The Bitcoin Cash Fork: What You Should Know

    • Leonard Butler
  • Bitcoin

The Bitcoin blockchain forked this summer, on August 1, 2017. This led to the creation of Bitcoin Cash.

Bitcoin Cash was created due to an argument over the bit size of the Bitcoin blockchain. The democratic element built into the blockchain allows nodes and mines the option to update blockchain protocols or not. When one group of the network updates to a new protocol while another team sticks with the original, a split occurs in the network, creating an alternative currency. The new currency uses the new, updated protocol while the original currency continues with the old, tried and true protocol.

The decision to fork came after a pivotal argument in the community: block size. The original Bitcoin blockchain had a 1mb block size limit, allowing for 4.4 transactions a second. This was implemented at first to mitigate the risk of spam transactions on the network, but over time it has become its most significant foil. Only allowing 4.4 purchases a second makes transaction time on the Bitcoin blockchain very slow and expensive. Users had to pay extra fees to speed up their transactions, keeping Bitcoin unnecessarily costly and out of reach for many. Attempts to mitigate this began in the form of a call for an increase of the bit size, but the community split over whether or not this was a good idea.

Mining is an essential part of the blockchain.  Without it, transactions wouldn’t get verified, and the blockchain wouldn’t move. Essentially, the public ledger system would stand still. Most miners were decidedly against the block size increase because they thought that transaction fees, paid for decreasing long transaction times for users, a lucrative business would diminish or worse, vanish. Arguments against this said that by increasing the block size, the network would be more scalable, which would mean an increase in transaction and thus, an increase in fees.

There were many attempts at a soft fork, but efforts resulted in a hard fork. The difference as described by Andreas Antonopoulos is, “If a vegetarian restaurant would choose to add pork to their menu it would be considered to be a hard fork. If they would decide to add vegan dishes, everyone who is vegetarian could still eat vegan, you don’t have to be vegan to eat there, you could still be vegetarian to eat there, and meat eaters could eat there too, so that’s a soft fork.” The proposal, by Bitmain, the creators of Bitcoin Cash, was User Activate Hard Fail. This answer allowed for those users and miners who wanted a more substantial bitesize to activate it, building a new blockchain that wouldn’t be compatible with the older Bitcoin.

Bitcoin Cash is in some regards successful. It is the third largest cryptocurrency by market capitalization but has less than ten percent of the market capitalization as Bitcoin. Bitcoin cash transaction times are much quicker, due to incentives from the cryptocurrency for miners. While many wonder the future of Bitcoin Cash, it remains popular among exchanges and wallets.

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