Litecoin’s price rose some 20% today following news that BW was signaling for segregated witnesses (segwit), a protocol upgrade which combines added on-chain capacity with fixes that aim to support the Lightning Network and other layer-two protocols.
Price reacted almost instantly to the news, rising from around $9.70 to just under $12, currently seemingly settled around $11.30 at the time of publishing.
Some suggest segwit support on litecoin now stands around 77%, above the 75% threshold required for its activation. Sites tracking segwit support state it currently stands at around 73% over the short and high variance time period of 24 hours.
Segwit support needs to stand at or above 75% for a period of two weeks. Thereafter, another two weeks is given as a grace period to allow non-upgraded miners to upgrade. The incentives, after it becomes clear segwit has activated, are to go with the majority, but in this case it might be more complicated.
LTC1BTC’s founder has come out strongly against segwit while there were rumors Antpool hired litecoin hashrate to reduce segwit’s network share. It is not clear whether they would upgrade if segwit is activated, nor is it clear what would happen if they do not upgrade.
The 75% threshold has been strongly criticized in the bitcoin context due to suggestions that it would force 25% of miners, or it would lead to a chain split. In a soft-fork context it might be slightly different, but there is no soft-fork as far as miners are concerned. For miners, all forks are hard-forks.
We have seen this many times when soft-forks accidentally led to a chain split. We have never seen an intentional chain-split in a soft-fork, but there has been no controversial soft-fork of note either.
What exactly would happen if there is such intentional chain-split is not very clear. The usual advice is to not transact during this period because a re-organization is expected. Moreover, there may be some confusion as transactions seemingly confirm and then unconfirm.
Minority miners would probably lose their blocks. Moreover, keeping the minority chain running might be expensive, but F2Pool would have the ability to cause chaos if they switched their hashrate, or if minority miners add hashrate and gain 51%.
As such, the upcoming few weeks are likely to be an uncertain period for litecoin until it becomes clear what dissenting miners intend to do. If they follow other miners, then it will be as if nothing happened, but if they keep objecting, then we would enter an unchartered territory.
However, the market seems to like the upgrade, probably because it brings attention to litecoin which was significantly overshadowed to the point of forgotten prior to the segwit merger.
It also appears to have support in the litecoin’s public space, but they seem to engage in arbitrary moderation, seemingly lacking public mod logs, therefore it is not obvious how much of that support is genuine or otherwise considering allegations of troll armies.
On balance, as litecoin has nothing else going for it, it is probable the majority supports the upgrade as might be indicated by the amount of hashrate support. An objective poll through token holders vote, however, would have been useful.
The Bitcoin Angle
The more important consideration is how would segwit’s activation on litecoin affect bitcoin’s scalability debate, if it affects it at all? It may be the case that small block supporters conclude if litecoin is going the segwit way – and, therefore, the settlement way – there is no longer any reason why bitcoin should.
They may, therefore, move to litecoin, allowing bitcoin to follow Nakamoto’s roadmap of on-chain scaling, while litecoin applies Finney’s vision, thus allowing both to compete in an open and free market, in a fair way, with experience and history left to judge which path is best.
If that does indeed happen, it would be interesting to see whether r/bitcoin becomes, in effect, r/litecoin. That would be quite a bemusing spectacle, but can’t really be written out.
The flip-side might be that litecoin’s segwit activation leads to a doubling down by small blockers, but bitcoin is very divided, with neither side able to conclude the debate after two years. As such, it appears far more rational for Blockstream to move to litecoin and drop its opposition in bitcoin which clearly seems to want to follow Nakamoto’s roadmap as shown by hashrate’s support levels of BU and segwit.
That wouldn’t be without costs to bitcoin. Any open source project would like more, not less, developers. However, Gavin Andresen and Jeff Garzik, both very capable developers, seem to have currently been sidelined. If bitcoin moves ahead on Nakamoto’s roadmap, they may return to play a prominent role in development once more.
Moreover, if the toxic atmosphere comes to an end, the project might attract new developers or those that left. It might also be able to collaborate with other open source projects, combining forces and talent.
As such, litecoin’s segwit activation might be actually good news as small blockers would no longer have any intellectual standing to change Nakamoto’s roadmap when they can compete in a free and open market and prove their worth just as Nakamoto did his (or hers/theirs/whatever).
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