Bitcoin has seen significant rise since the start of 2020 (although, it’s still early days). While this could have something to do with the upcoming halving in May, there could actually be a more important issue on the horizon. Bitcoin is expecting a soft fork later this year, a development which has been called “one of the most innovative additions” that Bitcoin has seen. This could be what sends Bitcoin to 10K – time to get those party hats out.
A soft fork is an update to the blockchain’s software/protocol where only previous transactions are considered invalid. That means that old nodes will understand that new blocks are valid, so a soft fork is backward compatible.
Soft forks are different to hard forks, which are not backward compatible.
Bitcoin halvings happen every 4 year or 210,00 blocks. In essence, it’s when the reward that miners receive validating transactions and building blocks is halved. Bitcoin halvings also affect the inflation rate, the hash rate, and they have historically lead to Bitcoin bull runs (2013 and 2017).
According to Luca Nuzzi, an analyst from Digital Assets Research, “Bitcoin will soft-fork this year. It will be one of the most innovative additions to [Bitcoin’s layer one] thus far.” There are three planned proposals, Schnoor signatures, Taproot schemes, and Tapscript language, which will likely all be incorporated into the Bitcoin blockchain by Q4 of 2020.
“These are powerful foundational technologies that will bring novel smart contracts to Bitcoin’s base layer,” continued Nuzzi. “2020 will be good.”
A survey by The Block, a crypto news site, surveyed the Bitcoin community and found that the upcoming soft fork is being religiously followed – with some well known developers predicting that it could bring major changes to the blockchain. These changes include cheaper transactions, and enabling the development of new features, like the Lightning Network.
According to Jimmy Song, a Bitcoin Core developer and Bitcoin Fellow at Blockchain Capital, “There will no longer be any penalties in terms of fees for multisig and that should lead the industry toward using best practices.”
He added, “We expect that this will create more interest in Lightning in general as the bleeding edge of Bitcoin will be a little less bloody. Finally, we expect Taproot to be incorporated by more wallets and more interesting features built for those who are securing their Bitcoin.”
With the halving just around the corner, it’ll be interesting to see how the rest of 2020 plays out. Of course it’s possible that a combination of these two events could send Bitcoin on a bull run, but will one be more of a contributing factor than the other? Historically we’ve seen a halving push Bitcoin to two all-time-highs (at the time). So, this could be what sends Bitcoin to 10K – and beyond.
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The soft fork could very well spell good news for Bitcoin. In fact, this could be what sends Bitcoin to 10K. However, with the halving around the corner, it’s likely that we’ll see a combination of the two events coming together to send Bitcoin on a bull run. Will the combination of the halving and the soft fork come together to send Bitcoin skyrocketing? Only time will tell – but we’re certainly in for an exciting start to the decade, bull run or no bull run.
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