Preparing for the Bitcoin fork: what should you be doing?

Bitcoin is forking. If you have Bitcoin this means that you will probably be the rightful holder of two cryptocurrencies that will result from the split. There are things you should be doing to prepare, and I aimed to cover the best options here. Please comment with suggestions and other tactics I might've missed.

I wrote this for people who know what the fork is but aren't sure what to do about it, and for people who may not realise they should be preparing. You risk losing at least some of your Bitcoin if you don't choose one of the options below. I recommend these resources to learn more about what is happening and its broader implications:

The other assumption I am making is that a hard fork is inevitable at this stage. It seems the Bitcoin community is beyond unifying on a way forward, which would've been nice in an ideal world. In the real world we have to solve these issues with forks, not spoons.

I'm basing at least some of this on my experience of holding Ether before the Ethereum Fork and dealing with the fallout that occurred. The economics and technical dimensions of Bitcoin are quite different from Ethereum, but in terms of a hard fork there are some lessons to be learned.

Based on the current status quo, these are the tactics to consider:

Option 1: Do Nothing
This is a valid approach, unless your Bitcoin is stored with a third-party like Coinbase, or an exchange that isn't committed to honouring both chains after the fork. Doing nothing is only an option if you have control of your private keys or keep your Bitcoin with a third-party that will honour resulting balances. If you don't know what a private key is (it isn't your Bitcoin address, which I've discovered some users seem to think), then I suggest you consider the other options below.

If you have control of your private keys then you will be able to redeem balances on both branches of the resulting blockchains after the fork. This will require some technical knowledge of what you are doing, probably some hairy moments of execution, or a reliance on the community to develop tools that make redeeming on alternative chains easy.

Based on what we learned from the Ethereum fork, redeeming branch balances (sometimes called 'harvesting') will be non-trivial and not for the feint of heart. If you aren't very sure of your own technical abilities in dealing with private keys, et al, then read on.

Alternatively, if your Bitcoin is held by an exchange such as Bitfinex, Bitstamp, or Kraken then you can also safely do nothing. More on that with Option 2 below.

I must stress this again: If you don't control your private keys then you need to find out what the third-party you are storing them with is planning to do about the fork. For example, Coinbase has said that it will not support alternative branches - so you really should be moving your Bitcoin away from Coinbase, unless you don't care about losing the value held in, most likely, Bitcoin Unlimited. That's up to you.

Option 2: Move your Bitcoin to an exchange that will honour resulting balances
Several Bitcoin exchanges recently published joint contingency plans for the hard fork, committing to preserving customer balances across branches after the hard fork. What will most likely happen is that your Bitcoin on the Classic chain will remain as BTC, and a successful Bitcoin Unlimited branch will appear as an additional balance with the symbol BTU. This is similar to what happened after the Ethereum split when users on Kraken, for example, preserved their original ETH balance, and also received an equal amount of ETC (Ethereum Classic).

The exchanges that have committed to the plans at time of writing are:

Move your Bitcoin to one of these exchanges and let them take care of the rest. This isn't a bulletproof option, however. Exchanges can and do mess up. I recommend Kraken, given its track record and the great job the team did with the Ethereum fork.

Option 3: Sell Out
The fork is going to do nasty things to the price of Bitcoin. For some understanding of what we're in for, check out Vinny's article I mentioned above. The price will almost certainly drop, there is a significant chance of replay attacks and other vulnerabilities resulting from the fork, and it's going to be a general shitshow while the dust settles. If you want to protect your money, you might consider selling your Bitcoin. This is probably the safest way to prepare for the fork.

Selling out also means that you could take advantage of lower prices to buy back in once the fork has happened and branches have been stabilised. This would also allow you to indirectly vote for the version of Bitcoin you want to support - just buy back into the chain that aligns with your values.

At this point it is impossible to say when the fork will happen, but it seems unlikely that it will be circumvented. So pick your tactics.

Personally, I'm holding on for the ride. It's folly to try and predict the outcomes of activity in a level two chaotic system, but I have the sense that after the fork we will see proof of work deciding the future of what we consider as the official Bitcoin, after which the price will very quickly recover and punch through current ceilings. Whatever happens, Bitcoin needs us now.

Thanks to Simon de la Rouviere and Vinny Lingham for proofreading.

I'm a writer and broadcaster who also designs apps and strategies for disruptive startups in the financial world. Find out more on my about page.