Bitcoin Cash: genie released from the bottle

Source: Thomson Reuters



On July 14, quite extensive material was published on Geektimes with an assessment of the development of Bitcoin infrastructure. Then it was said that from August 1, the cryptocurrency can be divided into two branches, which will evolve independently or almost independently from each other. One of the problems that led to the separation is the increase in the time of confirmation of a transaction in the Bitcoin network.



Before the separation, the block size was 1 megabyte, and the transaction processing speed was no more than 7 units per second, while in the Visa network this speed is much higher - tens of thousands of transaction units per minute (about 2 thousand per second in normal mode). In general, as expected, the separation took place on August 1. There was a new cryptocurrency, which was called Bitcoin Cash.

Why separation occurred

Around the middle of July, the developers agreed on the need to update the Bitcoin protocol using SegWit2x (Segregated Witness) technology. Such a solution was proposed by the Bitcoin Core development team, it was supported by the largest mining pools from China. The new technology made it possible to remove a certain part of information from the block, including transaction signatures, while simultaneously increasing the throughput of the entire chain.



Most miners agreed to update the protocol, which promised to improve the performance of the entire network. But some of the large mining companies supported the division. Most supporters of this position are from China, it can be said that the Chinese miners caused the Bitcoin fork (by the way, not everyone agrees that this is a fork). But, in general, this is true. So, on August 1, the Bitcoin Cash cryptocurrency was born with a block size of 8 MB. The separation took place at block number 478558. Accordingly, both versions of bitcoin have common old transactions, but all new operations are different. At the same time, the block size of the new currency is 8 MB. Interestingly, the Chinese were the first to carry out operations with this cryptocurrency too.



"A group of miners who did not like the option using SegWit2x decided to increase the size of the block of cryptocurrency from 1 MB to 8 MB," commented Charles Morris, a representative of NextBlock Global investment company.

Disaster or not?

No, with the exception of the "redistribution of spheres" of influence and changes in some of the principles of the infrastructure in the world of cryptocurrency, nothing like this happened. In principle, the separation was expected long ago, and they were preparing for it. Here, the words “who did not hide, I am not guilty are fair to the full. Not for nothing, before the separation of Bitcoin users, they were asked not to accept and not send payments on July 31 and August 1. No one knew exactly what could happen - perhaps, if you sent a certain amount of money, it simply would not reach the addressee, or it would, but then it would disappear directly from the wallet.



Before the division, the Bitcoin rate reached $ 2,900, although then it fell slightly. The volatility of the cryptocurrency was very high, the rate of both units is still not very stable. The same Bitcoin Cash initially cost $ 300, then its rate rose to $ 700 and fell again, although not to its original position, but to about $ 500.



At the time of August 2, Bitcoin Cash climbed to the third place among cryptocurrencies. On the first and now is Bitcoin (original), on the second - Ethereum.





Bitcoin course before splitting. Source: Bloomberg



"The Bitcoin rate has risen before dividing up on expectations of additional profits by cryptocurrency holders," says one of the market participants. "This has already happened in other blockchains. This is a common market phenomenon when you expect additional money."



Some of the exchanges, just before splitting Bitcoin, remembering the problem described above, stopped performing operations with cryptocurrency, including freezing acceptance and issuance of deposits, but rather quickly resumed all operations (literally the next day after separation). As mentioned above, part of the Chinese stock exchanges immediately began to conduct operations with a new cryptocurrency. Cash is supported by companies such as OKCoin, Huobi, BTCCPool, Bitmain, F2Pool, BTC.Top, ViaBTC, BiXin, BW, 1Hash, Canoe, BATPool, Bitkan and others. On the other hand, no less than those who decided not to work with Bitcoin Cash until the situation stabilizes. These include the Coinbase Exchange, a fairly large player in the cryptocurrency market.



“On the eve of the separation on August 1, we say that we will support only one version. We have no intentions to work with a bitcoin fork, ”said the head of Coinbase.



It should be noted that after the division of Bitcoin, all owners of classic cryptocurrency became Bitcoin Cash owners as well. And since 16.48 million bitcoins were in circulation, the number of new cryptocurrencies was similar. According to Katie Wood, a representative of ARK Investment Management, the new and old cryptocurrencies will receive their purpose in the blockchain world, no one will be left behind.



By the way, after the split, a new software client was introduced, which was called Bitcoin ABC. Some nodes will be updated, and it will use it, while others will remain "at their own." Each node will decide what to do, updated or not, independently.

What's next?

Experts in cryptocurrency believe that in the future the original Bitcoin will develop faster than fork. This will mean that the “big brother” will for a long time be a more attractive target for investors than Bitcoin Cash. But if enough miners and exchanges pay attention to the new cryptocurrency, then its development will also be fast. Miners before all other participants in the cryptocurrency market will determine the future of the new Bitcoin.



In addition, those who trade virtual coins also contribute to the development of a new cryptocurrency. So, some users of the Bitcoin network are buying up Bitcoin Cash en masse, in the hope of increasing the rate and earning money, and not a bad one.



The number of market participants that support Bitcoin Cash is growing. So, if immediately after the separation, a new cryptocurrency was supported by 3% of miners, but now there are already about 10% or even more.



However, at the moment, not tens and hundreds, but units of large pools are engaged in mining a new cryptomonet. There are three of them. Two are ViaBTC, plus the company ViaBTC. But the third is still unknown. At the same time, the third pool accounts for more than 77% of the network's hashrate.







According to data released by Bitcoin.com representatives, representatives of MC Pool from Hong Kong have mined new cryptocurrency. They themselves say they do it more for fun than for profit. At the same time, the pool itself is located in the building of the Kwong Wah Mansion in Hong Kong.







Next to this building is a new shopping center, owned by MC Pool, so the company minits Bitcoin Cash also for the sake of advertising. A few days after working with the Bitcoin fork, the MC Pool management announced that it was not profitable to extract this cryptocurrency, because the complexity of the network was the same, but the reward was less. "The reward here does not correspond to the complexity of mining," said the owner of the MC Pool. He also added that he fully admits that the fork will exist without any problems, gradually evolving. “Yes, something similar has happened with other cryptocurrencies. They are quite able to coexist, ”he said.





As far as can be judged, it is here that the lion’s share of Bitcoin Cash is mined.



Accordingly, it is more profitable for miners to get the original Bitcoin, which, moreover, is trusted by most companies that work with the blockchain. This is one of the problems that stand in the way of the development of Bitcoin Cash, and it is quite serious.



As far as can be judged, in the near future Bitcoin Cash will be weaker than the main cryptocurrency, but still nothing threatens the existence of the alternative. If the miners support Cash, then everything will be fine. And the same company MC Pool, despite the management's statement about the cessation of mining, seems to continue to carry out this work, and it is clearly not for the sake of advertising, since all operations are carried out without much publicity.



Anyway, the genie is really already out of the bottle, there is no going back.