A potential Bitcoin chain split looms on the horizon.
In the event of a chain split happens, to ensure the integrity of customer funds, Uphold will temporarily disable Bitcoin withdrawals and trading, as well as Ethereum and Litecoin trading, until it deems the network to have stabilized. The exact length of this period is uncertain, but you should expect it to take somewhere between a few hours to a few days. If a stable altcoin emerges from the split, Uphold will implement a way for its members to access such funds in the weeks that follow.
As always, our focus remains on the safety and integrity of your funds within Uphold, and that will be the guideline for any decision resulting from the various challenges posed by a Bitcoin chain split.
So, what’s it all about?
If you’ve been anywhere near Bitcoin in the past couple years, you’ll likely have heard about transaction delays and larger fees that result from an increasingly clogged network. In simplistic terms, this is a result of a limitation on how many transactions can fit into a block in the bitcoin blockchain, which has lead to a lively discussion and drama around bitcoin scaling. Suffice to say, there are different visions for how this should occur, which has largely led to a split in the community.
On one side, there’s the Bitcoin Core (BC) approach, which contends that no amount of on-chain scaling will be sufficient, and advocates for optimizing the existing chain and implementing off-chain solutions like the Lightning Network, where smaller transactions are executed without going through the Bitcoin Network, with periodic settlements to the chain. The proposed approach (including SegWit) solves a number of issues with the network itself (eg, malleability) and would still result in a sizable increase in the number of transactions per block.
On another side there’s Bitcoin Unlimited (BU), arguing that scaling should happen on-chain, moving the decision on block size to the miners and advocating for more transactions per block and therefore larger blocks. While this is an idea worth considering, BU has been accused of focusing primarily on the economical interests of miners and has been mired in controversy for its lack of rigour and poor adherence to open-source development best practices.
Both camps claim that the other’s approach will lead to more centralization. In my opinion, there are reasonable concerns on both sides: moving too much processing off-chain could lead to the creation of “Bitcoin banks”, where only large and expensive transactions are processed on-chain, whereas moving the control over the consensus rules to the miners, arguably puts too much control in the few large entities currently tasked with keeping the network safe.
Oddly enough, a casual, reasonable observer could be led to believe that there is likely a solution where both parties reach a compromise, which works for the community as a whole. Alas, much like you can see in other areas of society and around the world, the community has become strongly polarized, with plenty of loud voices that don’t necessarily think things through in detail or weight the full consequences of their choices, and the discussion has degraded to a point where a more dramatic rift has formed in the community, with an us-vs-them mentality. We’re therefore forced to contemplate and prepare for a possible contentious bitcoin fork.
This prospect puts Uphold in a delicate position and we will carefully consider how this may potentially affect our members. Ultimately, in our opinion, a contentious fork is a disservice to the community and the Bitcoin brand as a whole, and we’re hopeful that a compromise can be found to move forward in a way that allows Bitcoin to stick together and thrive. Aside from any opinions we may harbour, and regardless of any ideological or technical arguments, you can rest assured that our focus remains on our customers and the safety and integrity of funds held with Uphold.
What happens at Uphold in case of a chain split?
If Bitcoin forks, it essentially means there will be two competing groups within the network, vying for control, and the strong possibility that a new cryptocurrency will emerge.
As an Uphold member, if a Bitcoin fork does occur, here’s what you can expect:
- As soon as the fork is detected, and until such time as we deem the situation to be stable, Uphold will temporarily suspend withdrawals and trading of Bitcoin.
- Also, because markets in other cryptocurrencies are directly related to Bitcoin, we’ll also suspend trading of Litecoin and Ethereum (but not deposits or withdrawals). We will do everything in our power to restore service as soon as humanly possible, but you can expect this to take anywhere from a few hours up to a few days.
- We will continue to accept deposits, but their processing may be delayed. To avoid replay issues, please ensure to that any funds sent after the fork have already been split, we will only credit the card you send to, any replayed funds on a forked chain will be lost.
- If a deposit is received that would generate a trade while Trading is suspended, we will redirect the funds so they are safe but not traded (e.g., if you send Ethereum to Bitcoin they will be deposited as Ethereum; if you send Bitcoin to a dollar card they will stay as Bitcoin).
- Once the Bitcoin fork is deemed stable, if a new currency is formed, we will implement a way for our members to withdraw their funds in the new cryptocurrency.
As for which version of Bitcoin will be supported by Uphold, we will look to the community for a consensus and will provide a revised update. We are aware of the joint statement by a number of exchanges, which makes sense in the context of ensuring operations during the fork, but we’re equally aware that the principles behind Bitcoin imply that the longest chain effectively becomes - by definition - Bitcoin. As such, and given the uncertainties involved, Uphold reserves the right to name these cryptocurrencies in a way that best serves the interest of our customers, and we will do so after careful analysis of the situation.