Source: LayerTwo Labs

From a high of $69,000, the entire cryptocurrency market has entered a bear market that has lasted nearly 2 years, following the pace of Bitcoin’s decline.

As we approach the Bitcoin halving in 2023, people are once again expecting the cryptocurrency market to go bullish under the leadership of Bitcoin in 2024, just like the previous 3 bull markets.

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However, history will not simply repeat itself, as Bitcoin’s development curve has entered a flat zone, it needs new catalysts to push it upward.

The block reward for miners will decrease from the current 6.25 BTC to 3.125 BTC. With the current block reward of 6.25 BTC, according to BTC.com data, the current mainstream Bitcoin mining machines shut down when the price is between $14,000 and $20,000. After the halving, in the absence of an increase in hash rate and significant changes in transaction fee income, the price of Bitcoin needs to reach over $40,000 for miners to break even and have the incentive to maintain the Bitcoin network.

And with each bull market, the price increase of Bitcoin has been shrinking, while the hash rate continues to increase. In fact, Bitcoin has underperformed many large US stocks since 2018, with a price increase only close to that of Amazon and Netflix, while Apple’s increase is three times that of Bitcoin, and Tesla’s increase is more than eight times.

After Bitcoin mining ends, how to keep miners in the network to maintain Bitcoin security, this question was raised shortly after the birth of Bitcoin. Increasing transaction fees is obviously not acceptable, and increasing transaction volume to increase miner income is the only way. Therefore, attempts to scale Bitcoin have never stopped, and Bitcoin hard forks as a way to “find a better Bitcoin” continue to occur.

Bitcoin forks are defined as changes to the Bitcoin network protocol or “when two or more blocks have the same block height” occur. Forks are usually done to add new features to the blockchain to reverse the impact of hacks or catastrophic errors. Forks affect the validity of network rules and require consensus to resolve, otherwise there will be a permanent split, resulting in a hard fork.

According to the different objects and purposes of hard forks, hard forks can be divided into several types.

1. Hard Forks of Bitcoin Clients

1. Bitcoin XT

Bitcoin XT is one of the earliest well-known hard forks of Bitcoin, initiated by Mike Hearn. Before the actual fork, Mike Hearn proposed BIP 64[2] on June 10, 2014, which suggested adding “a small P2P protocol extension to perform UTXO lookups given a set of outpoints.” On December 27, 2014, Hearn released version 0.10 of the forked client XT, which included the changes of BIP 64.

In August 2015, Bitcoin XT adopted BIP 101 released by Gavin Andresen, which changed the block size limit to 8MB/block, and the TPS of Bitcoin XT increased to 24. Bitcoin XT initially achieved success, with over 30,000 to 40,000 nodes running its software in the late summer of 2015. However, just a few months later, the project lost interest from users and was basically abandoned.

2. Bitcoin Classic

When Bitcoin XT declined, some community members still wanted to increase the block size. In response, a group of developers launched Bitcoin Classic in early 2016. Unlike XT, which proposed to increase the block size to 8MB, Classic intended to increase it to only 2MB.

Similar to Bitcoin XT, Bitcoin Classic initially attracted people’s interest, with a range of nodes from about 27,000 to 200,000 in several months of 2016. The project still exists today, and some developers strongly support Bitcoin Classic.

3. Bitcoin Unlimited

Since its release in early 2016, Bitcoin Unlimited has always been a mystery. The project’s developers released the code without specifying what type of fork it requires. The uniqueness of Bitcoin Unlimited lies in allowing miners to decide the size of their blocks, and nodes and miners limit the block size they accept, with a maximum of 16MB. This situation changed in November 2016 when the project shifted to a solution that transferred the restrictions of software rules to miners and nodes. The complexity of the rule changes essentially prevented Bitcoin Unlimited from being accepted.

2. Hard Forks of Bitcoin

This is the most common type of hard fork of Bitcoin, creating a new blockchain network by changing the network rules and sharing specific transaction history with Bitcoin.

The hard forks that split Bitcoin are listed below by date/block:

• BCH – Bitcoin Cash Original Chain, Fork Block: 478558, Date: August 1, 2017, Customers received 1 BCH for every 1 Bitcoin they held

• BTG – Bitcoin Gold, Fork Block: 491407, Date: October 24, 2017, Customers received 1 BTG for every 1 Bitcoin they held

• BSV – Bitcoin SV, Fork Block: 556766, Date: November 15, 2018, Customers received 1 BSV for every 1 Bitcoin Cash they held

• XEC – Fork Block: 661648, Date: November 15, 2020, Customers received 1 XEC for every 1 BCH they held

1. Bitcoin Cash (BCH)

The first hard fork of Bitcoin occurred on August 1, 2017, giving birth to Bitcoin Cash (BCH). This fork was initiated by the Bitcoin Unlimited team mentioned above, with the support of Bitmain, the world’s largest mining equipment manufacturer. This fork created a cryptocurrency that ranks fourth in market capitalization.

BCH is a supporter of the big block scaling approach and currently supports block sizes of up to 32MB. Bitcoin Cash remains the most successful hard fork of Bitcoin and as of June 2023, it is the 28th largest cryptocurrency by market capitalization.

2. Bitcoin SV (BSV)

On November 16, 2018, Australian businessman CSW (Craig Wright), who claims to be Satoshi Nakamoto, initiated a fork of BCH. This fork resulted in the creation of a chain called Bitcoin SV (BSV), which represents “Satoshi Vision” according to CSW.

Similar to the BCH fork from BTC, the BCH fork also represents a battle between two factions in the BCH camp: one led by Wu Jihan advocating gradual improvements, and the other led by CSW calling for radical revolution – adopting 128MB blocks and “locking” the client in the 0.1 version from the Satoshi era.

3. Bitcoin Gold (BTG)

BTG is a hard fork that occurred in October 2017. It differs from Bitcoin in terms of the Proof-of-Work (POW) algorithm required by miners. The creators of BTG aimed to restore GPU mining, as they believed that the equipment and hardware required for mining had become too specialized.

The increasing mining difficulty of Bitcoin and the emergence of Application-Specific Integrated Circuit (ASIC) hardware specifically designed for Bitcoin mining made it almost impossible for ordinary people to participate in Bitcoin mining. BTG supporters believe that this is detrimental to the security of Bitcoin.

BTG introduced a pre-mining feature, where a certain amount of BTG was directly placed into team addresses, which later sparked controversy. In the eyes of many investors, BTG became a typical case of project parties taking advantage of hard forks to manipulate the market.

Since August 1, 2017, when BCH became the first hard fork project in Bitcoin’s history, there have been numerous forks of Bitcoin. According to statistics, in just one month in December 2018, more than 10 Bitcoin fork projects were born. According to data from https://forkdrop.io/, there are as many as 78 forks of this kind. A large portion of these forks are created by speculators and scammers taking advantage of the name of hard forks to deceive people.

In addition to these two categories, there is another type of hard fork that serves as an experiment for Bitcoin. You may think of LTC (Litecoin), but in the future, you will hear about LayerTwoLabs, MainChain, and DriveChain.

Experimental Hard Fork in the LayerTwoLabs Plan

This is a type of necessary hard fork, similar to the birth of Monero and Ethereum, as well as the hard fork in the LayerTwoLabs plan.

Due to the increasing conservatism of the Bitcoin Core team and the importance of the network security budget for BTC, major changes need to be extremely cautious. Soft fork upgrades for Bitcoin have only occurred every 2-3 years in recent years. The BIP-300/301, which is supported by many community members, has not been implemented yet. With the approaching halving, the loyalty issue of miners is becoming increasingly apparent. Measures to solve this problem must be accelerated. LayerTwoLabs plans to hard fork Bitcoin this year as an experiment and as a phased measure to seek solutions to the problem.

However, the hard fork in the LayerTwoLabs plan is different from Monero and Ethereum. The latter launched a new chain because their improvement proposals were not adopted by the Bitcoin Core team. LayerTwoLabs hopes to verify the feasibility and effectiveness of their DriveChain solution through a hard fork, and persuade the Bitcoin Core team and opponents to upgrade the Bitcoin network with BIP-300/301, thereby enhancing the security and usability of Bitcoin in the future.

BIP300 Miner Sentiment

BIP300 supports decentralized sidechains, such as EthSide or zSide, or even large block size sidechains. The development of BTC becomes more competitive. Users may not trust BIP300, making it useless. In addition, miners will be responsible for adding/removing sidechains, which they may find annoying. BIP300 seems not to harm any other BTC use cases, so it may be activated.

New Species DriveChain Miner Sentiment

`BTCv25+BIP118/118/300/301/345=？

BIP301 Miner Sentiment

BMM blindly merges mining to improve merged mining by eliminating the need for miners to run alternative chain software. BIP301 can be used by altcoins (such as namecoin) or Bip300 sidechains called “Drivechains”. There seem to be no technical objections to BIP301. MM merged mining has been used continuously for over 10 years. On the other hand, there are currently not many technical comments about BIP301. BIP301 seems not to harm any other BTC use cases, so it may be activated.

The hard fork of LayerTwoLabs is also different from BCH/BSV. The hard forks of BCH/BSV are not in line with the direction of the Core team on the scaling roadmap. Their roadmap requires changes to the underlying code of Bitcoin and tends to centralize in the future, which affects the security of the Bitcoin network. LayerTwoLabs is an advocate of small blocks, and the scaling solution of DriveChain does not require code changes at the Bitcoin consensus level, and the security issues of sidechains will not affect the main chain. The main concerns of opponents currently exist in the security of cross-chain assets and how to ensure that miners do not engage in malicious behavior in the case of concentrated computing power. In the hook mechanism of BIP-300, cheating by miners is both short-sighted and immoral, and it can easily be dealt with by honest participants.

Over the years, the DriveChain community, led by core members like LianGuaiul Sztorc and fiatjaf, has been working hard to promote and popularize DriveChain. They have proposed a more optimized form of merged mining called BIP-301, designed seven different functional sidechains, and integrated miner and developer resources. They are about to embark on a bold exploration of the future of Bitcoin.

A Hard Fork is Both a Split and a Growth

Having only one voice in a group is dangerous, and the consequences of being stagnant can be unbearable. A hard fork is a split, but a split can also be a growth, seeking opportunities on different paths. Bitcoin has always faced issues with its roadmap. For supporters and enthusiasts of Bitcoin, a hard fork experiment is an exploration of solutions, not a rupture.

To some extent, every new Bitcoin fork has created fertile ground for the development of the blockchain itself and the entire cryptocurrency technology, whether it is genuine developers innovating or forks driven purely by narrative hype. As the most popular cryptocurrency project in the market, Bitcoin has always been the center of attraction for new and promising ideas related to using its publicly available blockchain code in various directions. It has given rise to various exciting blockchain applications such as GameFi, NFT, DeFi, Metaverse, and more.

DriveChain provides a simple, effective, and secure method to incorporate these use cases into the Bitcoin network and address the fundamental network security issues caused by declining miner rewards. LayerTwoLabs and the community will explore its effectiveness.

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