The Bitcoin Cash Hash War: ABC vs SV

Last week’s contentious Bitcoin Cash hard fork was the likely reason for one of the biggest sell-offs in the cryptocurrency market in the past year. In this short article, we recap what happened and where we are right now.

What is A Hard Fork?

In simple terms, a hard fork of a digital asset network happens whenever the underlying protocol is changed in a way that makes it incompatible with the existing protocol. In this case, any miner that runs the original software will no longer accept blocks created by miners running the “updated” mining software and vice versa. Hence, from this point onwards, the blockchain branches into two distinct blockchains that produce blocks according to their own rules.

The evolution of Bitcoin Cash forks. © AM

If the vast majority of miners switch to the updated protocol (or stay with the original protocol) the other branch will eventually be abandoned and the main protocol continues under the new rules (or under the original rules).

Bitcoin Cash (BCH) was itself a hard fork that split away from Bitcoin in August 2017 in an attempt to increase transaction throughput by increasing the size of each block. In May 2018, BCH underwent a scheduled (non-contentious) network upgrade which increased the block size even further. Since this update was accepted by all miners, the network did not fork.

What are BCH ABC and SV?

Bitcoin ABC stands for Adjustable Blocksize Cap and is seen by many as the continuation of the original BCH protocol. The main points are to keep the current blocksize of 32MB and to introduce certain code that would allow the blockchain to access external data. Bitcoin SV stands for Satoshi’s Vision and aims to increase the block size to 128MB. It also wants to re-enable some code proposed in the original whitepaper that was later disabled due to security concerns. Furthermore, Bitcoin SV plans to remove the cap on the number of instructions that can be executed in one go. More technical details can be found here.

What is the Controversy?

In short, there is no real controversy and the war seems mostly politically motivated. In fact, there is a third proposal, called Bitcoin Unlimited, that would incorporate features from both organizations. However, it seems that reaching a compromise is not in the interest of either party. Instead, both parties openly announced that they fight until one chain dies.

The Fight to Death

Source: Coin.dance

The main problem of the November 15 hard fork is that both camps are relatively evenly matched and thus neither side is willing to back down. BCH ABC is supported by Bitmain, the largest BCH mining manufacturer in the world, and BCH SV is supported by CoinGeek, one of the world’s largest BCH mining pools. Craig Wright, a.k.a. ‘Fake-Satoshi’, the driving force behind BCH SV, announced on Twitter to engage in “Continuous competition until one dies as we do not stop.” Jihan Wu, co-founder of Bitmain, responded with:

“I have no intention to start a hash war with [Craig Wright], because if I do […] BTC price will dump below yearly support […] But since [Craig Wright] is relentless, I am all in to fight till death!”.

No Truce Without Replay Protection

What makes the Nov 15 fork particularly dire is the lack of replay protection. Since both camps claim to be the true and only successor of Bitcoin Cash (or even Bitcoin), both camps refused to implement a replay protection in their protocol update. Without replay protection, any valid transaction on one chain is also a valid transaction on the other chain. This can be used to perform a so-called replay attack. In a replay attack, a receiver asks the sender to send them BCH SV coins. The sender then uses their private key to sign the message and publish the signed transaction. Since both chains use the same transaction format, the sender can then take this signed transaction and include it also in the BCH ABC blockchain to receive an equal amount of BCH ABC coins.

Conclusions

The BCH hard fork is the first ‘real’ war between two big players in the blockchain space. Even though the underlying changes are relatively minor and easy to reach a compromise on, neither party is willing to end the war in the interest of the rest of the blockchain world. Like any real war, this does not come cheaply. It is estimated that both sides currently burn between $300,000 to $400,000 a day to fuel the hash war. Additionally, just as in the real world, the conflict spread to the rest of the blockchain economy and wiped out almost $40 billion of the total digital asset market.