A Retrospect on the Bitcoin Cash Hard Fork
Software can be surprisingly political.
This is especially true when it comes to cryptocurrency ‘forks.’ A fork occurs when the underlying software for a cryptocurrency splits into two versions, each with different purposes.
Seeing as the code for Bitcoin is open source, anyone can create their own fork of it. If the Bitcoin community agrees upon a proposed change, this can be incorporated into the code. But if there is disagreement about a suggested alteration, those in favour of it may decide to perform a fork.
Bitcoin forks tend to have a political flavour because they usually concern alternate goals and intentions for the community. Bitcoin is a highly malleable concept which can mean many different things to different groups, each of whom is likely to think theirs is the only correct perspective. When one group is adamant a particular change will bring Bitcoin closer to what they see as its ‘true’ purpose but the rest of the community disagrees, they may decide on a fork.
In some ways, this is an excellent system because it creates competition and enables Bitcoin to adapt to suit all of its users. On the other hand, forks fragment the community and cause conflict.
They also mean developers working on one version cannot work on the other branch, potentially weakening the community as a whole. Divide and conquer is, after all, a classic military strategy for weakening an opponent.
Bitcoin vs Bitcoin Cash
The Bitcoin community has been divided by what is known as ‘the scaling debate’. The Bitcoin network can currently process about 7 transactions per second — (in comparison to the average 3941 transactions Visa processed in 2018).
During busy times, the Bitcoin network can become congested and transaction fees can rise to unreasonable levels.
Members of the Bitcoin community believed the solution for scaling was to utilise layer 2 technologies (like Lightning which provides off-chain peer-to-peer transaction authorisation to help support higher transaction volumes), with the base layer being a long-term store of value.
A small group of bitcoin miners, were not so keen with the plans to adopt the SegWit update and pushed forward an alternative solution for the base layer to have a higher capacity to solve the problem of scaling, by supporting more data per block. This change would allow the Bitcoin Cash network to process up to 8 times the amount of transactions processed by Bitcoin Classic every 10 minutes.
Forking the code
The Bitcoin Cash fork intended to solve this problem by increasing the number of transactions that can be stored on each ‘block’ (which records new transactions every ten minutes.)
Part of the community, led by investor Roger Ver, wanted to increase the block size to benefit people who use cryptocurrency for everyday transactions.
The group created Bitcoin Cash in August 2017. While there were some initial technical issues, unlike other Bitcoin forks, it is still functional. Bitcoin Cash has since gone through its own fork after some users felt it had diverged from the vision of Satoshi Nakamoto (the anonymous creator.) The official website describes it as ‘fulfilling the original promise of Bitcoin as “Peer-to-Peer Electronic Cash”.’ It allows for eight times as many transactions per second.
Was Bitcoin Cash a success?
That depends on who you ask, and what metrics you favour. Bitcoin Cash is objectively far less popular than its predecessor and has a much lower adoption rate.
Although Bitcoin Cash does trade on a few major exchanges, it’s fewer than Bitcoin and it’s also accepted by fewer merchants.
The Bitcoin Cash fork shows us that finding a consensus in any community is impossible. While forks are an ideal way to help everyone access a cryptocurrency that suits their needs, they also dilute funding, developer time, and people’s attention. Forks add a lot of complexity for the average user and cause technical hurdles for platforms, like exchanges.
Is the community still divided?
The scaling debate continues, although the Lightning Network is making strides towards enabling faster and cheaper transactions for everyone. Now that it’s possible to make nearly instant, free cryptocurrency payments to anyone, anywhere, the value of Bitcoin Cash is less clear. Bitcoin implemented the ‘SegWit’ (Segregated Witness) feature to enable the Lightning network.
The technical details are a bit complicated to include here, but the basic idea is that it lets each block store more transactions, speeding up processing times — though not by as much as Bitcoin Cash. Instead of storing all transaction details on the Blockchain, SegWit records them in a separate file. As it stands, most Bitcoin users do regard it as a longer-term store of value (instead of a quick transactional currency), so this is less of an issue than it was in the past.
These debates will inevitably continue, and it’s doubtful we’ll ever find a one size fits all solution.
Forks continue to happen on a regular basis, including Bitcoin Diamond and Bitcoin Gold.
It’s also unextraordinary for a forked cryptocurrency to go on to fork again. This has happened several times with Bitcoin Cash (more recently, Bitcoin ABC and Bitcoin SV). But the forks highlight part of the beauty of cryptocurrency — it is adaptable and users have the power to make new solutions that match their changing needs.
It’s also a reminder that money is not just about money.
It carries a lot of other meaning and significance, so conflict is inescapable. We all need to work together to figure out the best options for everyone.
What do you think of Bitcoin Cash? Do you think the fork has helped solve the scaling debate, or was it misguided? Let us know in the comments, or feel free to share your thoughts with us on Twitter.