Bitcoins You Possess Will Be Safe
The first and foremost piece of information all bitcoin holders should know is that in the event of a hard fork that splits the blockchain, bitcoins you possess will be perfectly safe.
Over the past year or so hard forks have gotten a bad reputation for political reasons, but in actuality, most types of forks are merely protocol upgrades. A blockchain split occurs during a hard fork which in turn branches the chain into two parts. If this happens, there is nothing a bitcoin holder has to do but wait and watch the fork unfold.
The folks at the subreddit r/btc have compiled a very well written frequently asked questions post concerning protocol upgrades and how users are affected. The thread gives details about the hard fork process and what to expect.
When the blockchain branches into two there will be two digital assets immediately after the hard fork. Bitcoin holders who possess their private keys will have access to assets on both chains after the split event occurs. So, if you “keep your money” in a local wallet on your computer or on your phone you can just stay put and watch the fork happen.
If you hold money on a bitcoin exchange, then it will be up to the exchange’s discretion on how they choose to disperse both token assets to customers. Most of the well-known industry exchanges have already pledged to support both assets if a blockchain split event takes place.
Storing Bitcoin On Exchanges
Users should remember that holding cryptocurrency on an exchange is not recommended even during non-eventful times. As explained above, after a blockchain split customers storing bitcoin on an exchange will have to succumb to the rules of that specific trading platform. For instance, it’s highly possible that exchanges will pause withdrawals for 24-48 hours during and after the fork. Most reputable exchanges should and will likely disperse both assets to their customers sometime after the event, but users should expect a waiting period while the businesses assesses the situation.
The bitcoin exchange Coinbase explains the company’s current contingency plan to its customers concerning a hard fork and possible blockchain split which includes pausing deposits and withdrawals;
“Ensuring the safety of customer funds is our top priority,” explains the San Francisco-based exchange. “In the event of a hard fork of the Bitcoin protocol, it is likely that Coinbase will temporarily suspend the deposit and withdrawal of bitcoin from the platform pending our assessment of the technical risks posed by any fork, such as the possibility of replay attacks, network instability, or other factors. Customers should take note that they will not be able to withdraw bitcoin from or deposit bitcoin to Coinbase for a period of up to 24 hours or more following the fork. In the event of a hard fork of the Bitcoin protocol, Coinbase may suspend the ability to buy or sell on our platform during this time.”
The other twenty or so well-known bitcoin exchanges that revealed their hard fork contingency plans last week will also list both digital assets (creating another account for their customers, for the “new” forked coin). Yet it is safe to assume these exchanges will also pause deposits and withdrawals during a split event. Customers will have to follow the rules of the exchange they store their funds with, and each business will have different guidelines.
