Another Fork in the Road for Bitcoin?

Another Fork in the Road for Bitcoin?


09/28/2017


JitcoinJack Liao, CEO of Hong Kong mining firm Lightning ASCI is slated to launch a new bitcoin breakaway currency called bitcoin gold, with the cryptocurrency being open to exchanges on November 1. This new cryptocurrency takes aim at the large mining firms that dominate bitcoin and attempts to open up mining to a wider range of participants. If this goes forward, there will be four cryptocurrencies with a common bitcoin lineage. To understand how this works, let’s take a step back and look at the most recent bitcoin rebellion.

Bitcoin Cash

In early August, bitcoin cash (BCH) split off from bitcoin (BTC) in order to create what the proponents considered improvements to the blockchain that bitcoin runs on. If you’ve read up on blockchain basics (and if you haven’t, do so now), you’ll understand that every cryptocurrency is tied to one linear chain of transactions made up of blocks. In the case of bitcoin, these blocks contain the details of every transaction made since the inception of bitcoin. All of the blocks are created using the exact same code and follow the exact same rules.

The creators of BCH made several changes to the rules including an increase in the block size from 1MB to 8 MB designed to increase the speed at which transactions can take place. Like BTC, the max supply of BCH is set at 21M. This change in the rules is known as ‘hard fork’ and cannot be undone. BTC and BCH share a common transaction history up to the point of the split and thereafter operate independently.

In order for BCH to have value, miners, exchanges, and wallets had to sign on to the new ‘altcoin’, which they did. This means that bitcoin cash is the first successful ‘hard fork’ in the Bitcoin road. As of publication, BCH is hovering at around 10% the value of BTC. The calculator below shows the current value.

[currencyprice currency1="btc" currency2="bch" feature="prices"]

The creators of BCH made several changes to the rules including an increase in the block size from 1MB to 8 MB designed to increase the speed at which transactions can take place. Like BTC, the max supply of BCH is set at 21M. This change in the rules is known as ‘hard fork’ and cannot be undone. BTC and BCH share a common transaction history up to the point of the split and thereafter operate independently.

In order for BCH to have value, miners, exchanges, and wallets had to sign on to the new ‘altcoin’, which they did. This means that bitcoin cash is the first successful ‘hard fork’ in the Bitcoin road. As of publication, BCH is hovering at around 10% the value of BTC.

Bitcoin gold would also represent a hard fork in the bitcoin blockchain. The ideology behind bitcoin gold is to create a cryptocurrency that better aligns with the goal of decentralization. But wait – isn’t cryptocurrency already decentralized? Well yes. Compared to fiat currency it definitely is, but purists believe that large mining companies have too much power in the bitcoin universe. Bitcoin gold changes the bitcoin algorithm (hence the fork in the road) to allow for mining with graphics cards, which in theory could open up mining to more participants. Skeptics dismiss the notion that bitcoin gold can truly disrupt the current mining paradigm.

If you already own bitcoin, you’ll own an equivalent amount of bitcoin gold once the split happens. What it’s worth is anyone’s guess. Check out this exclusive video by Cryptoguyz for more insight on the split and what it might mean.