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Dispute Could Mean Financial Panic in Bitcoin
Dispute Could Mean Financial Panic in Bitcoin

Dispute Could Mean Financial Panic in Bitcoin

Dispute Could Mean Financial Panic in Bitcoin

Got some bitcoin? An internal dispute over the digital currency could soon mean financial losses, whipsawing prices and delays in processing payments.

It’s also possible that nothing much changes. It all depends on whether the people who maintain bitcoin can agree by July 31 to implement a major software upgrade—one designed to improve capacity on the increasingly clogged network, AP reported.

Not everyone is on board. In particular, some bitcoin “miners,” who are rewarded for verifying transactions, aren’t supporting the changes. Any split between miners and others who use bitcoin, including a number of startups and a few big companies, could cause a panic in the $39 billion bitcoin marketplace.

So far, bitcoin’s value in US dollars has soared amid the uncertainty. It’s currently at about $2,300, more than triple what it was a year ago. But bitcoin is notoriously volatile; because the price spiked so rapidly, it also fell quickly, and bitcoin has lost about a quarter of its value since its peak in June at above $3,000.

The reformers say they’ve run out of patience and have set a deadline for moving to the new system.

At 8pm Eastern time on July 31, they’re threatening to stop recognizing transactions confirmed by miners who haven’t adopted the upgrade. That would create enormous uncertainty in the bitcoin economy, as no one could really know if the bitcoin they’d just paid (or received) was actually moving through the system the way it’s supposed to.

Some big bitcoin miners—like Chinese bitcoin mining equipment giant Bitmain—haven’t signaled support for the new system. A rift could result in two or even more incompatible versions of bitcoin.

Generally speaking, chaos—though mostly limited to those who use or squirrel away bitcoin. No one using bitcoin could be sure which version they held, or what might happen if they spent it or accepted bitcoin as payment.

Taking bitcoin, for instance, could leave you with currency you couldn’t spend freely—and that might disappear entirely if it ended up being the “wrong” kind.

That’s one reason the community-supported website Bitcoin.org warned users Wednesday not to accept any bitcoin up to two days prior to the deadline and to wait for confirmation the situation had been resolved before trading again.

“It’s a rather awful situation,” David Harding, who posted the warning for Bitcoin.org, said in an email.

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