Bitcoin cash: fork, block, split and the noise
At a time when the government and regulators are trying to make sense of bitcoin, an offshoot of the digital currency, called bitcoin cash, emerged on 1 August. Bitcoin holds a market share of 40-50% in terms of value in the world of crypto currencies. According to Coinmarketcap.com, a website that tracks crypto currencies, bitcoin tops a list of over 1,000 digital currencies that existed as of August 4, followed by ethereum and ripple. Let’s make sense of what is happening in the crypto world.
BITCOIN CASH
Bitcoin cash was created by forking or splitting bitcoin. According to Coinmarketcap.com, the value of bitcoin cash is $370 while bitcoin was valued at $2,760 as of August 4.
The main difference between bitcoin and bitcoin cash is the increase in the block size and code. For instance, the block size of bitcoin is 1 MB while bitcoin cash has a block size of 8 MB. Why is there bitcoin cash now when you have a bitcoin already? “The new cryptocurrency has emerged from a different school of thought.One way to explain the two sets of currencies would be an analogy of road—bitcoin being the expressway with bitcoin cash emerging as a small adjacent lane. Now it is up to you which road you want to take,” said Sandeep Goenka, co-founder, Zebpay, an app-enabled bitcoin exchange in India.
A section of bitcoin miners in the cryptocurrency world believe in increasing the block size and in the new version of bitcoin but a majority don’t. “However, when you increase block size without demand it increases the cost of handling the network and makes it more expensive,” said Goenka.
The term splitting can be confusing. In the equity market, a stock split simply means that if a stock at ₹10 was split into two, you would have two stocks of ₹5 each. In bitcoin, splitting refers to moving away from the current path to a new one, the outcome of which is a new currency. In fact in builds a different ecosystem controlled by two protocols. “This is not the first time a cryptocurrency has split. For instance, ethereum was split in August 2016 and hence gave rise to ethereum and ethereum classic,” said Sathvik Vishwanath, co-founder and CEO of Unocoin. Ethereum is currently trading at $225, while ethereum classic is trading at $15.
UNCERTAINTY AROUND BITCOIN CASH
Not all exchanges are ready with technology that can handle bitcoin cash. “As of now none of the exchanges in India support bitcoin cash. It is still too early to say whether the valuation of bitcoin cash is correct. We are monitoring bitcoin cash and we will take a call whether to offer bitcoin cash based on volatility and demand. Right now it is too early,” said Hesham Rehman, co-founder and CEO, Bitxoxo Bitcoins Pvt. Ltd.
Bitcoin miners and exchanges in India expect to get clarity on bitcoin cash by end of the month. Investing in crypto currencies is not recommended. You need to remember the basic investment rule—if you don’t understand a product, you should not invest in it.