Why Coinbase’s Segwit2x decision might be the nail in the coffin of the Bitcoin as currency vs. commodity debate.
As many in the crypto world know another fork to the Bitcoin chain in the form of Segwit2x is expected to take place in November. Segwit2x is supposed to provide added speed and cost efficiency to Bitcoin transactions, which has seen increased cost and slower execution as Bitcoin has become more popular. As a signatory to the New York Agreement - the proposal to activate Segwit2x - it was assumed at first that Coinbase, largely seen as the most important exchange - was planning to use the (BTC) symbol for the new Segwit2x chain and a different symbol for the legacy chain. However Coinbase just issued a statement
contradicting that assumption and in fact is planning to call the new Segwit2x chain B2X and keep the BTC symbol for the original chain. This is a very important decision that might have far reaching and ultimately historic implications for how Bitcoin is perceived. Let me explain.
For some time now banks and governments around the world have been conflicted on how to categorize Bitcoin. On the one hand it allows transactions of just about any size between parties like a currency, but on the other hand the accumulation and limited amount of Bitcoin (21 Billion maximum coins) along with its continued use as a sort of ‘safe haven’ investment have given it aspects of a commodity such as gold. As Bitcoin’s use has grown however the cost of transactions and time to complete have exponentially increased to the point where a solution has been needed in order for further growth to continue without these issues serving as bottlenecks. Let’s face it, if it takes hours or even a day for a transaction to complete and if the fees approach or even exceed the cost of a transaction using ordinary fiat then the benefits of Bitcoin are mitigated and it will simply never achieve mass adoption.
There have been numerous solutions proposed for this speed and transaction cost issue but most require a forking of the original Bitcoin chain in order to implement new technology. Most of these solutions include various variations and/or combinations of either increasing the block size, adding sidechains or other structual changes to the original Bitcoin protocol. The problem is that there is a constant disagreement in the Bitcoin community as to which of the proposed solutions is the right solution and therefore no majority has been willing to allow an improved fork of Bitcoin to retain the ‘official’ Bitcoin moniker and symbol. Herein lies the problem.
For obvious reasons Bitcoin owners are afraid of their Bitcoin losing value so they tend to opt on the conservative side and stick with the original, unaltered Bitcoin chain as the authentic ‘original’ Bitcoin and any improved, faster versions as the fork which if not viewed as the ‘real’ Bitcoin inevitably have less perceived value than the original. With Coinbase announcing that the original unmodified Bitcoin will retain the (BTC) symbol and the new improved Segwit2x Bitcoin will get a (B2X) symbol they are signalling to their users that (BTC) is the ‘real’ Bitcoin and therefore it most likely will retain the most value after the split. This is even more probable now that some previous mining supporters of Segwit2X are backing out of their support for the protocol after Coinbase’s announcement. This looks like a repeat of what happened with Bitcoin Cash which at this writing is worth less than 15% of original Bitcoin (BTC) despite having improved speed/transaction costs and thus serves as an example of what we might expect from the (B2X) fork.
With continued slowness in transaction speed and ever higher fees on the original Bitcoin network and with new altcoins becoming more popular that offer higher transaction speeds and lower cost it seems original Bitcoin (BTC) is inevitably on the path to being used as a commodity. Ultimately (BTC) will more and more act as a store of value like gold, that is then transferred to other altcoins or forks such as Bitcoin Cash (or the upcoming B2X) to conduct actual transactions.
As of today there are roughly 10 million Bitcoin users worldwide. If consensus of an improved version of Bitcoin as the authentic (BTC) can't be achieved now it will only get harder as the Bitcoin user base grows ever larger. With Coinbase’s decision to keep the original Bitcoin using the (BTC) symbol it is likely that the original unaltered Bitcoin chain will forever retain the (BTC) moniker and not only Segwit2x but any future attempts at improving the Bitcoin protocol through forking will ultimately fail to be recognized as the 'authentic' Bitcoin. Coinbase's decision rightly or wrongly just might have signaled the end of the debate as to whether Bitcoin is a currency or commodity. Agree or disagree? Please join our community to leave your thoughts and comments by replying below.