Bitcoin’s Split


 

Following a long series of debate within the bitcoin community over the cryptocurrency’s future, Bitcoin has split into two. The split doubled the holdings for investors who have held their bitcoin on an exchange, or in a wallet, that backed bitcoin cash before the split. The result, one coin on the original Bitcoin network, and a second coin on the new Bitcoin cash network. Those backing the new currency say it is necessary should Bitcoin look to have any impact o how the world uses money.

The two coins share the same cryptographic credentials, but right now have a significantly different value should one decide to sell them for cash. On Wednesday, a standard Bitcoin was worth ~$2700, and a unit of Bitcoin Cash was worth around $600.

There a variety of exchanges and wallets in which investors can hold their currency, however a number of big name exchanges have refused to back Bitcoin Cash, leaving some investors with no change to the quantity of their holdings. Coinbase, which serves almost 9 million individuals throughout 32 countries, was one of the big name exchanges which refused to back the split.

“In the event of two separate blockchains after August 1, 2017 we will only support one version,” the director of Biz Ops at Coinbase David Farmer wrote in blog post. Framer went on to say that the exchange has no plans to support the bitcoin cash split in the future, citing the difficulty in predicting how long the alternative version will survive.

Getting Bitcoin Cash off the ground was an achievement on its own, but the question now is whether its supporters can achieve the same success the pre-split Bitcoin has. If Bitcoin Cash fails to attract a decent amount of users and businesses, the network is at a big risk of failing. Should the new cryptocurrency succeed in attracting a critical mass, its future has the potential to be bright.

Bitcoin Cash was created as a solution to scaling issues the standard Bitcoin faces. Bitcoin supporters have long been worried about growing congestion in the mainstream Bitcoin network, which has led to slow payment processing and high fees.

Bitcoin has been built on what is called a blockchain. The Bitcoin blockchain is a public ledger that contains all transaction data from anyone using Bitcoin. Transactions are added to blocks that make up the chain, and each transaction must be recorded on a block. The issue Bitcoin has had is these blocks are now full, resulting in slow transaction time. Right now there are about an average of 1700 transactions that can be saved per Bitcoin block, up to 7  transactions per second. Because of this the Bitcoin blockchain has become too congested, resulting in transactions that could take hours to be approved.

The Bitcoin community has been debating on rule changes that will address these issues, in attempt to allow people to put more transactions on each block. Small-block supporters have raised concerns that raising the block limit will raise the storage and bandwidth costs for those participating in the network, forcing out ordinary users; ultimately leading to a network dominated by a few, making it more susceptible to government control and regulation, which is exactly what Bitcoin was created to avoid. However, big-block supporters have argued that since storage and bandwidth costs have fallen so quickly that this would not be a serious concern.

For many in the Bitcoin community the proposed rule changes were not enough; resulting in the creation of Bitcoin Cash by supporters of the big-block chain. The creators have released a completely new software that allows for eight times the number of transactions per block, is secured by the same cryptographic keys, and has the same transaction history prior to August 1, 2017. This means Bitcoin Cash could process transactions faster, removing an important obstacle that has arguably hampered the growth of the Bitcoin network.

Creators of Bitcoin Cash view believe their creation is not an alternative to Bitcoin, but its next stage of growth. They hope the higher block limit will allow Bitcoin Cash to eventually overtake the standard Bitcoin network in transaction volume, making it the most popular version.

Like Bitcoin, Bitcoin Cash will rely on the community it crates; its success determined by whether or not people decide en masse to create the blocks for the Bitcoin Cash blockchain. However, since not all Bitcoin exchanges will accept the new currency, potentially hindering the widespread adoption.

Right now, Bitcoin Cash is now the third largest cryptocurrency, and is trading at ~$628 a coin. The combined value of the two currencies is now higher than the value of the original, pre-split version.

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