Just a little over a year ago, all eyes in crypto were fixated on a monumental event: Bitcoin’s hard fork which spawned Bitcoin Cash. The hard fork represented more than a technical formality, but also a profound schism within the Bitcoin community. With such an unprecedented event in Bitcoin’s relatively short history, levels of uncertainty were extremely high. Since it’s been over a year, let’s take a look back and reflect on the event that continues to have resounding ramifications in the cryptocurrency community.
With a rising concern pertaining to Bitcoin’s lack of scalability and increasing transactions cost, opposing ideologies tied to Bitcoin’s true purpose began to emerge. The rising fees and slow transaction speeds were further exacerbated with the rapid growth in the Bitcoin network.
In order to quail differences and hopefully alleviate the problems plaguing Bitcoin, the New York Agreement of May 2017 was reached as a compromise to the scaling debate. It set forth a tiered approach involving Bitcoin Improvment Proposals (BIPs), which is highly simplified and encapsulated below:
- First, implement Segregated Witness (Segwit), which increases Bitcoin’s network capacity by separating (or segregating) the signature data from the transaction — Activated in August 2017
- Next, double the block size from 1 MB to 2 MB (usually referred to as SegWit2x) — This was scheduled in November 2017, but more on this later
The agreement was representative of a large cross section of crypto stakeholders, including a multitude of of crypto companies in various countries. However, this approach didn’t satisfy the contingency that was still in favor of even larger block sizes.
Disgruntled with the proposal, a group championing large block sizes, notably figured headed by prominent Bitcoin evangelist Roger Ver, decided to pursue a fork that would institute such changes.
Ver felt that Bitcoin wasn’t living up to its true vision as a “peer to peer electronic cash system”, and that an alternative was paramount. Thus Bitcoin Cash (BCH) was conceived, with its name being adorned by ViaBTC, one of the largest mining pools hailing from China. From the perspective of its supporters, Bitcoin Cash embodied the essence of the original Bitcoin whitepaper, authored by it’s anonymous creator Satoshi Nakamato. Bitcoin Cash was to distinguish itself from Bitcoin in a number of ways, including:
- Block sizes were made larger — Bitcoin’s 1MB block was beefed up to 8MB
- Larger block sizes would make it better suited for transactions and it was faster
- Bitcoin Cash also didn’t incorporate Segregated Witness (Segwit)
The Crypto Market Reacts Prior to the Fork
“At this point, it seems that the differences are irreconcilable and a split is unavoidable” — Amaury Séchet, Bitcoin Cash Developer
Before the fork was proposed, confidence was high in crypto, with Bitcoin nearly breaching $3,000. However, with the impending Bitcoin Cash fork, confidence subsided and Bitcoin prices were sent into a whirlwind with sharp price fluctuations. The price of Bitcoin feel below $2,000 and many believed the the fork would decide the fate of Bitcoin going forward— would the fork fuel a rally like never before? Would Bitcoin dump? Or worse, would a devastating technical vulnerability materialize?
Most major exchanges supported the hardfork. In a controversial move, Coinbase decided not to support the fork, which prompted a flood of Bitcoin withdrawals to personal wallets or to fork-friendly exchanges. Additionally, Coinbase received backlash for not permitting access to forked fund as it breed the perception that Coinbase was essentially commandeering funds resulting from the fork.
The Event — August 1st, 2017
The hard fork occurred August 1st, 2017. It left Bitcoin wallets with a 1:1 copy, so for every Bitcoin (or portion of Bitcoin) a equivalent amount was received in Bitcoin Cash.
Many saw this as an opportunity for free money, thus cashing out their Bitcoin Cash holdings immediately. As a result, the price of Bitcoin Cash plummeted from $700 into the $200 range. Going beyond any monetary gains, most importantly, the fork was officially successful. The two were co-existing, despite the contentious nature, and the integrity of either blockchains post-fork were healthy.
The Bitcoin train didn’t stop and within nearly a month after the fork, Bitcoin’s price broke the $3,000 barrier and catapulted to $5,000. The price of Bitcoin Cash rebounded as well and hit a mark of more than $900. However, the price of both Bitcoin and Bitcoin Cash took a big hit in September 2017 with China’s ban against initial coin offerings (ICOs) and crypto exchanges, as well as JP Morgan Chase’s CEO Jamie Dimon calling Bitcoin a “fraud”.
In November 2017, the Segwit2x hardfork was to take place. On twitter, those against the Segwit2x hardwork included the #No2x to their Twitter handles and bios. However, in the week prior to the fork, on November 8th, the Segwit2x was cancelled due to a lack of consensus as cited by BitGo CEO Mike Belshe in a message bulletin. As a result, Bitcoin Cash saw a massive surge the weekend following the cancellation, with many Segwit2x supporters flocking to Bitcoin Cash. Bitcoin’s price started to decline rapidly as Bitcoin Cash’s price rose from around $600 to about $2,500. It was evident that Bitcoin Cash was a force to be reckoned with as it momentarily overtook Ethereum and was worth .5 of a Bitcoin, before retracing.
Coinbase Adds Bitcoin Cash
The public backlash of Coinbase’s decision eventually was enough to pressure them in adding Bitcoin Cash and giving its users access to their appropriate share of Bitcoin Cash. Additional controversy ensued when Coinbase listed Bitcoin Cash, as allegations of insider trading were rampant. In the days leading up to the somewhat unexpected December 2017 announcement of Bitcoin Cash’s addition, Bitcoin Cash prices increased, serving as potential evidence to Coinbase’s impropriety. The price of Bitcoin Cash went as high as $8,500 on Coinbase only and Coinbase had to stop trading since it couldn’t withstand the demand.
To their credit, Coinbase has attempted to make amends for perceived transgressions by being fully transparent with the addition of future assets. More recently, a Coinbase internal investigation didn’t find credence to the insider trading allegations.
Moreover, the astounding success of the BTC/BCH hardfork incentivized a flurry of other forks including Bitcoin Gold and Bitcoin Private. These numerous forks, touting the recognized Bitcoin name, rode the coattails of Bitcoin’s name. New forks were often seen as free money and potential money grabs for the camps initiating the fork. However, it seems with each subsequent fork, the quality of the projects diminished.
The Bitcoin Cash fork also inspired the Litecoin/Litecoin Cash fork. With the forking craze, in my opinion, the market became over-saturated along with many ICOs that are often no more than vaporware.
Bitmain IPO and the Bitcoin Cash Connection
Bitmain, headed by Jihan Wu, is the preeminent producer of ASIC (application-specific integrated circuit) miners used for Bitcoin and a handful of altcoins. With Jihan Wu being one of Bitcoin Cash’s most prominent backers, Bitmain currently holds a large portion of Bitcoin Cash.
Later this year, Bitmain is expected to have an Initial Public Offering (IPO) on the Hong Kong Stock Exchange. Valuations are estimated to be as high as $20 billion. The outcome of Bitmain’s IPO will certainly influence Bitcoin Cash. Will Bitmain acquire more Bitcoin Cash, prop up the price, and continue it’s campaign in support of it? Or will Bitmain reduce it’s exposure and dump Bitcoin Cash after the IPO? Regardless, Bitmain could send Bitcoin Cash to new heights or immensely stifle it’s progress.
The BTC vs BCH War Continues
The war between Bitcoin and Bitcoin Cash continues, so much so it left many choosing one side, but seldom both. In fact, the @Bitcoin Twitter account and Bitcoin.com now represents the views of Bitcoin Cash (not Bitcoin).
Bitcoin Cash, despite questions about it’s initial viability, has solidified itself as a top 5 coin (in terms of market cap) and continues to try to build a community behind it. Even with the appearance of Bitcoin Cash, Bitcoin was able to reach nearly $20k in 2017 and it’s dominance still emanates over the crypto market.
Notably, both the Bitcoin and Bitcoin Cash have thrived in the year since the hard fork. Will the co-existence of the two be a detriment to either of the communities? Will the competition between the two factions leave only one?
No matter what side you’re on, if any side at all, the implications of this fork still resonate and are a still being shaped. The impact of this split may not be accurately quantified until many years from now and unseen future developments with even larger impacts have yet to occur. What are your thoughts? Do you believe the fork has been for the betterment of the cryptocurrency market?