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Bitcoin hits all time high as controversial 'hard fork' called off

Matthew Field
Bitcoin has avoided splitting - Getty Images Europe

Bitcoin shot to just shy of $7,900 (£6,000) after a controversial proposal that could have split the cryptocurrency was called off.

The currency had been scheduled to undergo a so-called "hard fork", a change to bitcoin's code that would have created an offshoot cryptocurrency, and which developers argued was necessary to keep up with the pace of its growth.

Despite widespread agreement over the summer that the upgrade, known as SegWit2x, would be implemented on November 16, support for the change had waned. 

On Wednesday, proposals to implement the changes were suspended over fears they could divide bitcoin irreparably and damage the cryptocurrency's growth. Bitcoin's price briefly surged to a new high of $7,848, compared to less than $1,000 at the start of the year. It has since fallen back to trade at around $7,250.

What has happened?

Members of leading bitcoin exchanges supporting the "SegWit2x" proposals have signed a letter calling off the upgrade. SegWit2x would have doubled the size of the bitcoin "blocks" on the blockchain, the record of bitcoin transactions, essentially making it easier to process more trades as more people join and trade bitcoin.

"Although we strongly believe in the need for a larger blocksize, there is something we believe is even more important: keeping the community together," said Mike Belshe, chief executive of bitgo.com.

Why has SegWit2x been cancelled?

Because bitcoin is decentralised it has no one controlling party. This means that changes to the code are decided as a group, similar to a vote or referendum. 

However, this has led to previous rivals to the current bitcoin splitting off, such as Bitcoin Cash over the summer. If certain developers refuse to accept the current bitcoin code, they can "hard fork" the blockchain and create a new one, and thus a new, rival currency.

FAQ | Bitcoin

With SegWit2x, around 95 per cent of bitcoin miners and developers had signalled support for the proposal over the summer. However, this had since fallen to around 75 per cent, with opponents calling the changes a power grab on bitcoin by bitcoin companies and large exchanges.

The code had also lacked "replay protection", which would have prevented transactions being copied across the old and new network. SegWit2x had also not been supported by bitcoin's core development team.

What happens now?

If bitcoin had suffered a split, there were fears major exchanges would not be able to decide which was the true bitcoin.  Coinbase, one of the best known trading platforms, had said it would "let the market decide" and would suspend trading of bitcoin ahead of the split.

Bitcoin developers still believe the currency needs to scale to cope with booming demand, but those proposals are on ice.

Bitcoin milestones

For now, bitcoin has remained one currency and investments in the currency remain on the original blockchain.