How to split your coins using Electrum in case of a BU Hard Fork

Notes:

1. I, Thomas Voegtlin, support Segregated Witness as a scaling solution for Bitcoin, and I am opposed to a hard fork initiated by miners running Bitcoin Unlimited. However, I also believe that Electrum users should be free to choose between Bitcoin Core and BU, and that I should not abuse my position in order to favor one party. I have tried to keep this documentation as neutral as possible.

2. Despite the various announcements that have been made by both parties, I believe that the probability of a BU hard fork is fairly low. Nevertheless, Electrum users have expressed concerns about a hard fork. This document is intended to address these concerns.

3. This document explains how to split your coins using the existing Electrum software. I am currently working on an improved version of Electrum, where blockchain forks will be detected and managed using checkpoints. However, if a fork occurs now, users will want to be able to trade their BTC/BTU coins as soon as possible, without waiting for a new software release. This is the purpose of the present document.

What does it mean to ‘split your coins’?

If there is a fork of the Bitcoin blockchain, two distinct currencies will coexist, having different market values. They are referred to as BTC and BTU here.

If you own Bitcoins before the fork, a transaction that spends these coins after the fork will, in general, be valid on both chains. This means that you will be spending BTC and BTU simultaneously. This is called a ‘replay attack’. To prevent this, you need to move your coins using transactions that differ on both chains.

Electrum and SPV

Electrum fetches block headers from the Bitcoin network in order to verify that your transactions are included in the Bitcoin blockchain. When a transaction is displayed as ‘verified’ by the GUI, it means that Electrum received a proof that the transaction is in the blockchain.

By default, Electrum trusts the longest blockchain to be the valid blockchain. Electrum is not able to know if block headers correspond to blocks that follow the Bitcoin Core or BU rules; it only checks that blocks have been mined with a valid Proof of Work, and that transactions are included in these blocks.

Electrum has two different modes for fetching your wallet history: manual server selection and auto-connect. In auto-connect mode, Electrum will always request your wallet history from a node that has the longest blockchain. If auto-connect is disabled, your wallet history will be fetched from a server you choose. If there is a fork, you will want to select your history server. This option is available in the GUI and from the command line.

In addition, Electrum has two different modes for fetching the block headers used to verify your history: it can receive block headers from a single node (your history server), or from a group of randomly selected nodes. By default, it will listen to a group of random nodes, and it will consider that the longest blockchain is the valid blockchain. If the ‘oneserver’ option is activated, it will receive block headers from your history server only. Unfortunately, the ‘oneserver’ option is only available from command line.

Step 1: Use separate directories for BTC and BTU

While it would be technically possible to use the same directory and wallet files for both BTC and BTU, doing so will force your client to discard and re-download transaction histories and headers everytime you switch between BTC and BTU. In order to prevent that, duplicate your entire Electrum directory; one will be used for BTC, one for BTU.

With the command line, you can use the -D option to select the directory used by Electrum:

electrum -D <directory>

If you are running Electrum binaries on Windows, you do not have access to the command line. You can use the ‘portable’ version of Electrum instead; it will use the ‘electrum_data’ directory located in the directory where the binary is located.

Step 2: Choose your wallet history server

You can select your server from the GUI. Disable the ‘auto-connect’ checkbox in the network dialog, and choose a server that you trust to run Core or BU. Usually servers advertise this information in the Console tab. There is no way to verify that the server actually runs what they claim, but this will not be a problem for us; if the server is dishonest, you will be able to see that your coins have not been split.

Note that you can also select your server from the command line, with:

electrum --server <server>

Step 3. Fetch block headers from the same node as your history.

If you are running Electrum from the command line, you can use the ‘oneserver’ option as follows:

electrum --oneserver

This option starts Electrum in ‘one server’ mode. When you open the Network dialog, you will see ‘Getting block headers from 1 node’. Now all your transactions will be verified using the headers sent by your history server.

This option is only available through the command line; if you are running an Electrum binary, you will not be able to use it. In that case, Electrum will fail to verify transactions that are on the minority chain, and it will display them as ‘unverified’ once they are confirmed (this is different from ‘unconfirmed’, although the GUI icon is the same). To address this, if you are not using the command line you should check that your post-fork transactions are confirmed on the shortest chain using an independent source, such as a block explorer.

Step 4: Split your coins

Different solutions have been proposed to split your coins. The cleanest method is probably to mix your coins with coins that have been mined after the fork. However, mixing your coins with newly minted outputs could be much slower, because you would need miners to send you new coins.

Here we propose to use RBF transactions: it will work with the existing software, and without the help of miners.

Launch two instances of Electrum, from your your Core and BU directories. Note that you can run them simultaneously. If you use the command line, you can combine all the options we explained above:

electrum --oneserver --server <electrum_btc_server> -D <electrum_btc_dir>
electrum --oneserver --server <electrum_bu_server> -D <electrum_bu_dir>

Create a replaceable (RBF) transaction that sends your coins back to yourself, and broadcast it on both networks (it should actually be broadcasted on both networks, because there is no replay protection at the network level. If that does not work, just copy-paste the transaction from one instance of Electrum to the other, and rebroadcast it manually).

Once the transaction is visible in both networks, bump its fee on your BTC version of Electrum. BU nodes might still receive the second transaction, but they will not propagate it because they do not implement RBF.

Wait until your transactions are confirmed on both networks, and check that they have different transaction IDs. If you cannot use the command line with the –oneserver option, check that transactions are confirmed using a block explorer website.

You will need to check that the transaction IDs are different on both chains, because this method is not guaranteed to work (although it should work most of the time). It will fail if your transaction is confirmed on the Core chain before you bump its fee, or if a malicious BU miner decide to confirm the second transaction, despite it not being normally accepted by BU nodes. If this method fails, you will only lose the mining fee, and a bit of time. If the BU chain is faster than the Core chain (or has lower fees), you may increase your chances by waiting until BU confirms your transaction before you bump its fee on Core.