Many customers have asked how we plan to approach the bitcoin fork that is expected to occur in mid-November 2017. We'd like to take this opportunity to explain what we are doing in preparation, and outline what our users should expect.
At Bread, we have two main objectives when making these types of decisions: 1) Keep customer funds safe, and 2) Give customers as much choice as possible. We believe these are reasonable and worthy goals, and they inform everything we do. They align with the core principles of controlling your own private keys: security and freedom. It is our great privilege to offer these benefits to our users.
Earlier this year, Bread made multiple announcements leading up to the Bitcoin Cash (BCH) fork, and we stayed true to our word to both keep customer funds safe and give customers a choice. Within 2 weeks, for those who did not wish to wait for a full-featured BCH wallet, we provided customers with a tool that could move their BCH to another wallet of their choosing.
This is the first of many posts regarding the SegWit2x fork (henceforth to be referred to as simply 2x for brevity). This fork is much more complex than the last, because it will likely not have built-in replay protection. This means that after the fork, any transaction sent on one of the two chains may or may not also be sent on the other chain, leading to confusion between parties and the potential loss of funds on one of the chains.
One of Bread's greatest strengths is its flexibility and ability to connect directly to the bitcoin network. Unfortunately, this flexibility can cause confusion for users who don't understand the issue at hand. As an SPV wallet, Bread performs a high-speed but simple verification to determine which chain has the most cumulative proof of work. However, it does not check or enforce rules regarding block size, which means SPV wallets (as designed today) will follow whichever chain has the majority of hashing power, regardless of the details that separate the two chains that will soon exist.
What this means is that unless you tether your app to a node of your choosing (a powerful feature that is available within the app today), your Bread will end up interacting with whichever chain has the most miners. If the majority of the mining power switches to the other chain, your wallet will also switch to follow that chain. This may not suit you if the hashpower is dedicated to a chain you do not wish to follow, or if the hashpower flips over to the minority chain at some point in the future.
Even with these issues at hand, Bread is still a great place to keep your coins during a fork, as we’ll explain in more detail below.
What should I do?
Keep in mind this important fact: Bread is a tool to access the blockchain—where your funds actually are stored—and you alone hold the private keys to access those funds. As long as you do not make transactions during the period of uncertainty, you will have the same number of coins on Chain A and Chain B as you did before the fork. The safest course of action is to refrain from making transactions until the fork confusion is resolved. This is our #1 recommendation to users.
What if I need to make a transaction?
If you absolutely must make a transaction during this time and have a preference for which chain you interact with, we highly recommend that you first tether to a node that represents your personal preference (whether the original chain or the new 2x chain). Depending on how the situation develops, we may include a user-friendly option that tethers to a list of known nodes on each chain to make the connection more robust.
Also, if replay protection is not fully implemented, you must be aware that you are highly likely to be sending both sets of coins to the receiver. If the receiver does not recognize or support the coin from the second chain, then this may result in a financial loss. Please note that this replay issue is not unique to SPV wallets such as Bread, and is a risk to all bitcoin users throughout the industry.
Why isn’t Bread picking a side?
We are picking a side. We side with our users. And even though many of our users strongly disagree with one another about the merits of Chain A or Chain B, it is not our job to tell any of them what to think. Bread is comprised of a group of individuals, any of whom will gladly give you their personal opinion on the matter, but as a company we have to stay true to our two promises: Keep customer funds safe, and give customers a choice.
Second, if both chains survive, we are offering an additional benefit to our customers that they would not be able to take advantage of if they use a wallet that gives them no choice: The option to access the coins that you do not want so that you may exchange them for more of the coins that you do want. What we learned from the BCH fork is that 100% of our customers wanted access to their BCH, whether to keep it, or to sell it. We therefore believe that it is our duty to provide as much technical support as possible to permit access to either chain.
So what next?
The context surrounding the 2x fork is quickly evolving and every day individuals and companies make new announcements and endorsements. It is conceivable that the fork will fail to materialize, but as it stands today, we anticipate the split is highly likely to occur.
Because you own your private keys within Bread, we believe it is one of the safest ways to store coins during forks such as this one. As the fork draws closer, we will increase the rate and detail of our communication and update our users on any related developments regarding new features designed to address the fork. Additionally, we are always looking for feedback from our customers and the community at large about how we can handle this better. Please reach out to us on Twitter.
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