The dynamics of world economics and technology are changing at an unprecedented rate. Many technological and financial experts across the globe have coined a new term known as ‘Fintech’ which basically means financial technology. The popularity of this new form of digital virtual currency called cryptocurrency is rapidly growing and the new form of crypto economics is here to play a role in future.
This year in the first week of August 2017, one of the most popular cryptocurrencies – Bitcoin – had to undergo through the event famously known as ‘hard fork’ which basically means that splitting the original currency into two different formats. This hard fork resulted in the birth of a new currency known as Bitcoin Cash and still many across the globe are quite skeptical about its existence and what exactly caused the split to happen.
“Bitcoin Cash brings sound money to the world. Merchants and users are empowered with low fees and reliable confirmations. The future shines brightly with unrestricted growth, global adoption, permissionless innovation, and decentralized development.”
How did Bitcoin Cash come into existence?
In the past year, there has been a sudden surge in awareness regarding Bitcoin and other cryptocurrencies and investors across the globe are rushing to grab their share of the ‘crypto pie’. However, with the sudden increase in demand and large trading volumes on daily basis investors have been constantly facing an issue relating to the transaction speeds on the bitcoin network.
The cause of the split and thus the birth of Bitcoin Cash is majorly attributed to the difference in opinion between the Bitcoin miners and developer community. Few of the China-based Bitcoin miners were not open to the idea of introducing a software upgrade which would speed up the transactions in the Bitcoin network. Rather they proposed for another kind of software upgrade – the SegWit 2X proposal – that would increase the transaction limit from existing 1MB to 2MB. This idea did not go quite well in the eyes of the developer community which argued that it would do little in order to speed up transactions and reduce the transaction times.
As a result, these members pushed the blockchain (the digital ledger technology that backs bitcoin and records every bitcoin transaction) to split into two different chains, giving rise to the birth of a new type of virtual digital currency known as Bitcoin Cash.
Why was a fork necessary to create Bitcoin Cash?
The legacy Bitcoin code had a maximum limit of 1MB of data per block, or about 3 transactions per second. Although technically simple to raise this limit, the community could not reach a consensus, even after years of debate.
Was the 1 MB block size limit causing problems for Bitcoin?
Yes, In 2017, capacity hit the ‘invisible wall’. Fees skyrocketed, and Bitcoin became unreliable, with some users unable to get their transactions confirmed, even after days of waiting.
Bitcoin stopped growing. Many users, merchants, businesses and investors abandoned Bitcoin. Its marketshare among other cryptocurrencies quickly plummeted from 95% to 40%.
Does Bitcoin Cash fix these problems?
Yes. Bitcoin Cash immediately raised the block size limit to 8MB as part of a massive on-chain scaling approach. There will be ample capacity for everyone’s transactions.
Low fees and fast confirmations will resume with Bitcoin Cash. The network will be allowed to grow again. Users, merchants, businesses, and investors will return.
Why didn’t Bitcoin raise the block size if it was easy?
Some of the developers did not understand and agree with the original vision of peer-to-peer electronic cash that Satoshi Nakamoto had created. Instead, they preferred Bitcoin become a settlement layer.
Many miners and users trusted these developers, while others recognized that they were leading the community down a different road than expected.
These two very different visions for Bitcoin are largely incompatible, which led to the community divide.
So what is the difference between Bitcoin and Bitcoin Cash?
In case of a hard fork a new version of the original currency is created – Bitcoin Cash is a new version of Bitcoin. This means that all past transactions in Bitcoin Cash’s new blockchain will be similar and identical to that of bitcoin core’s blockchain. However, after the split all the future transactions and balances will be completed and recorded on separate ledgers.
One of the major difference which was also the primary reason of split is that Bitcoin Cash now allows for faster transactions by using the custom block sizing. Bitcoin is limited to 1MB of transactions every 10 minutes while Bitcoin Cash will cater to block size having 8MB of transaction limit. This is vital for cryptocurrencies to scale and become a more mainstream form of payment.
What future does bitcoin cash hold from here?
Looking to the fact that Bitcoin Cash has an identical blockchain to that of the Bitcoin, it technically means that everyone holding bitcoins ahead of the split should have an identical amount of Bitcoin Cash which should reflect in the Bitcoin Cash’s blockchain.
For this to happen you should be controlling your own private keys or your existing exchange should be supporting the Bitcoin Cash transactions. In case you exchange doesn’t support Bitcoin Cash or your Bitcoins haven’t been physically stored in a wallet with private keys, you’re probably out-of-luck.
Note that this doesn’t mean that all your Bitcoin Cash has been swallowed by your exchange in their accounts. It simply means they don’t find value in this currency and if at all they plan to support in future, the exchanges will distribute the Bitcoin Cash to their users.
Also note that it is just not out of the whims-and-fancies of exchanges that they have decided not to support Bitcoin Cash. The reality is that it is nearly impossible to send Bitcoin Cash as of now over the blockchain reason being the blockchain is yet to adjust its difficulty which takes place automatically after every 2016 blocks.
Many analysts believe that the lack of acceptance by many exchanges has kept Bitcoin cash to hold its value and investors are waiting to sell as they get an access to it. However, this might be a knee-jerk reaction out of fear and panic in investors, as the availability of Bitcoin Cash on exchanges increases.
It is only after some wide-scale availability we could be able to more accurately predicted of what is in store ahead of Bitcoin Cash. Being able to process more transactions at a faster rate definitely gives Bcash an advantage over the legacy coin.
Let us know what you think of Bitcoin Cash!