On October 3, Litecoin creator and former Coinbase executive Charlie Lee revealed that he has officially advised the Coinbase development team to maintain the “BTC” and “Bitcoin” moniker for the original Bitcoin blockchain in case the SegWit2x hard fork occurs in November as planned.
For many years, Lee has served Coinbase as the director of engineering and the head of its flagship cryptocurrency trading platform Global Digital Asset Exchange (GDAX). On June 9, Lee resigned as the Coinbase director of engineering, to focus on the development and growth of Litecoin. After leaving the company, Lee has continued to advise the Coinbase development team and assist engineers at Coinbase and GDAX.
SegWit2x and the Difficult Position of Coinbase and Cryptocurrency Exchanges
For cryptocurrency exchanges including Coinbase and GDAX, the November SegWit2x hard fork, a proposal to increase the Bitcoin block size to 2MB, is specifically difficult to handle because unlike the Bitcoin Cash and Ethereum Classic hard forks, Segwit2x is an upgrade to the current codebase of Bitcoin.
If SegWit2x had not been a contentious hard fork and the entire Bitcoin ecosystem ranging from developers to users agreed on the update, SegWit2x would not lead to the emergence of yet another fork of the cryptocurrency. But, because users, miners, developers, and businesses disagree on the necessity and implication of the SegWit2x hard fork, if the fork is executed in November, it would inevitably lead to the creation of the SegWit2x bitcoin.
The problem for Coinbase and other cryptocurrency exchanges is that the 2x hard fork cannot be handled the same way as Ethereum Classic and Bitcoin Cash. More to that, the issues become more complicated if bitcoin remains as the majority blockchain. In that case, SegWit2x would have to operate under a different moniker to BTC and bitcoin, like Bitcoin Cash. Coinbase also cannot simply reject the integration of support for SegWit as it would likely lead to lawsuits from its clients.
“Choosing to support only one fork (whichever that is) would cause a lot of confusion for users and open them up to lawsuits. So Coinbase is forced to support both forks at the time of the hardfork and need to let the market decide which is the real Bitcoin,” added Lee.
Although the SegWit2x proposal has the support of the majority of hash power and mining community, it is still at an early stage to justify whether SegWit2x could evolve into the majority Bitcoin blockchain. Additionally, in the bitcoin and the cryptocurrency markets, users, traders, and investors justify the value and the market cap of cryptocurrency networks, not the miners and businesses. Hence, even if the majority of miners migrate to the SegWit2x chain, there is a higher probability that the original bitcoin blockchain would remain as the majority chain.
“Thankfully, Bitcoin doesn’t work this way. It’s the people who use the coin that gives it value, and miners will mine the coin that makes them the most money. And right now, pretty much all the Bitcoin Core developers and a large part of the community including a lot of prominent figures in this space have come out against this hardfork,” Lee explained.
Instead of predicting which of the two blockchains will emerge as the majority chain, Lee advised the Coinbase development team to pursue the integration of support for SegWit but with a different moniker. If SegWit2x turns out as the majority chain, Coinbase can potentially utilize the BTC and bitcoin moniker to support the SegWit2x chain.
“Although Coinbase signed the NYA agreement, I do not believe that this agreement binds them in any way with respect to how to name the separate forks. For practical reasons, the BTC symbol belongs to the incumbent, which is the original chain. This is because there will be no disruption to people who are running Bitcoin Core software and depositing/withdrawing BTC to/from Coinbase and GDAX.”