Bitcoin Cash, a hard fork

Bitcoin Cash, a hard fork

On August 1st Bitcoin had a hardfork into two different currencies Bitcoin and Bitcoin Cash. After much arguing within the community and discussion about what the miners vote for it turned out that Bitcoin Cash was created. Bitcoin Cash, for non-technical people was basically free money. If you owned Bitcoin, and had it in a supported BCH (Bitcoin Cash) wallet, you got the same amount of BCH that you had in BTC (Bitcoin)… aka free money. If you haven’t claimed your BCH yet there are likely guides out there for your particular wallet and how to claim your money. Just look up “how to claim BCH from (insert your wallet name here).”

However, what really happened other than giving people free money on August 1st? And why was a fork or upgrade to the Bitcoin network even needed? Heck what is a fork? Well here is a fork… https://www.coindesk.com/short-guide-bitcoin-forks-explained/

The forking, a solution to perceived problems:

Perceived problems:

Bitcoin’s protocol had limited the size of the block to 1MB. The reason the protocol had this block size limit is to prevent malicious actors from attacking the network. Those people would create huge fake blocks and submit them to the network. The network would detect them and deny them from processing but it consumed time and clogged up the network, slowing down transactions. So the protocol was updated to include a block size limit to prevent these attacks. The huge blocks would automatically be detected and rejected.

As Bitcoin grew in popularity the block size limit limited the number of transactions taking place; only so much data can fit into a 1MB block. This meant the bitcoin network couldn’t support a world population as a fast, cheap method of payment. In fact, sometimes those payments would take hours or days to confirm.

Some solutions were proposed. Some vendors took the risk upon themselves and allowed purchases to confirm after the customer had left the store, but this wasn’t ideal.

Another one was to increase the block size limit. But, many within the community feared this would lead to an increase in centralization of mining. And for a community built upon decentralization that’s a scary thought.

Segwit, the solution:

Segwit (segregated witness) was the solution proposed by a member of the bitcoin core development team to help increase transaction speeds, reduce costs, and stop transaction malleability (a way to attack a transaction by changing the user ID before confirmation). How did Segwit do all of this?

Segwit increased the block size but it hid the increase. How it did this was by removing the signatures and scripting code from the block and attaching them at the end. Segwit changed the 1MB block size limit to a 4 million unit limit, basically changing the transaction format. This new format allowed a 1MB block to be completely filled with transactions and not filled up with script. But the script and witness or signature data was attached on the end of the block.

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This was a nice middle ground reached by the community. However, it relied upon 95% of the miners voting for it.

Result:

Well the result Segwit was adopted by 97% of the miners and Segwit was added to the Bitcoin network.

However it was not all fun and games because a portion of miners didn’t signal for Segwit and went with a different proposal of increasing the block size. The nodes (computers which have a partial or full copy of the blockchain) and miners who went with the increased block size proposal caused the hard fork on August 1st.

So what does this mean? Pros and Cons.

Pros: It means that Bitcoin Cash has cheaper transaction fees, it is faster, and has less backlog than Bitcoin even with Segwit on the Bitcoin network. This, in theory, allows Bitcoin Cash to scale more, is better for peer to peer exchange, for commerce, and just about everything.

Cons: Newer and less known dev team, less hashing power on the network, less nodes, tendency towards mining centralization based upon large block size, it doesn’t solve transaction malleability, and finally it won’t allow Lightening Network to run on it.

Conclusion:

Bitcoin cash is good for commercial use and buying normal products. Until some of the miners move over and contribute more of their power to the BCH network, staying away from using it might be a good idea. With confirmation times being insanely volatile I can’t see the justification in using it. The confirmation times are still much less than with traditional banking but that’s besides the point. Most store owners shouldn’t be using BCH until things get under control. And investors I don’t think should be in it at all. Considering it’s lost so much value and Bitcoin continues to break into new highs.

I think, Bitcoin is still the best place for store of value and long term investment. They have a more stable network. Bitcoin is less susceptible to being manipulated by large miners unlike BCH, which shows manipulation.Just take a look at these block time confirmations and compare those with the hashing power dips. Likewise, after August 1st the price of Bitcoin went on a Bull run for about a month before topping out at 5k. And after it’s dip back to the 4k level, it’s now broken out past the previous all time high. That’s likely due to another planned fork called Bitcoin Gold and everyone wanting to get free money.

Hashing: https://bitinfocharts.com/comparison/hashrate-bch.html

Time: https://bitinfocharts.com/comparison/bitcoin%20cash-confirmationtime.html

But Bitcoin is still the powerhouse in the crypto-world and will be for some time. A few days ago Bitcoin had 56% of the market cap which is incredibly impressive. So Bitcoin should still make up a large portion of your crypto protiflo. And even for traditional investors adding some small amounts of crypto might be a decent idea, depending on your risk tolerance.

5 Replies to “Bitcoin Cash, a hard fork”

  1. Thanks for sharing superb informations. Your web-site is so cool. I am impressed by the details that youve on this site. It reveals how nicely you understand this subject. Bookmarked this website page, will come back for more articles. You, my friend, ROCK! I found just the information I already searched everywhere and just couldn’t come across. What a great website.

  2. You are very right. 15 difference in international prices (BTC to USD) and in Indian market (BTC to INR) is a big difference. However this has happened due to demonetization. Due to demonetization, there has been drastic increase in demand. The Bitcoin exchanges do not have enough liquidity. When they have limited number of bitcoins with them and demand is huge, they have no option but to increase the price. No one is selling bitcoins so these exchanges are not receiving any SELL orders. They are only getting BUY orders resulting in a crunch leading to increase in their selling price.

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