Here’s What’s Next for Bitcoin Now That the 2x Fork is Not Happening

So it turns out that scary hard fork attempt that could have potentially split the Bitcoin network in two won’t happen. Now that the forking scare is over, the focus can be moved back to the uncontentious improvements that are coming up for the Bitcoin network.

Over the near term, increased adoption of Segregated Witness (SegWit) by bitcoin wallet providers should eventually create an effective doubling of on-chain capacity. The key wallet service to watch here is Blockchain, as CEO Peter Smith claimed the company accounts for roughly 40{8139253ca906d8d68487924acd2bd6dddc706794ed2ab7afbf93cd9cbc023267} of all on-chain transactions on a somewhat recent episode of This Week in Startups.

Additionally, sidechains and the Lightning Network should be able to free up some of the block space on the main Bitcoin blockchain, while also providing new types of functionality to the system.

 

Finally, a hard-forking increase to capacity is still not completely off the table, and it’s possible a new proposal for such a change could be made in 2018.

Bitcoin’s First Sidechains

A sidechain is a blockchain separate from the main Bitcoin blockchain that is able to use the bitcoin token. When funds are frozen on the main Bitcoin blockchain, they become active on the sidechain. Funds can be moved back and forth between the two chains.

Sidechains are widely viewed as a useful way to try out new features that are too experimental for the main Bitcoin blockchain. Some developers also believe sidechains can impact the scalability debate by offering an opt-in, less contentious method of increasing effective capacity.

RSK is an Ethereum-like sidechain to Bitcoin that intends to launch before the end of the year. The initial version of the sidechain will be mostly controlled by a federation of well-known Bitcoin companies, but the plan is to further decentralize the platform by giving more control to bitcoin miners over time.

Those who choose to opt into the features provided by the RSK sidechain will likely be able to enjoy lower transaction fees — albeit at the cost of decreased security and increased centralization (it’s still too early to predict the exact tradeoffs here). The level of security offered by these sorts of federation-based sidechains is likely somewhere in between the base Bitcoin blockchain and a centralized exchange.

In addition to RSK, Blockstream, which is the company behind the original sidechains proposal, also intends to launch their own federated sidechain, known as Liquid, in early 2018. This particular sidechain is aimed at those who often move funds between bitcoin exchanges.