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Was Bitcoin Community’s Criticism on Xapo’s SegWit2x Support a “Witch Hunt?”

Was Bitcoin Community’s Criticism on Xapo’s SegWit2x Support a “Witch Hunt?”

Was Bitcoin Community’s Criticism on Xapo’s SegWit2x Support a “Witch Hunt?”

Earlier this week, popular Bitcoin wallet platform and Visa debit card service provider Xapo was heavily criticized by the Bitcoin community for its plans to handle the SegWit2x hard fork in November.

In a corporate blog post entitled “About the Bitcoin SegWit2x Upgrade,” Federico Murrone, the Xapo co-founder and COO, stated that in the event original Bitcoin blockchain or legacy chain is overtaken by the SegWit2x blockchain upon the completion of its fork, Bitcoin will be listed with the moniker “BC1.” If the original Bitcoin blockchain remains as the majority chain, Murrone noted that the SegWit blockchain would be listed as “BC2.”

“We are going to call the chain with the most accumulated difficulty Bitcoin or BTC . If the minority chain is the one with 1MB blocks we are going to call it BC1 and if the minority chain is the one with 2MB blocks we are going to call it BC2,” wrote Murrone.

Some experts including ShapeShift CEO Erik Voorhees praised the strategy of Xapo, stating:

The strategy of Xapo to allow the market to decide which Bitcoin blockchain remains as the majority chain is praiseworthy, as Coinbase and Bitfinex, two of the largest Bitcoin companies in the industry, have taken a similar approach. But, the Bitcoin community rejected the indicator Xapo intends to use to justify which Bitcoin blockchain is the majority chain.

Unlike Bitfinex and Coinbase, the Xapo team led by Murrone have stated that the Bitcoin blockchain with more hashrate or hashing power will be considered as the majority blockchain. However, the community and the market have disagreed on the indicator used by Xapo, as the blockchain with more developer activity, higher market cap, and more valid blocks should be considered as the majority blockchain.

As the Bitfinex team stated:

“As the proposed consensus protocol Segwit2x project appears likely to activate, we have elected to designate the Segwit2x fork as B2X, for now. The incumbent implementation (based on the existing Bitcoin consensus protocol) will continue to trade as BTC even if the B2X chain has more hashing power. We are doing this for practical and operational reasons. Political considerations are irrelevant here. While we cannot change or re-assign ticker symbols, we can change the label or description associated with that ticker symbol.”

It is not practical and reasonable to wholly decide which Bitcoin blockchain is the majority chain based on hashrate because in blockchain networks, hashrate could very easily migrate from one chain to another, as demonstrated in the case of Bitcoin Cash. Upon its hard fork in September, most of Bitcoin’s hashrate moved from the original Bitcoin blockchain to Bitcoin Cash. As Bitcoin Cash became less profitable to mine than Bitcoin, mining pools redirected their hash rate to Bitcoin.

In response to the decision of Xapo, a group of users have started to protest against the company by canceling their orders for Bitcoin Visa debit cards.

Alistair Milne, a partner at the Atlanta DIgital Currency Fund, noted that miners follow the money, and will not remain on the blockchain that is less profitable to mine.

“Miners follow the money, they do not lead the money. This has never been illustrated more clearly than by Bcash and the joke that is their difficulty adjustment algorithm. A rational miner fears the market negatively valuing the tokens they are trying to mine. They are extremely sensitive to profit & loss (no matter how rich they pretend to be),” said Milne.

Hence, hashrate or hashing power should not be the sole indicator to decide which Bitcoin blockchain is the majority chain.

Author : Joseph Young

Joseph Young is a finance and tech journalist based in Hong Kong. He has worked with leading media and news agencies in the technology and finance industries, offering exclusive content, interviews, insights and analysis of cryptocurrencies, innovative and futuristic technologies.

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