Bitcoin prices have risen by over 25% from their two-month low over the weekend, jumping by around $500 as miners signal support for a scaling compromise.
Mining groups have begun attaching flags to their transactions showing support for Segwit2x, a scaling solution based on Segregated Witness, a compromise between two separate plans offered by the mining community. Segregated Witness, or SegWit, streamlines blockchain processing by removing signature data from transactions once fund availability has been verified. This would both reduce the volume of the data on the network, clearing logjams, and would also nearly quadruple the size of the blocks, which are currently restricted to 1MB.
Several of the largest bitcoin miners (who create new bitcoins and support the blockchain), including AntPool, BitClub, Bixin, BTC.com and BitFury, have started showing their support for bitcoin improvement proposal (BIP) 91, by adding a piece of code to each new block of bitcoins they generate.
The miners were not expected to start coding their support for BIP 91 until July 21. Already, 66 percent of the last 144 blocks created signal support for it. The proposal needs 80 percent support to be “locked in” to the blockchain permanently. This will bring relief as it prevents the blockchain splitting into two separate chains, which would effectively create two different coins.
“Barring any unexpected twists in the bitcoin scaling drama, a contentious fork will be avoided in the coming days,” Garrick Hileman, economic historian at the London School of Economics, told CNBC via email.
“The prospect of a contentious August fork has been hanging over bitcoin’s price like a sword of Damocles, and so the 20 percent plus price pop we’ve seen in the last 24 hours is not surprising.”
As of this writing, nearly 64% of miners have signaled their support for Segwit2x.
Miners are scrambling to throw their support behind the plan as a July 31 deadline approaches. If the miner signaling does not reach an 80% consensus by the end of that day, an alternative plan known as the User Activated Soft Fork will take effect, which could cause the currency to split into two competing versions, one running SegWit and one not.
Fears of a currency fork earlier this year had a similar temporary chilling effect on Bitcoin prices.