, Back’s Digicash became useless. When Bitcoin came around, he wondered if people would again ascribe a value to it. And they have — a big one.

He says he chooses to align with the so-called small blockers or 1x side because Bitcoin’s “differentiating value is the payments that you can only make with Bitcoin” — transactions in which you don’t have permission to send money, where you’re concerned about transacting for privacy reasons or where the receiver doesn’t have a bank account. “These payments are differentiating payments. Those are the ones that are unique and some of those scenarios banks cannot compete with. So you have the space to yourself in a business setting — for regulatory reasons or because of the difficulty of obtaining bank accounts or because it’s used for programming an online service and it’s very complicated to get permission from a bank.” He pooh-poohed a 2014 headline-making wave of big retailers such as Overstock, Expedia and Dell accepting Bitcoin. “If you’re ordering a computer from Dell and live in the U.S, and give your street address, what’s the benefit? What’s unique and different? I’d argue there isn’t one.”

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While he agrees the community should try to scale Bitcoin so everyone on the planet can use it, he says that will happen with so-called second-layer solutions such as the Lightning Network and the product his company is working on, side chains, in which transactions don’t occur directly on the Bitcoin blockchain but are settled on it. (Blockstream plans to sell side chains to enterprises, charging a fixed monthly fee, taking transaction fees and even selling hardware — a fact that has caused the big blockers to protest that Blockstream and the engineers it employs who are also Bitcoin core developers want to keep the block size small so Blockstream can profit. Back says this isn’t true because, beyond a certain point, side chains won’t really solve scaling.) Back says the community shouldn’t remove Bitcoin’s unique features in order to scale the network. Drawing out the other side’s position to an extreme, he says, “If we’re going to get centralized into a big data center somewhere, as in the PayPal case, it’s basically guaranteed the company running it will get national security layers and blacklists and all the things banks do and regulations will apply to them.”

Back’s (and the cypherpunks’) vision for the future of Bitcoin is one in which users can run their own nodes and control their own private keys rather than entrusting a company. Right now, a number of startups manage users’ private keys for them, with the biggest being Coinbase — a Silicon Valley unicorn with backing from the New York Stock Exchange, Andreessen Horowitz, Union Square Ventures and Institutional Venture Partners, among others. “Using smart contracts, there are ways to get the security features of something like a custodian while having control yourself,” Back says before launching into the technical features of how it works.

The bigger block side includes several venture-backed startups who have brought millions of people to Bitcoin such as the two biggest wallets, Coinbase and Blockchain who have an estimated 30 million crypto users altogether. Other popular companies on this side include Xapo, which is one of the top five Bitcoin storage companies globally and whose CEO Wences Casares may be the entrepreneur most responsible for getting Silicon Valley excited about Bitcoin; Shapeshift, which CEO Erik Voorhees says sees 2-3% of the daily global Bitcoin transactions; Circle, which has backing from Goldman Sachs; Blockchain, whose investors include Lightspeed Venture Partners and Richard Branson; and the biggest investor in the space itself, Barry Silbert’s Digital Currency Group.

Their vision for Bitcoin is of a new form of money not dictated by any government or central bank but created and used by the people — lots of people, including traditional Wall Street financiers investing in Bitcoin, people in developing countries making $5 transactions, people in developed ones paying for $5 for a cup of coffee.

One of the largest Bitcoin holders, Roger Ver, who is a proponent of big blocks, says the small blockers “think it’s just an interesting science experiment, and they can have everybody running Bitcoin on their Raspberry Pi at home. For me, I want to build a currency that’s going to replace the euro, the dollar and the yen, and every other government-issued currency around the world, and in order to do that Bitcoin needs to scale massively.”

Vinny Lingham, a serial entrepreneur, shark on South Africa’s Shark Tank and current CEO and cofounder of blockchain identity startup Civic, also supports big blocks. (Civic uses the Bitcoin blockchain.) “If you want Bitcoin to stay with the cypherpunk mentality, you have a much smaller market for Bitcoin than if it goes mainstream,” he says. “Most people buying Bitcoin today don’t even know what the hell cypherpunk is. They don’t care. They don’t know what SegWit is. They don’t care.” He says Bitcoin companies have made everyday consumers aware of the cryptocurrency and driven the adoption that has pushed up the price — mostly to the benefit of the cypherpunks who got in early.

Shapeshift’s Voorhees says his interest in Bitcoin grew out of a realization he had during the financial crisis: how central banks debase fiat currencies, “stealing several percent of everyone’s money every year” — which he calls the biggest financial fraud ever perpetrated in the world. “I saw Bitcoin as the world’s first free-market form of finance, a way to have money and everything else built upon finance from the bottom up without banks or government money involved at all.” Like other big blockers, he is pragmatic about what he sees as a need for larger blocks. Because the second-layer solutions are not yet available, “blocks have been full and fees have been rising drastically. It’s now silly and stupid to send a bitcoin transaction less than $10 or $20 because the fee is $0.50 to $10 and that makes that prohibitive. When I got involved in Bitcoin, it was amazing to send Bitcoin anywhere in the world at almost no cost, like fractions of a penny.”

He says high transaction fees have made Bitcoin uncompetitive and pointed to the examples of Counterparty and Omni, two protocols that, early on, enabled developers to launch tokens on Bitcoin. “Those became completely unusable when fees got so high on Bitcoin. What it meant was, instead of people creating tokens on the Bitcoin platform, now they just create tokens on the Ethereum platform. For someone who is dedicated to making Bitcoin a success, when I see that happening unnecessarily, I think it’s a problem — especially when you can solve it relatively easily by creating more space in the blocks while the layer two technologies get built. Those who are just working on the protocol or who work in areas where they don’t have actual customers or users, where they don’t see the software being used at scale, they don’t appreciate these issues. They don’t see them. They see things academically as opposed to how it’s actually used in the real world. Shapeshift itself is 2-3% of all the Bitcoin transactions in the world. We have a good idea of how this technology gets used by real people in the real world and, if you’ll notice, the companies that have the most users are all nearly unanimously in favor of a larger block and Segwit2x generally.”

Carlson-Wee, summarizing the divide between the cypherpunks and startups, says the 2x supporters want lower transactions fees for users. “The question is what’s the timeline and the urgency and how do you balance the need for that vs. the need to make it cheap to run a fully validating node. There is no technically right answer,” he says. “It just becomes an ideological battle about would you rather have transaction fees lower or would you rather have a fully validating node cost less, because there’s a sliding scale. When one goes up, the other goes down to some extent. People have different values and visions and so what is ultimately in my mind a pretty small technical debate about 1MB or 2 has become very politicized and ideological.”

How Bitcoin Politics Created The World’s Most Expensive Game Of Chicken

If cypherpunks vs. entrepreneurs represents the philosophical divide, SegWit vs. SegWit2x is the political one — and it’s intensely political. Bitcoin’s four main stakeholders are the tech-focused core developers, the profit-driven miners, the business-oriented startups and the users, who range from immigrants sending remittances back home to the 1% wanting in on this new digital gold rush.

The Bitcoin core developers have been in charge of the protocol, making technical upgrades to the network. (They’re the designers of the homes.) They have the support of a very vocal contingent of Bitcoin fans who often espouse their views on the block size debate via, say, Twitter profile pics of them wearing camo hats emblazoned with acronyms only hard core Bitcoiners would know like “UASF,” or by changing their Twitter handles to include their stance on the Bitcoin block size to @name [NO2X].

The Bitcoin miners are the people who run the computers that power and secure the Bitcoin network and ensure transactions get put into blocks. (They are the house builders.) They have, for a long time, been supporters of bigger blocks. However, in 2015 and 2016, they were also loath to ditch the Bitcoin core team. During those years, Coinbase and some pro-big block developers tried to get miner support for various efforts to increase the block size, but the miners decided to stick with the core developers and get them to institute bigger blocks. For a long time, the developers and miners were the main parties in the scaling debate, while businesses attempted to intervene to little avail.

In February 2016, at a meeting in Hong Kong, a group of miners and devs did agree to compromise on both SegWit and a 2MB block (yes, exactly the SegWit2x solution of today) — an accord that later came to be known as the Hong Kong agreement. However, the developers there didn’t represent all the core team, and they ultimately worked only on SegWit. Once Core had completed its code in fall 2016, because they didn’t want to appear to be in control of this decentralized network, they declared that SegWit would be adopted only if 95% of miners signaled their intention to adopt it. However, six months in, less than 30% of them had. (A miner can signal an intention by including an informal text note in any block they add to the chain.) The miners felt betrayed by the developers for reneging on the 2MB hard fork promised; Back says that later, at least one miner promised to back SegWit without a hard fork but did not follow through.

Some Bitcoin core supporters who had been excited about SegWit became so frustrated that the miners were holding it hostage that they threatened a grassroots change called a user-activated soft fork (UASF) that would, on August 1, force adoption of SegWit on the network — and possibly split Bitcoin into two chains. (Perhaps fearing that, miner support for SegWit increased to 45%.)

That’s when the third political group, the businesses, stepped off the sidelines. In late May, at Consensus, the largest blockchain conference, held at the New York Marriott and put on by a subsidiary of Digital Currency Group, which has invested in almost 100 crypto-blockchain startups, many of the venture-backed businesses that represent millions of users brokered a deal with the miners — SegWit2x, same as the Hong Kong agreement. (While some developers had been invited to this meeting, whose accord is now called the New York agreement, none had gone.) The group, which at the time of signing comprised 58 companies and 83% of the computer power on the Bitcoin network, declared they would adopt SegWit, along with a 2MB block, if 80% of miners signaled support for it. Miner signaling hit that threshold in two weeks. Suddenly, a plan to change the network was in the works — but the Bitcoin core developer team that had so far been in control of the protocol did not put it through, let alone support it. They and their supporters have called the New York Agreement a corporate takeover of Bitcoin and decried the notion that Bitcoin can be controlled by “back room deal-making.” Mike Belshe, the CEO of cryptocurrency security company BitGo, who is one of the SegWit2x developers, responds, “I’d argue the New York Agreement team is bigger than the core team. Go looked at who checked in material code to Bitcoin core and see if it’s greater than 60 people. It’s not.” (DCG’s Barry Silbert and the lead developer on SegWit2x, Jeff Garzik, declined to comment.)

Though it managed to break through the years-long deadlock, the SegWit2x plan may have had one fatal flaw. It triggered the upgrade to SegWit in August and planned to raise the block size to 2MB 90 days later. That means, for the interval between the two parts of the plan, Bitcoin has been a 1MB coin featuring SegWit — the coin that the developers wanted but the miners did not allow. So now the developers and their supporters — the cypherpunks — are doing their best to prevent the upgrade to 2MB, or at least to ensure that the 1MB coin with SegWit survives and is labeled the real Bitcoin.

What Will Happen Come November

The plan by the SegWit2x developers is to execute the fork in such a way that the legacy chain does not survive. In their view, they are upgrading the network according to the definition of Bitcoin in the Bitcoin white paper, which consistently describes Bitcoin as being the longest chain and that being the longest is “proof that it came from the largest pool of CPU power.” If all goes according to their plan, such a large amount of hash power will go to mining the 2x chain that the 1x chain will basically become dysfunctional — blocks could take hours to get added to the chain, fees could become prohibitively high as people compete to get their transactions included in the next block, and because most parties require a transaction to be six blocks deep in the chain to consider it confirmed, confirmation times will become excessively long. Miners compete to get the new Bitcoins mined on the network and how easy it is to obtain that award is determined by something called the difficulty algorithm that adjusts every 2,016 blocks, which turns out to be every two weeks as long as a block is processed on average every 10 minutes. But if, say, 90% of miners are no longer mining on that chain, it will take 100 minutes to find a block, 10 hours to get a confirmation, and 140 days for the difficulty to readjust.

Additionally, the developers of the SegWit2x plan are not instituting a technical measure called replay protection that would entirely separate the transactions on the two blockchains. Without replay protection, if both chains survive, any transactions that occur on the 2x chain will also be replicated on the 1x chain and vice versa. However, this will cause more problems on the chain with less mining power because blocks will be mined more slowly. Let’s assume the chain with less mining power is the 1x chain. That means that if you are a 1x supporter and dump your 2x coins, you will also lose your 1x coins. (According to core developer Eric Lombrozo, some people plan to offer special services that enable people to separate their coins so they can transact in them without replaying the transaction on the other chain.) Belshe says they aren’t instituting replay protection because their intention is that there will only be one chain, not two, after the fork.

In general, a chain with little hash power will be vulnerable to attack. If only 5% of current hash power remains on that chain, then any miner with enough power can turn 5.1% of current hash power on to the first chain and double spend to their heart’s content in what’s called a 51% attack. A miner could also conduct what’s called a wipeout attack in which they use their greater hash power to mine blocks faster than the rest of the network in secret, without broadcasting each new block to the network. Then, when they’re many blocks ahead of the chain, they broadcast all the blocks at once, wiping out all the transactions that had been added by the other miners in the interim. Then, even transactions not just six but 60 blocks deep could become invalid.

The above scenarios assume the vast majority of miners turn all or nearly all their hash power onto the 2x chain. But will they? Answers from miners, including the ones who are signaling SegWit2x and who signed the New York agreement, are inconclusive. Forbes contacted all the known miners. Fifty-six percent of the network hash power — AntPool, BTC.com, BTCC Pool, Bixin, BitFury, BW.com, 1Hash, GBMiners and KanoPool, as well as the 3.3% of hash rate that is unknown — declined to comment or did not respond to requests for comment, with the exception of KanoPool (which is 0.8% of hash power), which pointed to a Bitcoin Talk post stating that it hasn’t decided. The only miners that said they will definitely turn all their hash power onto the 2x chain were Ver’s Bitcoin.com (1.5%) and BTC.top, which accounts for 14.1% of the hash power. BTC.top CEO Jiang Zhuoer, wrote via WeChat, “I will do my best to support 2x, even if the mining is not profit[able].” However, he also said if the 1x chain is more profitable for a “long time,” such as one or two weeks, he will let miners in his pool who want to mine on the 1x chain do so. ViaBTC and BitClub, which respectively have 9% and 3.5% of the hash rate, say they plan to let their individual miners choose which chain to mine. Wang Chun, the CEO of F2Pool, who made waves for signing the New York agreement and then later backing out, says F2Pool will mine the most profitable chain but will always pay its miners in 1x coins. Slush Pool, which did not sign the New York agreement, will mine the 1x chain due to the lack of replay protection, though it said in a written statement, “We might consider switching over only if there is a strong community consensus validating S2X as Bitcoin, which is in our opinion highly improbable.”

So, while it is technically unknown which chain 76.8% of hash power will support right after the hard fork, it is reasonable to believe most of it will mine the 2x chain, as about 85% of blocks being mined now are by miners signaling SegWit2x (down from 95% a couple weeks ago). Of the known plans, 15.6% of miners will definitely mine 2x, 12.5% will let their miners choose at will, 8.4% of the hash power will mine the most profitable chain but pay the miners in 1x coins, and 7.4% will mine the 1x chain.

It’s certainly possible that the vast majority of hashing power goes to the 2x chain. However, it’s also possible that enough hash power remains on the 1x chain that it survives. In that case, what happens on the exchanges will be key. It will also be most true to the game theory of Bitcoin, which, in contrast to the Bitcoin white paper, says it’s not hash power over time that determines the real Bitcoin, but the users who decide; the only problem with this is that there’s been no way to see, by way of price, which coin users would find more valuable without actually presenting them with different versions of Bitcoin — until now.

So far, a number of exchanges and wallets have indicated that they expect to support both chains, at least initially. Coinbase, the single biggest holder of Bitcoins on the planet, has announced it will give users access to coins on both chains and, a few hours after this article was initially published, stated that it would name the original chain BTC and the new chain B2X. Kraken, Bitfinex and Xapo, all the next biggest holders, with roughly the same amounts, have different stances. Kraken, which did not sign the New York agreement, has not issued a statement. Bitfinex has announced trading for “chain split tokens,” in which customers can ascribe a certain percentage of the value of a current whole Bitcoin to the 1x and 2x chains as long as the two add up to 100. The 1x chain split token is called BT1 and the 2x chain split token is called BT2, and after the hard fork, BT1 will convert into BTC and BT2 will convert into B2X. (SegWit2x supporters are crying foul over the naming favoritism being shown the 1x chain, but Bitfinex said that for an exchange like itself that offers leveraged trading, it needs to offer continuous markets, and because tickers are the primary keys in all its databases, changing tickers would break system functions for market data, trading records, etc. However, it could much more easily move the descriptor Bitcoin to another ticker such as B2X.) So far, the legacy chain split tokens are trading at about 87% the price of a current Bitcoin, and the SegWit2x chain split tokens are trading at about 13%. (Another exchange, OKCoin, which didn’t specify its naming policy, shows the same price differential; Huobi, which may rename BT2 BTC, shows a similar spread.) Xapo, which isn’t an exchange and does not need to offer continuous trading, has announced it will make the new coin available to customers but it will follow the chain with the “most accumulated difficulty” — the most hash power since the inception of the chains in January 2009, when Bitcoin first launched, following the definition of Bitcoin in the Bitcoin white paper — and name that one BTC. If the legacy chain is the minority chain, it will name that BC1 and if the SegWit2x chain is the minority chain, it will name that BC2. (All the exchanges/wallets above declined to comment or pointed to their public statements regarding the hard fork.) Currently, more than half of all Bitcoin trading volume takes place in Japan, and after the 27% of trading volume that takes place in the United States, another 11% occurs in South Korea, so exchanges in those countries will also certainly play a role.

Given that 85-90% of miners are signaling that they support SegWit2x, let’s assume that that’s how much hash power goes to that chain. Meanwhile, if 85-90% of users really do support the 1x chain as the chain split tokens indicate, to the point where they are willing to give up coins on the 2x chain to buy more 1x coins (and assuming that they’re not foiled in their attempt to do so by a replay attack), then it really does become a game of chicken. However, who blinks first is highly dependent on price.

The key to the 2x side winning is for the miners to act in concert and hold on, even if the other chain is more profitable, until the 1x chain becomes unusable and users flee to the 2x chain. How long they can do so depends on whether mining the 2x chain will simply be less profitable than mining the 1x chain or actually unprofitable. Part of the miners’ motivation to push for bigger blocks has to do with the fact that transactions on the blockchain itself pay miner fees. The more of those that are shifted to layer 2, the less they make in such fees. So, while mining the 2x chain may be less profitable or even unprofitable for some time period, they may be willing to make that tradeoff for their long-term goal. If the 2x chain prevails, 1xers who tried to boost the chance of their coin winning by selling the 2x coins in droves may end up losing money. Even more significantly, the core developers will have at least temporarily lost control of the protocol, and some may abandon Bitcoin altogether. It’s possible that losing the power struggle could prompt the core developers to do a hard fork to what’s called a proof of work change that would render the miners’ equipment useless for mining the legacy coin, but Lombrozo says that’s unlikely for now: “For that to happen, there would really have to be a strongly adversarial scenario where miners are actually attacking the chain” (such as the wipeout and 51% attacks described above).

However, while the SegWit2x side could win in a number of scenarios, the opposite could happen too. The 1x chain could be more profitable not only because of the current chain split token spread, but also because users on the 1x chain may pay high fees to try to get their transactions pushed through the infrequent blocks. These factors could entice miners to mine that chain. Blocks then wouldn’t be as slow and the chain could have fewer problems, which would boost the confidence of 1xers and push the price up, which would draw more miners, and so on, in an upward spiral until the SegWit2x chain is unprofitable for so long that almost all the miners defect from it back to the 1x chain.

Placing Bets

It could go either way. Both sides are highly confident their chain will win.

Tuur Demeester, editor in chief of Adamant Research, believes the current prices on the chain split tokens will likely reflect the prices of the two coins, so if miners mine the 2x chain, they will be leaving money on the table. “We see very clearly in the alt-coin space that miners eventually always follow the price,” he says. However, he says if the miners do mine the less profitable chain, causing problems on the 1x chain, “I would expect both prices would drop — both the price of B2X and the legacy chain — but I don’t really see that the ratio would change necessarily.”

The momentum the 1x side has going into the fork based on the price may also indicate how things will go after it. Spencer Bogart, head of research at crypto venture firm Blockchain Capital, says, “There’s a level of commitment from diehards within the 1x side that is ideological, and would go further than somebody that’s just being pragmatic. … I think a substantial portion of people will immediately sell all their 2x coins and re-up on what you can get on the original chain…. and then you’ll have some people who will tentatively wade into the other side but not commit to it. There’s a little asymmetry there that favors the status quo.”

However, the miners may also have some momentum of their own. The recent rise in price could mean that mining on the 2x chain isn’t unprofitable — merely less profitable than the 1x chain. Paul Sztorc, an economist at Bloq, rounding up the 13% price for chain split tokens on the exchanges, notes that 15% of a $6,000 coin is $900, which was the price of Bitcoin as recently as March of this year. Since miners invest in equipment based on conservative estimates for price, many of them may have invested an amount that would make mining profitable at a Bitcoin price as low as $900. So the recent jump in price makes it possible for them to hold out longer in pursuit of their ultimate goal of having bigger blocks. “It is likely that many miners believe that they can cause that 15% figure [the price of the SegWit2x chain split tokens] to rise to 100% if they starve the 1x chain of hashpower. Which they can now do much more easily. They are probably more likely to take the risk, the larger their profitability cushion is,” he wrote in an email.

Some Bitcoin insiders surmise that the 1x supporters buying chain split tokens are only a small but extremely vocal minority and that the vast majority of users don’t care about small blocks and are happy to let businesses decide for them. After all, the vast majority of the millions of users who have bought Bitcoin on Coinbase keep their coins there rather than taking control of them in their own wallets.

Kyle Samani, managing partner of crypto hedge fund Multicoin Capital, says he doesn’t understand the contention by 1x supporters that the 2x side represents a corporate takeover of Bitcoin. “You, as a user in Bitcoin, because it’s permissionless, have the right to run your own node, and be totally autonomous and independent. Great for you. But that’s a minority of users, and it’s absolutely a minority of dollars. The vast majority of people and money that interact with Bitcoin today interact through Coinbase, Xapo Bitpay, all these companies around the space — that has been true and will become more true, so when you say the evil CEOs are overtaking Bitcoin, I would say, no, the users interact with Bitcoin through these companies.”

On the flip side, many on the 1x/cypherpunk side have said that 1x-supporting customers of companies who signed the New York Agreement could have grounds to sue them — on what grounds exactly remains to be seen as many of the company statements issued so far are giving users access to their coins on both chains. However, the threat itself is rich in irony given how Bitcoin’s rise was fueled in part by libertarians’ love for it.

The last wild card is how Bitcoin Cash could affect this fork. It has 8MB blocks, no SegWit, and two of the most notorious big blockers, Ver, one of the richest Bitcoin hodlers, and Jihan Wu, the CEO of mining manufacturer Bitmain and pool operator Antpool, already promoting it. Ver has also claimed that it is true to the original vision of Bitcoin, since the white paper is titled, “Bitcoin: A Peer-to-Peer Electronic Cash System,” which implies many transactions per second.

Polychain’s Carlson-Wee, noting that the ideologically minded big blockers have already thrown in their lot with Bitcoin Cash, says, “The people who opted into Bitcoin Cash knew they were losing. Let’s say SegWit2x loses. Will the SegWit2x chain have the same kind of staying power of Bitcoin Cash if it’s the minority? In a way, I think the loser might lose even bigger this time, especially if it’s SegWit2x, since I think those ideologically driven folks are on Bitcoin Cash now. If the core chain loses, that chain will stay around, I’m confident.”

If the 2x side wins and unseats the core developers from their power over the protocol, it would be a stunning upset. But if the cypherpunks prevail, it remains to be seen how much effort the businesses will continue to put into Bitcoin. Already, Coinbase and Blockchain have adopted Ethereum, and Coinbase’s newest product Toshi is focused solely on Ethereum, and a contingent of cryptocurrency enthusiasts, worn out by the stalemate in Bitcoin, have moved on to other crypto tokens. So the question may not be which side wins, but whether, in the long run, anyone will care about this battle at all. – Written by ,