Home / Markets News & Opinions / BitMEX Clarifies Position on Bitcoin Hard Forks With SegWit2x Looming

BitMEX Clarifies Position on Bitcoin Hard Forks With SegWit2x Looming

Last Updated March 4, 2021 5:00 PM
Lester Coleman
Last Updated March 4, 2021 5:00 PM

BitMEX, a cryptocurrency exchange, has clarified its position on hard forks considering the pending SegWit2x hard fork in November. The SegWit2x hard fork is intended to provide a minimal patch to resolve the conflict over activating SegWit and increase the block size to allow faster transactions on the bitcoin blockchain.

In the interest of protecting customer assets, BitMEX noted in a blog  that it requires the following measures of hard forks:

  • Strong two-way transaction replay protection, enabled by default, so that transactions on each chain remain valid on one another.
  • A clean break so that the new chain does not become removed by the original one.
  • A modification to the block header so that all wallets are required to upgrade to follow the hard forked chain.
  • A new address format that prevents users from inadvertently sending coins to a wrong chain.
  • New P2P network magic bytes that provide both coins a reliable node network.

Wipeout protection and robust replay protection are deemed critical. BitMEX, which has no plan to access or keep the coins, will not support a hard fork that does not follow such measures.

BitMEX considers the administrative overhead required for distributing hard forked coins, including Byteball/Lumens bitcoin-based distributions, prohibitive, and will not maintain balances of hard forked coins.

Discretion Over Forked Currency

BitMEX holds discretion over any forked currency. It could snap users’ margin balances when the fork occurs, should BitMEX choose to distribute, but it does not guarantee its safety. Those users concerned about balances are advised to withdraw their funds before the fork occurs and take responsibility for the split.

The SegWit2x proposal to increase the block size is not compatible with the current bitcoin protocol, the blog noted. Hence, a new coin could be created.

Not Positioned To Support SegWit2x

Supporters of the SegWit2x proposal hope the new coin becomes known as bitcoin, but they cannot guarantee this will happen. Instead, traders and investors will decide which coin has the highest value. For the process to work seamlessly, robust two-way transaction replay protection is needed.

The SegWit2x proposal does not include this protection, enabled by default, BitMEX noted. Hence, BitMEX will not be in a position to support SegWit2x. It will not support B2X distribution, and it will not be liable for any B2X it receives. The policy also applies should the SegWit2x chain hold the majority hash rate.

Users will have to take it upon themselves to withdraw bitcoin form BitMEX prior to the fork in order to access B2X, the blog noted.

BitMEX regards all contentious hard fork tokens as altcoins, and the .BXBTJPY and .BXBT indices will not change and will not include B2X.

Also read: Bitcoin exchange Bitfinex lists SegWit2x chain split tokens

Community Wary of SegWit2x

The bitcoin community has not met the SegWit2x proposal with open arms. Last week, Bitcoin.org threatened to publicly denounce companies that support SegWit2x and have not committed to treating the competing blockchains as separate cryptocurrencies in the event of a chain split.

Blockchain banking and payment platform Bitwala announced in August it would not follow SegWit2x without Bitcoin Core’s support.

The Bitfinex exchange has listed SegWit2x chain split tokens to allow traders to speculate on the future outcome of the proposed November hard fork. Traders will be able to create chain split tokens– dubbed BT1 for the original chain and BT2 for the SegWit2x chain — by depositing BTC into the token manager.

Coinbase has announced it will support both competing blockchains following the proposed SegWit2x hard fork.

Featured image from Shutterstock.