Threat of a bit­coin split avoided, for now

Kuwait Times - - TECHNOLOGY -

On the eve of a ma­jor change in bit­coin, a threat of a split in the dig­i­tal cur­rency has been avoided - for now. A move by users to force a change in the com­puter code by Mon­day has worked. A ma­jor­ity of “min­ers” - the core bit­coin users who ver­ify bit­coin trans­ac­tions around the world - has sig­naled sup­port. Though the change is de­signed to im­prove ca­pac­ity on the in­creas­ingly clogged net­work, some min­ers had ob­jected be­cause it could re­duce trans­ac­tion fees they col­lect. The show of sup­port has helped re­verse a slide in the value of bit­coin from around $1,900 two weeks ago to roughly $2,800 on Mon­day.

How­ever, some un­cer­tainty still re­mains. A May agree­ment between large bit­coin com­pa­nies ef­fec­tively pushes the threat of a split off un­til Novem­ber. And one pro­posal to launch an al­ter­na­tive cur­rency, Bit­coin Cash, is sow­ing con­fu­sion and fears of scam trades. Here’s a look at the cur­rent dis­pute.

What is bit­coin, again?

Bit­coin is a dig­i­tal cur­rency that’s not tied to any bank or gov­ern­ment . Like cash, it lets users spend or re­ceive money anony­mously, or mostly so; like other on­line pay­ment ser­vices, it also lets them do so over the in­ter­net.

The coins are cre­ated by min­ers, who op­er­ate com­puter farms that ver­ify other users’ trans­ac­tions by solv­ing com­plex math­e­mat­i­cal puz­zles. Th­ese min­ers re­ceive bit­coin in ex­change. It’s also pos­si­ble to ex­change bit­coin for US dol­lars and other cur­ren­cies. Bit­coin has been touted as a cur­rency of the fu­ture, but so far it hasn’t proven very pop­u­lar as a way to pay for goods or ser­vices.

What’s be­hind the fuss?

In a word, speed. The bit­coin net­work is lim­ited in how quickly it can shuf­fle around dig­i­tal money. As bit­coin has grown, pay­ment de­lays have be­come more com­mon and wor­ri­some.

Some soft­ware de­vel­op­ers came up with a way to speed things up by reengi­neer­ing bit­coin’s uni­ver­sal ledger, a file called the blockchain. Sup­port­ers of the new method in­clude Mi­crosoft, the bit­coin ex­change Coin­base and a va­ri­ety of other bit­coin pro­po­nents who would like to see the cur­rency used more widely in com­merce. Re­form­ers had threat­ened to stop rec­og­niz­ing trans­ac­tions con­firmed by min­ers who hadn’t adopted the up­grade.

What would a split mean?

Gen­er­ally speak­ing, chaos - though mostly lim­ited to those who use or squir­rel away bit­coin. Peo­ple who use bit­coin couldn’t be sure which ver­sion they held, or what might hap­pen if they spent it or ac­cepted bit­coin as pay­ment.

Tak­ing bit­coin, for in­stance, could leave you with cur­rency you couldn’t spend freely - and that might dis­ap­pear en­tirely if it ended up be­ing the “wrong” kind. That’s one rea­son the com­mu­nity-sup­ported web­site Bit­ had warned users not to ac­cept any bit­coin up to two days prior to Mon­day’s dead­line and to wait for con­fir­ma­tion the sit­u­a­tion had been re­solved be­fore trad­ing again. But the change now has the sup­port needed to pro­ceed, so a dis­rup­tion isn’t likely this week.

What are the re­main­ing is­sues?

A separate group of de­vel­op­ers sought to solve the speed issue by propos­ing a new cur­rency called Bit­coin Cash. It ef­fec­tively re­wards every owner of bit­coin with an equal amount of the new cur­rency us­ing a sys­tem that can han­dle much higher vol­umes of trades. But some dig­i­tal cur­rency ex­change op­er­a­tors- in­clud­ing Coin­base and Bits­tamp - have said they won’t sup­port Bit­coin Cash. And Cor­nell com­puter sci­ence pro­fes­sor Emin Gun Sirer says savvy traders can game the sys­tem to cre­ate free money for them­selves. Bit­coin Cash was slated to launch on Tues­day. As of Mon­day the price of Bit­coin Cash fu­tures was about one-tenth of bit­coin it­self.

Tone Vays, a bit­coin an­a­lyst and con­sul­tant, says he thinks Bit­coin Cash is des­tined to be­come one of many al­ter­na­tive dig­i­tal cur­ren­cies known as “alt-coins.” He says the con­cept is sim­i­lar to Clams , dig­i­tal coins that were also awarded to bit­coin hold­ers in 2014 but now trade at about one-thou­sandth of bit­coin’s price. Once Bit­coin Cash went live Tues­day, peo­ple “will im­me­di­ately sell it for bit­coin,” he said Mon­day.

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