Popular exchange GDAX has advised customers it may suspend bitcoin deposits/withdrawals or even trading at the beginning of August. It will take such action in the event the anticipated user-activated soft fork (UASF) splits the blockchain.
GDAX, a subsidiary of Coinbase, is the most popular U.S.-based exchange and in the world’s top ten, according to CoinMarketCap. In the past 24 hours it has processed $38.8 million USD in ETH trades, $28.5 million in BTC, and $17.4 million in LTC.
GDAX general manager Adam White posted the advisory on the company blog this week. If the UASF activates, there are two possible scenarios: (a) a large majority of the community sides with one chain, leaving the other to wither, and (b) there is technical and economic support for both chains, giving both to strength to continue in parallel.
The user-activated soft fork will begin to activate SegWit on 1st August, but will only have an impact if there is enough support from economic nodes and miners. Exchanges like Bitfinex have previously promised to trade tokens from both chains if there is enough interest.
Look to Ethereum for Chain Fork Scenarios
The latter scenario happened to the Ethereum network on 20th July 2016. Both blockchains continue to this day, now known as Ethereum (ETH) and Ethereum Classic (ETC). While the value of both chains’ native currencies slumped in the wake of the fork, it’s important to note that anyone who held onto both tokens has made a tidy profit on them since.
However there was also some confusing surrounding exchanges at the time. Many users complained their exchange had sided with the dominant fork, giving users ETH and keeping the ETC for themselves. Technically, users should keep both tokens.
GDAX Assures Users, but Trust Remains up to You
Now, GDAX’s contingency plan is a worst-case scenario model and is designed to keep user funds safe. There’s no reason to believe the company would not act in its customers’ best interests.
However it also means your funds are at the mercy of a third-party company, which has worked out badly for Bitcoiners at times in the past. It all hinges on how much you’re prepared to trust your provider — whether it’s GDAX, any other exchange, or online custodial wallet.
The old adage “if you don’t hold the private keys you don’t own the bitcoins” remains true. Coins on any exchange, GDAX or otherwise, will always belong to the exchange and not you — as far as code-defined law goes.
The only way to be 100 percent sure your funds are secure and in your possession after a hard fork is to move them to a wallet where you hold the keys.
Where are you holding your bitcoins for the next two months? Feel free to give advice.
Images via GDAX, Pixabay