The Bitcoin fork

Reported by: |Updated: August 23, 2017

On 1 August cryptocurrency Bitcoin split into two. One of the resultant entities retained the Bitcoin name, while the other went by the moniker Bitcoin Cash. The immediate reason for the split is the debate over the cryptocurrency’s future – one group stating the underlying technology is not capable of scaling.

Bitcoin has been improving over a period, its value climbing up from $500 per unit in 2016 to around $3500 now. This led to substantial increase in the volume of transactions but apparently the technology could not handle this volume. This led to groups emerging among the developers and supporters of the cryptocurrency. One group, essentially those who were core developers, opted for a gradual approach that would first make more space in the ledger by shuffling how things were stored. And then as a second step, increase the size of the ‘blocks’ or groups of transactions that were added to the blockchain (the ledger that records all of Bitcoin’s transactions). The existing technology supported only 7 transactions per second but what was required was thousands of transactions per second. The other group did not agree to this route and therefore developed a different design which was a major divergence from the existing Bitcoin blockchain. Since the two groups did not agree on a middle course, the solution was a split. The latter group, therefore, created its own version of Bitcoin, Bitcoin Cash. The split did not create any upheavals for the original Bitcoin as its value remained almost same but Bitcoin Cash was way behind – at around $600.

Cryptocurrency experts define Bitcoin Cash as a clone of the original but they are not sure about its future as they feel it will depend on increase in the number of users and investors supporting it. They also point out that nothing has gone wrong after the split. Bitcoin miners are continuing, exchanges are exchanging and users are trading as well as using their bitcoins as they want.

They, however, point out to a possible initial advantage Bitcoin Cash may have over Bitcoin. The bigger transaction blocks that the former has would facilitate faster and cheaper transactions. But Bitcoin developers too are not resting on their laurels. They are planning another upgrade after the first part of the so-called SegWit2X protocol upgrade, which is now steady. To that extent Bitcoin Cash may lose that advantage.

These developments are not likely to hinder the process of Bitcoin emerging into the financial mainstream. Already, there are efforts made to create anti-money laundering, consumer protection and technology standardization processes in the digital currency space. Time is not far off when such efforts would cover the cryptocurrency space as well.