Odds Are In Favor Of Soft Fork, But JCBA Issues Guidelines In Case of Hard Fork Too

On July 20 and 21, 2017, following a bitcoin transaction freeze concerning the contentious possibility of a fork of the Bitcoin blockchain on August 1, the Japan Cryptocurrency Business Association (JCBA) provided additional guidelines to its members.

The association told its members to accept bitcoin but stop withdrawals in response to a soft fork (which will likely not result in a branch of the bitcoin blockchain that creates a new and backwards-incompatible form of bitcoin). The announcement gave members the discretion on when to initiate the suspension, but provided that notice to customers should be given via the association member's homepages. Members are also told to send a separate notification to customers when it resumes accepting withdrawals and deposits. In all likelihood, this is the most practical response from the JCBA that crypto-enthusiasts can expect, given the fact that 91percent of bitcoin miners are signaling acceptance of the BIP 91 protocol (a soft fork initiated by miners indicating acceptance of SegWit activation without forcing a hard fork).

In the unlikely event of a hard fork on the Bitcoin blockchain, the JCBA said its members would continue to accept bitcoin from the old chain, while classifying the new currency resulting from the hard fork as “bitcoin cash.” Members are to set the terms and conditions for the bitcoin cash individually, but the association requests that each member provide these policies by January 1st. In addition, the JCBA requests prompt communication to customers as to what type of currency, be it bitcoin or bitcoin cash, they should use for purchases. The JCBA advises members to use their own judgement to determine whether or not bitcoin cash is suitable for transactions and provide prompt responses to customer withdrawals following a hard fork. The JCBA asks that members also inform customers in advance about the start date and times for transactions when not accepting withdrawals. Once again, given the current acceptance of BIP 91 by miners, it is highly unlikely any of this will occur.

Japan has been quick to embrace new technologies, and blockchain-based currencies have achieved mass acceptance in the island nation. The preemptive countermeasures taken in concert by members of the JCBA speaks of a readiness to provide traders and those who pay for goods and services with virtual currencies with a defined set of expectations as to how virtual currency businesses and, to some extent, the market as a whole will react to a fork, whether soft or hard.

ETHNews will continue to provide coverage as SegWit developments emerge.