I've had a hard time grasping what's happening, but I think I finally get the picture. I thought it would be helpful to explain in simple terms what's going on. The situation is quite complicated with SegWit2x entering the picture so this is long but it should still be simple with minimal confusion due to interchanging terminology. If you like it please leave a comment to boost it so that other people can read it too.
Bitcoin blockchain quick overviewAs most everyone knows bitcoin uses a blockchain, and all clients follow the same set of rules to ensure that the chain is valid. If someone breaks the rules, like sending a transaction without a fee that the rules require a fee for, then all clients will just ignore it. Changing these rules requires that people change their bitcoin software, which is called a hard fork. This obviously results in two chains since at least a little of the chain that uses the old rules will continue since not everyone will want change their software. The old chain can get stalled quite badly since it takes a long series of blocks for the difficulty to adjust and if nearly all of the mining power switches away from the old chain then the old chain gets stalled.
Definitions:- User activated soft fork (UASF): When just the miners change something in the blockchain that doesn't break the rules. Regular clients don't have to change software. 51% or more miners enforce a new rule and then the remaining 49% have to switch to the new mining software else their blocks won't be accepted anymore and they can't make money.
- SegWit (Segregated Witness) BIP141: A soft fork method of increasing the blockchain capacity by about 4 by changing how transaction signatures are stored without changing the 1MB block size limit. Already adopted by Litecoin.
- SegWit2x: An eventual hard fork that increases the block size limit to 2MB, in addition to having SegWit features. It enables itself on July 21st and when 80% of the SegWit signal is present. Initially it is a soft fork that will compete with SegWit / BIP148. By design, after about 3 months it will increase the block size which will be the hard fork, and everybody not just miners will be affected.
- Bitcoin XT, Bitcoin Classic and Bitcoin Unlimited: Other proposed methods of increasing the block size 1MB limit.
- SegWit signal (bit 1): A mark left in a block meant to signal that that miner supports SegWit. Introduced with BIP 8. It exists purely for statistics reporting for future client decision making.
- BIP8: A method of activating the SegWit UASF where miners switch to SegWit after the SegWit signal reaches 95%. It Expires in November 2017.
- BIP9: A version of BIP 8 that does not expire.
- BIP148: A method of pushing all miners to adopt SegWit clients (or at least signal the SegWit flag) by only needing 51% to go along with it. This is like a 51% attack. It triggers on August 1st and BIP 148 miners will not accept blocks that do not have the SegWit flag present. This is necessary because the SegWit signal isn't reliably reaching the 95% needed for BIP 8/9. I think that once SegWit is activated on the chain BIP 148 is not needed and disables itself.
- BIP 149: A feature that allows miners to turn on SegWit when they want to rather than have it happen automatically based on the software's hard coded trigger. This may be the same as SegSignal.
- NYA string: A marker left in blocks mined by SegWit2x software, potentially used by SegWit2x miners to identify their blocks and reject non SegWit2x mined blocks thereby creating a soft fork. This is the first half of SegWit2x adoption. Correction: It's the same concept as only allowing mining of SegWit compliant blocks once SegWit goes live. I'm still unclear about how NYA / Bit 4 are to be used concerning fork enforcement.
- BIP91 or Bit 4: Correction: It's the standardized version of NYA, put in to the proper version field. It creates the unknown blocks being mined warning. It's the same as NYA but newer clients do this in addition to NYA. It may be an additional activation method of SegWit2x miners or fork enforcement method of SegWit2x when it activates.
- btc1: The name of the client miners are using to push SegWit2x.
- replay: An issue that can cause coins for the other chain (other coins) to be spent without your knowledge along with the coins that you intend to spend from the blockchain that you're using if there is a split in the blockchain. A specialized client that's aware of the split is needed to avoid this.
- ASICBoost: A patented mining performance optimization of up to 30% that can be done overtly such that such minded blocks are publically visible, or covertly. Covertly mined blocks may hide from the patent but are not compatible with SegWit, creating resistance to SegWit from some miners.
- Bitcoin Cash (BCC): This in an altcoin that's trying to take advantage of the confusion surrounding August 1st to start their own fork. They're just trying to make their own fork of Bitcoin that will be different from both SegWit2x, and classic Bitcoin (which will come in to existance after the SegWit2x hard fork around November).
The future Bitcoin scailing issues explainedTo get to the point, competing segwit and segwit2x are being planned for the Bitcoin network. This allows the Bitcoin network to scale to a larger number of transactions by allowing the Blockchain to grow at a faster rate, which is currently limited by fees, and a hard 1MB per block limit which limits the blockchain size to a bit over 50GB per year. It will also raise the system requirements for running a full node, and more people running full nodes is important for the security in distribution of the Bitcoin network. Segwit2x is a hard fork after an initial soft fork. Your bitcoin software will have to be changed if you want to go along with it. Segwit is a soft fork. But this is the second step in the plan. Both BIP148 leading to SegWit and SegWit2x's initial soft fork leading to a hard fork are two step strategies.
Note: SegWit2x is now adopted in the mining world. The BIP148 related things are probably no longer an issueBIP148 and August 1st soft chain forking explainedThe first step involves BIP148 which operates like a 51% attack on August 1st and it involves the SegWit support flag in blocks. The whole purpose of BIP148 is to use 51% of miners to force >95% of miners to use SegWit clients so that SegWit can activate. Miners and mining pools are encouraged to upgrade to a special client that supports BIP148 & SegWit that puts flags in mined blocks which signal SegWit support. All SegWit supporting miners leave the SegWit flag be they BIP148 or older BIP8/9. Non BIP148 clients ignore this flag.
On August 1st 2017 this flag will become mandatory for users of the BIP148 mining clients. These miners will no longer accept blocks mined by non BIP148 clients. This a strategy to force the remaining minority of miners to switch to BIP148 clients. If a majority of miners are BIP148, then all of the blocks mined by non BIP148 clients will not be accepted by the BIP148 mining majory and there will be zero profit in mining, so they will switch over to BIP148 or give it up. The BIP148 minority situation: If a minority of miners adopt BIP148 miners, then there will be two chains, with BIP148 miners only accepting previous blocks mined by other BIP148 clients, and the non BIP148 clients choosing the longer chain which isn't BIP148. If this happens eventually the BIP148 miners will give up and switch back to the non BIP148 client.
SegWit2x enters the picture creating another possible fork situationThere exists another problem. BIP148 only exists to speed up the adoption of SegWit by forcing all miners to mine with SegWit clients. If SegWit is enabled before August 1st because 95% or more BIP8/9/148 clients are mining, then BIP 148 and August 1st is no longer a thing since its purpose has occured already. The problem is that the BIP148 fork also won't happen if SegWit2x (in initial soft fork mode) becomes the dominant chain, since SegWit2x also enables SegWit. So the soft forked chain won't be BIP148 and original non BIP148, it could be SegWit2x in a minority competing non SegWit2x (normal and BIP8/9/148) clients, just like BIP148 could be a minority competing with non BIP148.
The full impact of SegWit2x successfully soft forking leading to the hard forkThe second step happens after successful adoption of the SegWit in the mining community. When SegWit is activated, it could have happened because 95% SegWit flag was reached, or because August 1st came and BIP148 forced the 95% needed for SegWit adoption, or because July 21st and 80% of the SegWit2x flag or flags was or were present and SegWit2x activated, which also activates regular SegWit. SegWit2x is the big question here and it can activate at any time after the 21st. It's actually a much bigger deal than the non SegWit2x related August 1st issue. The initial adoption of SegWit2x isn't the problem since it's essentially the same as SegWit. The problem is that this SegWit2x mining software eventually enforces a hard fork. If SegWit2x wins the soft fork, then after about 3 months that software will enforce a hard fork and allow 2MB blocks. All users of bitcoin will have to change their software or continue using the classic wallet, but the classic wallet will be stalled and it will take ages to confirm a transaction because most of the mining power left and because it takes a long time for difficulty to adjust back down to 10 minute blocks. edit: Maybe I didn't make it clear, but if you continue to use the classic wallet, in addition to the initial slowness, you'll be on a different forked network that's completely separate from the new SegWit2x one. Also, with the hash power lacking on the classic network, it will be easy for interests behind SegWit2x to do a 51% attack and stall the classic network and discourage anyone trying to stick with classic Bitcoins. edit:
It looks like we may be getting SegWit2x, and if it sticks then we'll get a hard fork around October/November which may be here to stay as two different networks, so you'll want to have BTC in your wallet before the hard fork date so that your coins will exist on both sides of the split, with you having both original and SegWit2x coins.
There is also a 336 block grace period after SegWit2x activates (after the 80% tigger) before the SegWit portion of it activates. So BIP148 could still activate on August 1st if SegWit2x happens to still be in the grace period phase. So that could lead to a soft fork between SegWit2x and BIP148. If both BIP148 and SegWit2x somehow had shorter chains than the classic miners' chain then a 3 way fork would result, but I don't see how that could happen. The SegWit2x chain should come out as the winner since it already has around 80% of the hash power behind it. I don't see why this is a big deal since there should be a clear winner and only BIP148 miners or clients who downloaded the special BIP148 client would get stuck on the BIP148 chain.
Forked blockchains and the potential for a stalled or split networkIf BIP148 fails and is a minoriy after August 1st, or if SegWit2x fails is a minority after it activates, then the possibility of having the blockchain soft forked two ways exists! A three way fork is not possible since BIP148 disables itself when SegWit activates, and if SegWit2x wins the soft fork it will enable SegWit which will disable BIP148. All these complicated things have lead up to this simple fork situation that everyone is talking about! It's unlikely but if two chains exist with one not becoming the clear winner then it'll cause havoc to all exchanges and regular wallet users as they won't know what coins they are spending or receiving until the situation is cleared up. It could be between BIP148 and classic or between SegWit2x and everyone else.
Multiple coins could temporarily exist after a forkAnother thing worth mentioning is that if the August 1st BIP148 adoption fails, or if SegWit2x adoption fails and two chains result, people with modified clients or who are otherwise able to select which blockchain to participate in will have two sets of coins to spend, and will be able to choose which ones to spend. People could potentially be cheated by receiving coins on one chain which ends up dying and having those coins disappear, while the sender still has the same coins in the other chain. During the split even if BIP148 wins the old chain will likely keep going for a few blocks so don't do any transactions for the first hour or two after the August 1st trigger!
I hope that helps make things easier to understand! Please let me know about any mistakes and please comment!
Here are some sites that are tracking the progress or the markers that the particular miners leave in the blockchain for the potential changes:
This ones shows a 100 block average and a 1000 block average. You can see BIP 91 (Bit 4) adoption really surging in the last few days (2017-7-18) due to the large 1000 block vs 100 block difference:
https://www.xbt.eu/ This site shows a regular graph based on 2016 blocks:
https://coin.dance/blocks/proposalsNote that the SegWit2x (btc1) client does not necessarily signal SegWit (Bit 1) until SegWit2x activates with its own trigger. That's why SegWit shows lower on the graph than SegWit2x (NYA & BIP91).
Sources:
http://www.investopedia.com/terms/s/segwit-segregated-witness.asphttps://bitcoinmagazine.com/articles/bip-148-and-bip-149-two-uasfs-activate-segwit/http://www.coindesk.com/explainer-what-is-segwit2x-and-what-does-it-mean-for-bitcoin/https://medium.com/@jimmysong/uasf-bip148-scenarios-and-game-theory-9530336d953ehttps://medium.com/@jimmysong/segwit2x-what-you-need-to-know-b747e6326266https://www.reddit.com/r/btc/comments/6i74o4/eli5_why_does_segwit2x_activate_segwit/https://bitcointalk.org/index.php?topic=2027513.0There is no restriction on copying or publishing what I wrote here.
Edit 2017-7-17: added and corrected things concerning the difference between segwit and segwit2x, BIP 8/9, added sources, and added definitions.
