BITCOIN MAKES A HARD FORK
Bitcoin wallets double with new bitcoin cash
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.