BIT­COIN MAKES A HARD FORK

Bit­coin wal­lets dou­ble with new bit­coin cash

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Bit­coin has now be­come bit­coin and bit­coin cash (name could have been less con­fus­ing, guys), wal­lets be­ing pop­u­lated with an equal num­ber of the new ver­sion, cre­at­ing $4 bil­lion of cryp­tocur­rency overnight. The blockchain has been cloned, known as a hard fork. The na­ture of the math be­hind bit­coin means that trans­ac­tions, and hence new coins, be­come in­creas­ingly more con­vo­luted to make. The orig­i­nal specs have slowed this to a crawl. Bit­coin cash uses the same ba­sic blockchain sys­tem as bit­coin, but with much big­ger blocks, up from 1MB to 8MB. The bit­coin min­ers now have some­thing po­ten­tially prof­itable to chew on again.

The ar­rival of bit­coin cash caused a spike in bit­coin’s value, to near $3,500. But, given the volatil­ity of bit­coin, printed val­u­a­tions are ephemeral.

The split mir­rors that of bit­coin’s founders and de­vel­op­ers as to how to ad­dress the speed prob­lem. A large block size eats into bit­coin’s dis­trib­uted na­ture as hard­ware re­quire­ments in­crease, erod­ing its demo­cratic na­ture. A ri­val camp backed an up­date due this fall, called SegWit2x, which also in­creases block size, but in­cludes off-chain trans­ac­tions. This has caused rip­ples, and may lead to an­other split, as those fol­low­ing the orig­i­nal prin­ci­ples rebel.

Bit­coin has weath­ered storms be­fore. Last year saw the de­par­ture of one of the founders, Mike Hearn, who claimed bit­coin was “a failed ex­per­i­ment,” and it was in the hands of a small group of peo­ple run­ning the big ex­changes and de­vel­op­ers, the Bit­coin Core, which goes against the found­ing prin­ci­ples. He is also said to have sold all his coins, a de­ci­sion he might now re­gret.

Money is about trust, and bit­coin’s jour­ney to ac­cept­abil­ity has been tor­tu­ous, but in­ex­orable. Even the fall of the Ja­panese ex­change Mt. Gox, which had 650,000 coins stolen, didn’t faze in­vestors much. In July, the FBI caught up with Alexan­der Vin­nik, who al­legedly laun­dered mil­lions through the BTC-e bit­coin ex­change, in­clud­ing pro­ceeds from the Mt. Gox hack. Cryp­tocur­ren­cies are here to stay, but need sta­bil­ity, an elu­sive qual­ity, for wide­spread ac­cep­tance.

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