Bit­coin Likely to Split into Two, Thanks to Bit­coin Cash

As soon as the split takes place, most peo­ple will see their bit­coin hold­ings dou­ble, say ex­perts

The Economic Times - - Finance & Commodities -

Busi­ness In­sider

New York: Bit­coin will likely split into two sep­a­rate cur­ren­cies, and it’s all thanks to bit­coin cash.

For years, bit­coin power bro­kers have been squab­bling over the struc­ture of the blockchain net­work that un­der­pins the red-hot cur­rency.

On one side of this war, there are the so-called core de­vel­op­ers who want to keep the blocks that make up the net­work lim­ited in their size to pro­tect against hacks. On the other side, are the min­ers who want to in­crease the size of blocks to make the net­work faster.

In or­der to find some mid­dle ground, some busi­ness ex­ec­u­tives and min­ers came up with a pro­posal known as SegWit2x, which would in­crease the size of bit­coin blocks to 2 megabytes. And up un­til last week, it looked like nearly ev­ery­one was on board with that plan.

That was un­til bit­coin cash, an al­ter­na­tive to both the orig­i­nal bit­coin and the SegWit2x ver­sion, en­tered from stage left.

“Bit­coin cash ba­si­cally came out of nowhere,” Char­lie Mor­ris, the chief in­vest­ment of­fi­cer of Nex­tBlock Global, an in­vest­ment firm with dig­i­tal as­sets, said. “A group of min­ers who didn’t like SegWit2x are go­ing to opt for this new soft­ware that will in­crease the size of blocks from the cur­rent 1 megabyte to 8.” As a re­sult, a split in bit­coin on ap­pears to be very likely.

Ac­cord­ing to Mor­ris, as soon as the split takes place most peo­ple will see their bit­coin hold­ings dou­ble. But that doesn’t mean the value of in­vestors’ hold­ings will dou­ble. Mor­ris said that bit­coin cash (BCC) has been trad­ing in the fu­tures mar­ket for about $200 to $400. Thus, if a split were to oc­cur BCC would trade some­where in that range while the value of bit­coin would wit­ness a de­cline equal to the value of the new bit­coin.

The fork, ac­cord­ing to Mor­ris, will most likely re­sem­ble the Ethereum split. Bit­coin’s ri­val, Ethereum, ex­pe­ri­enced its own fork in 2016 , even­tu­ally lead­ing to the cre­ation of the ver­sion of the cryp­tocur­rency we know to­day.

“It will be sim­i­lar to what hap­pened with Ethereum when Ethereum came to the scene,” Mor­ris said. “The two cur­ren­cies mar­ket­cap equaled out to the mar­ket­cap of the orig­i­nal Ethereum.”

On the whole, most bit­coin en­thu­si­asts aren’t too con­cerned about a fork. “In gen­eral, I think the fork is a healthy process be­cause it’s sim­i­lar to how evo­lu­tion works in na­ture,” Yoni Ben Shi­mon, CEOat Match­pool told Busi­ness In­sider in an email. “And that is the main rea­son bit­coin will never die — it’s be­cause it can adapt it­self to changes.” Arthur Hayes, CEO of BitMex, a bit­coin de­riv­a­tive ex­change, said that he thinks a fork will ben­e­fit the cryp­tocur­rency in the long run, de­spite short term volatil­ity.

“There are peo­ple with bil­lions of dol­lars of skin in the game and they will ul­ti­mately go with the su­pe­rior bit­coin net­work, and then the mar­ket will fol­low,” Hayes con­cluded.

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