Miners hold both a significant voice and a significant stake in the possibility of a forked network. The majority of miners hold veto power of any backward compatible hard fork, such as increasing the block size, which can lead to interesting scenarios in how the hard fork plays out.

Veto Power

Miners hold vetoing power on increasing the block size due to it being backward compatible. This means that if the majority of miners decide to require 1MB blocks to be considered valid, then even clients that allow 20MB blocks would be stuck with the old rules of the blockchain. What complicates this even further is that miners down the road changing their mind about which chain should be mined could orphan the 20MB chain even a significant time after the diversion. The 1MB blockchain would never be susceptible to such an attack, as the 20MB version would never be considered valid.

Economics of Mining

Miners can switch fairly effortlessly between the two chains. Difficulty will vary between the two chains as will value of the chains. While miners may have personal interest in what chain to mine, most will follow profits. Miners can mine a chain they prefer at cost if they want, but doing so only costs themselves and benefits competitors. The miners suffer a prisoners dilemma without the ability to form a cartel to punish defectors.

After the fork, I will assume both chains persist in some form. For this to occur, some reasonably significant portion of miners would decide to mine on the old chain (enough that we wouldn’t have to wait years for a block to be formed, before difficulty resets), and at least 50% decide to mine the new chain. If any of these assumptions do not hold, it is less interesting. If no miners mine the old chain, it has little value and we’d have to wait a great amount of time to ever reset difficulty. If fewer than 50% decide to mine the fork, then the old chain will win even by the new rules.

Each holder of Bitcoin will end up with equal balances on both the Bitcoin Classic and Bitcoin XT forks. However, the value of these coins will be independent (and may be lesser or greater than the previous value of Bitcoins). Once the miners have chosen a side, difficulty will reset to a proportion matching the miners on each side. If the proportion of difficulty to value on one chain varies from the others, miners will have the option to increase profits by switching sides. Miners do this today on many alt-coins- switching between various chains based on profit potential and difficulty, so there’s no reason to think miners wouldn’t do the same. Miners that prefer one chain may vary well mine the other chain, sell those coins for their preferred coin, just as alt-coin miners do today.

Short Term Majority is not Sufficient

This poses a very large potential threat to holders of the Bitcoin XT fork. Even when a majority of miners prefer the new coin to the old coin, if the old coin ever gains a sustained value greater than or equal to the new coin, miners will move to mining Bitcoin Classic until they make up greater than 51% of the network. Once this happens, Bitcoin Classic will outrun Bitcoin XT chain. Without checkpoints or breaking backward compatibility, its fate is sealed.

Removing the Risk

The risk can be drastically reduced if the forked version is not backward compatibility. For example, requiring an exact block number to be invalid on the old network would be sufficient to prevent this situation. I have yet to see this proposed by Gavin, but it seems like a necessary choice to remove the risk of the fork getting outrun. Another possibility is a checkpoint after the fork, which would be done at a single point in time, and could be discussed before the fork.