Survival school: how to avoid bitcoin losses during Bitcoin Gold and SegWit2x hardforces

Over the next 30 days Bitcoin will undergo two hardforces. On October 25, Bitcoin Gold (Bgold) will separate from Bitcoin and create a new cryptocurrency that can be mined on graphics processing units (GPUs). A few weeks after that, a large group of companies wants to make a hardforward under the SegWit2x plan defined in the New York Agreement (NYA), which could lead to another cryptocurrency.

If all goes as described above, in less than a month there will be three blockchains independent of each other and three different coins. One blockchain will adhere to the current Bitcoin protocol (BTC, or B1X). The second blockchain will follow the Bgold (BTG) protocol. The third blockchain is the SegWit2x (B2X or BTC) protocol.

Despite the rather widespread (and irresponsible with the current balance of power) opinion that these hardforces are essentially the same, there is a huge difference between them, and the situation after the second one can be unpredictable. SegWit2x was not intended to create an altcoin, but rather to update the Bitcoin protocol, so the activation of the hardfork will not just split the blockchain, but will start a “battle for the true Bitcoin,” the winner of which is not predetermined at all.

SegWit2x has a significant hash rate advantage (now about 85%) and major infrastructure companies (BitPay, Coinbase, Blockchain.com, Xapo, BTCC, and others) on its side. On the Bitcoin Core side, there is an established development team, the largest number of “full” nodes in the network, some business, and about 15% of the hash rate capacity of today’s network. Private users will have to decide for themselves which wallet to use and which of the two resulting blockchains to consider as real Bitcoin. The winner of this confrontation may not be determined immediately.

The good news is that the private keys giving access to the current BTC will be valid in all three blockchains. Therefore, if you keep the private keys of your bitcoins at the time of the fork, you will be able to claim your BTC, BTG and B2X (B1X) in all networks. However, the bad news is that hardforces can cause confusion and be quite risky. If you are not careful, you could lose all your coins at once.

This article collects some basic things you can do to protect your funds during upcoming hardforces and make sure you have both BTC, BTG and B2X (B1X) at your disposal by the end of next month.

What to do before the fork

First of all, keep in mind that branching the network can be very risky. Especially in the case of such a controversial hardfork as SegWit2x. Although nothing is clear at the moment, any day there could be some drama that could lead to a sharp drop in the cryptocurrency. If you do not want to get caught in the crossfire, then make sure that you keep in bitcoin the amount of money that you are theoretically ready to part with. And if it is extremely important to you to keep them at all costs, convert the part you need into fiat currencies and weather the storm in them. However, be prepared for the fact that you will have to “bite your elbows” after losing the opportunity to earn on hardforces. Yes, it is also possible.

If you want to save your bitcoins and get your first “bonus” – get ready for October 25th – on this day the alternative cryptocurrency BTG will appear. Each BTC owner will receive the same amount of BTG.

If you store your bitcoins on an exchange or any other platform that also stores your private keys, you should not expect to get your BTG, B2X (B1X) or even BTC with a hundred percent guarantee. No one can be sure what will happen during or after each of the hardforces, and especially the second one.

If you want to continue storing your coins at such sites, at least make sure that the particular service you choose has issued an official statement regarding its policy during the hardforces. If you can’t find the information in public sources, try contacting the site’s representatives.

However, the best thing you can do to get unlimited access to your BTC, BTG and B2X (B1X) is to keep your private keys yourself. Then you don’t have to be at the mercy of any third party.

If you are currently storing your bitcoins in a marketplace, it is worth it to get them out of there into your own wallet. Which type of wallet to use – it’s up to you. But for this particular purpose, it is worth using a service that allows you to quickly get direct access to your keys. In general, any wallet that allows you to store your private keys will do. With that in mind, here are some basic solutions:

• If you are not going to do anything with your BTC, BTG or B2X (B1X) in the near future and just want to keep it as a long-term investment, a “paper wallet” is fine for this purpose. It’s worth noting, however, that this method can only be considered safe if you strictly follow the precautions described here.

• The security of traditional wallets depends on the security of your computer or phone. Since most phones and computers are quite vulnerable, these wallets should not be used to store large sums.

• Full node” wallets such as Bitcoin Core or Bitcoin Knots; would be the most secure choice. However, these wallet types are more resource-intensive compared to most other wallets.

• Another option is to purchase a hardware wallet. However, it is a bit more difficult to get direct access to your keys through such wallets. In addition, it is not entirely clear whether these wallets will give access to BTG. For B2X (B1X), too, few of them have yet given guarantees. While hardware wallets will keep your private keys safe, getting all three coins in the future can be a very interesting quest.

Whatever you choose, make sure you have a copy of your private keys. Many wallets offer to create it in the process of installation. Do not neglect this step.

After the Bitcoin Gold fork and before the SegWit2x fork

Sometimes the Bitcoin Gold fork is referred to as a “friendly fork”. Mostly because it has no intention of declaring itself “real Bitcoin,” but also because of plans to implement full transaction repeat protection. This means that you can not accidentally send your BTGs when you were going to transfer BTCs (and vice versa). That way, even after you’ve spent your BTCs, you can still access your BTGs.

Remember that you can take your time to access your BTGs. Don’t try to do this before the week is up unless you intend to sell them immediately. The most conservative option is to ignore this fork until the SegWit2x branching happens. Then you only have to go through the process of getting new coins once instead of twice. However, this requires strong nerves, because the rates of all cryptocurrencies at least until the end of November will be more volatile than usual.

After the SegWit2x fork.

Unfortunately, with the second fork, things could be much more complicated. First, supporters of SegWit2x consider it an upgrade of the Bitcoin network itself. Accordingly, they are not going to give the new network a new name. Some of them plan to call or post the new coin as bitcoin and BTC. They can also call the existing BTC as “B1X” or something else.

Of course, each coin will have its own exchange rate. Since different exchanges will call & nbsp; “BTC” different coins, the rate may vary accordingly depending on the site. Therefore, you should not buy or sell any coins called “BTC” unless you are one hundred percent sure what s the cryptocurrency is.

In addition, the SegWit2x hardfork will take place without full transaction repeat protection (because, as stated above, it will be a “battle for true Bitcoin”). This means that after the fork, BTC and B2X (B1X) transactions will look identical, and will be valid in both blockchains. The SegWit2x client (BTC1) plans a “voluntary” protection against duplication, and the node owner can apply it at his discretion.

So, if you spend your coins in a BTC blockchain, it could cause you to accidentally spend an “equivalent” amount of B2X (B1X)  in another blockchain. It turns out that BTC and B2X (B1X) are inseparable until a final winner in this dispute is determined.

To be on the safe side, don’t spend your coins immediately after the SegWit2x fork. First, you need to “split” them as described below.

Some light (or mobile) wallets will display the blockchain that has more hashing power. This means that the balance displayed in them can refer both to BTC and B2X (B1X) – it will be impossible to distinguish them.

For your own safety you should not accept any payments via easy wallets because you may receive B2X (B1X) instead of BTC or vice versa. At the very least, you should make sure you know for sure what currency your wallet balance is displayed in.

The wallet developers Electrum and GreenAddress are running on Bitcoin Core, so it doesn’t matter which network  has more hashing power (chain length in terms of complexity). If you use full-node wallets, such as Bitcoin Core or Bitcoin Knots, there is no contradiction in those either – they can only work with one blockchain.

Depending on the hashing power of each network, transaction confirmation times may vary (in the Bitcoin Core blockchain, they will be slower than usual) and fees may increase. In addition to the speed of block mining, this will depend on the number and activity of users in each network. If you remember the situation after the Bitcoin Cash hardforge on August 1, there will probably be a long lull, so there will be no blockchain congestion.

Get your coins

If all three chains survive and you control your private keys, you will be able to access both your BTC, BTG, and B2X (B1X) around mid-November. Getting BTG should be easy enough, given that some wallets will support the new coin. Most likely, you will just have to enter your private keys (or the passphrase to them) into such a wallet.

However, this process does present some security and privacy risks. While it is impossible to say exactly what they will be, as it is not clear which wallets will support BTG (so far no certainty that such wallets will be, except for a wallet from the developers themselves). But in general, you should first move your BTCs to a new wallet before trying to get BTG.

Receiving and using your B2X (B1X) and BTC can be a bit more complicated, mainly because there is a risk of repeating transactions. For this to be possible, B2X (B1X) and BTC must be separated from each other.

Some wallets can split coins for you, but it is not clear which ones will be able to do this yet. In addition, exchanges are more likely to start offering coin splitting services and think of all the complexities for you. You will only need to send your BTC or B2X (B1X) to the exchange, and the service will credit your account with both BTC and B2X (B1X). There may be other solutions for the separation of coins. Wallets supporting both blockchains may be available by mid-November. Most likely you will need to update your wallet or download a new one;

Keep in mind that both Bitcoin Core and the full BTG wallet and BTC1 most likely use an almost identical code base. This means that when installed on the same operating system (especially Windows) they can conflict with each other, up to mutual overwriting of data, which can lead to malfunctions and even loss of keys. Therefore, all three wallets must be installed on different computers or virtual machines. With similar “easy” wallets, conflicts are much less likely, but still possible.

The bottom line

Let’s briefly summarize how to secure your bitcoins under both hardforces:

1. By October 25, make sure you have full control over your private keys. Preferably store them offline or in a Bitcoin Core wallet (or other “full” client) that independently checks incoming blocks and transactions.

2. If you want to sell BTG immediately, transfer your bitcoins in the original blockchain to the new wallet (not to another address in the same wallet) after the Bitcoin Gold hardforge.

3. Load the private keys from your old wallet into a trusted Bitcoin Gold wallet (preferably from the development team) and transfer BTG to wherever you want. To be completely safe, it should be installed on another computer or in a virtual machine to avoid various bugs.

4. Continue to keep private keys from your new bitcoin wallet until the SegWit2x hardfork in mid-November.

5. Immediately after the SegWit2x hardforge, avoid any transactions with your coins or buying or selling “BTC” on exchanges or exchanges, regardless of which blockchain you (or the owners of the service) consider “real bitcoin”.

6. When the situation clears up – first of all, wait for official reports from developers, platforms, and services – and transactions begin to go through without significant delays (which can take several days, and possibly more), transfer the bitcoins in Bitcoin Core again to the new wallet.

7. Load the private keys from your previous wallet into the SegWit2x wallet. To be completely safe, it is also advisable to install it on another computer or virtual machine;

You can now independently manage the coins in all three blockchains, if there are still three of them.