Bitcoin Is Dead. Long Live Bitcoin.
You may have heard about this thing called Bitcoin Cash recently. There’s a lot of buzz considering it briefly was bigger than Ethereum. You may have heard about “hard forking” and Bitcoin Gold too. So what is going on here? To understand what’s going on, we have to understand what Bitcoin is at a fundamental level. So what is Bitcoin fundamentally? Bitcoin is a protocol for transmitting money. Bitcoin works as a protocol for transmitting money because the participants in its network all agree on a specific version of the Bitcoin protocol they want to follow.
A protocol is like having a special handshake with your friends. Shake hands, fist bump, hold up the peace sign. The internet is made of all sorts of protocols, as a matter of fact, the internet is a protocol: IP — Internet Protocol. IP is a protocol for computers connecting with each other based on numeric addresses. DNS is a protocol that routes human readable names like “overstock.com” to these numeric addresses. HTTP is a protocol for sending web data, and SSL is a protocol for encrypting it.
Protocols only work when all parties involved can agree to a protocol version. This is called consensus. Outside of finance, it can be acceptable to be okay with using multiple protocol versions throughout everyday interactions with networks. However, since there’s money involved in the Bitcoin protocol, there is no compromising by accepting multiple transaction protocol versions. Each chain of Bitcoin can only support a single transaction protocol version. When nodes in the Bitcoin network disagree on the protocol version, a “Hard Fork” occurs, and the blockchain splits in two, with the market deciding which chain will ultimately be the more valid one.
Hard forks happen because nodes in the bitcoin network and users in the Bitcoin ecosystem have differing opinions about scaling. There are several ways that Bitcoin scaling can be achieved, mostly falling into two categories: On-chain scaling, and off-chain scaling.
On-chain scaling refers to being able to fit more transactions directly into the Bitcoin blockchain. People and institutions that are in favor of on-chain scaling want bitcoin to use bigger blocks and accept more pure Bitcoin protocol transactions. Some people that want on-chain scaling want it exclusively, these people believe that everyone on bitcoin should always be using the exact same transactional rules. Most people however are in favor of a mix of both on-chain scaling and off-chain scaling.
Off-chain scaling refers to updates to the the Bitcoin payment protocols that would allow transactions to clear outside the blockchain, and occasionally have final settlement on the blockchain as the right conditions are met. Off-chain scaling advocates want to reduce bitcoin transaction size so more transactions fit in blocks of the same size, and they want to have payment channels that move transactions off the blockchain completely.
Both branches of thought are equally worth considering, which is what the Bitcoin ecosystem has been doing since August 1st 2017. You see, Bitcoin as we knew it is actually dead. On August 1st 2017, Bitcoin split into two protocols, the dominant chain, Bitcore, went for supporting off-chain scaling. The minority chain, Bitcash (Bitcoin Cash) went for an 8x on-chain scaling solution. Originally, Bitcore was going to adopt 2x on-chain scaling in November. This plan was scrapped, and resulted in a seismic shift in Bitcash’s price, signaling strong community support for the value of on chain scaling.
It is important to understand that Bitcoin is not a stagnant thing. It is an ever evolving code base and protocol. Understanding the ways that people want to go about upgrading it is important. It is also important to take positions both market wise and opinion wise on these differing scaling solutions. There will be more hard forks to come, so it is important to be educated.
Understanding the implications of hard forks will put you far ahead as a user and buyer in the ecosystem. Many people are buying on hype alone, don’t do that. Take the time to really understand the reasoning behind scaling solutions and whether they’re worth pursuing in the long term. The Bitcoin name is still strong, and it will be contested between chains because of the hard forks. Don’t let the chain name fool you. Look at the fundamentals of its scaling to see if you think that chain’s solution to scaling is worth moving forward on.
“People shouldn’t be getting caught up in the name “Bitcoin”, they should be getting caught up in the idea of it. The idea that people should control their money and be able to choose the protocol that they use to transact with.”
Rather than calling any particular chain the one true Bitcoin, it is best to be honest and say “Bitcoin is Dead, Long Live Bitcoin.” The original Bitcoin protocol is no longer supported, and we should be celebrating evolving past it and scaling as a community. The fact that multiple scaling solutions can have independent market value shows the resilience of bitcoin and the open source philosophy behind it.
We can have Bitcore, we can have Bitcash, we can have Bitgold, we can have SegWit2x, and we can have even more forks beyond them. The ultimate decider of which is truly valuable is the market. If a particular chain fails, it’s not an issue, because there’s other chains of much more resilience to back it up and take that place. This is part of the beauty of Bitcoin as a protocol and financial system.
Let’s just be honest about what is going on. People shouldn’t be getting caught up in the name “Bitcoin”, they should be getting caught up in the idea of it. The idea that people should control their money and be able to choose the protocol that they use to transact with. The idea that you really, truly, provably own your little part in the global financial register, and it is yours to to do what you will with it. That is what people should be enraptured by, and that’s why they should care about choosing the best solutions to bring it to everyone. So do your reading, choose a chain, and get out there and advocate for it. Bitcoin is Dead, Long Live Bitcoin.
If you like this article, follow for more no-nonsense and no-hype cryptocurrency content. Thanks for reading. — Zach (https://1za.ch)