On November 15, 2018, Bitcoin Cash (BCH) split in two and the long-awaited Bitcoin Cash hard fork finally took place.
Now, Bitcoin Cash completing a hard fork isn’t actually major news. Not usually, at least. The Bitcoin alternative (itself born from a hard fork) performs scheduled hard forks to implement security and mining protocol upgrades throughout the year. But this one was different.
Let’s take a look at what’s going on with Bitcoin Cash, Bitcoin ABC, Bitcoin SV, and the hard fork dubbed “The Hash War.”
Why Did Bitcoin Cash Need a Hard Fork?
A “hard fork” is a divergence of two competing ideas in a single cryptocurrency. If there is enough support to take a cryptocurrency in a different developmental direction, the users and developers that support that idea can fork away from the original project. Then, the developers and users develop the cryptocurrency separately as they see fit.
Bitcoin Cash is itself a hard fork of the Bitcoin blockchain, with its own development pathway. The Bitcoin Cash development team increased the block size from 1MB to 8MB, increasing network capacity and increasing scalability (the block size later rose to 32MB). However, that’s where the ongoing Bitcoin Cash hard fork tribulations stem from: multiple development groups are attempting to take BCH in different directions.
Bitcoin ABC vs. Bitcoin SV
There are two competing visions for the future of Bitcoin Cash. Each development path has the backing of some pretty big names in the crypto world.
Important reading: the Bitcoin ABC Roadmap
Bitcoin Cash evangelist, Roger Ver, and Jihan Wu co-founder of Bitmain, strongly support BCH in its current guise, arguing that it remains the true vision of Satoshi Nakamoto. That said, Bitcoin Cash would also undergo a name change post-fork, changing its name to Bitcoin ABC. Bitcoin ABC stands for Adjustable Blocksize Cap.
It isn’t just a straight continuation of Bitcoin Cash into Bitcoin ABC. The Bitcoin ABC roadmap sets out some important changes to the protocol that should allow further expansion, a reduction in network bottlenecks, and lays “the technical groundwork for massive future on-chain scaling.”
The reasons I started investing in Bitcoin in 2011 are the exact same reasons I’m investing in Bitcoin Cash today. pic.twitter.com/OpOV7OKeGN
— Roger Ver (@rogerkver) September 5, 2018
Important reading: the Bitcoin SV Roadmap
On the other side of the fork are self-proclaimed Satoshi Nakamoto pretender, Craig Wright, and gambling billionaire, Calvin Ayre. Wright, who has made multiple claims that he is the developer behind the Satoshi Nakamoto pseudonym, put forward a vision that involves increasing the Bitcoin Cash blocksize from 32MB to 128MB. The post-fork coin would take the name “Bitcoin SV,” from the nickname Satoshi’s Vision.
Bitcoin Unlimited, another hard-fork that increases blocksize, actually proposed an update to their protocol that would have integrated key features from both proposals.
I would like to propose a strategy for Bitcoin Unlimited for the near future. In essence, our message will be “run Bitcoin Unlimited to vote for compromise.” The Bitcoin Unlimited client will incorporate features from both organizations and allow these features to either be activated via BIP135 (a generalized form of BIP9 miner voting via version bits), explicit configuration, or (development time and feasibility permitting) emergent consensus.
The Bitcoin Unlimited statement also notes that the pre-fork Bitcoin Cash “periodic hard-fork is being used to ‘bundle’ individual organizations’ favorite features into a single ‘swallow the sweet with the bitter’ package,” illustrating where much of the ill-feeling between the divergent ideas for the cryptocurrency stem from.
Bitcoin Cash Hard Fork and the Mass Sell-Off
With the two camps unable to reconcile differences in their respective visions, the hard-fork took place as scheduled. On November 15, Bitcoin Cash split into Bitcoin ABC and Bitcoin SV. So, what happened next?
Well, for one, Bitcoin Cash took a price hit:
The hard fork presented cryptocurrency miners with a problem. Those already mining BCH had to choose between Bitcoin ABC or Bitcoin SV, splitting mining power between the new blockchains. Ultimately, whichever cryptocurrency proves the most profitable will attract the most hash power.
However, the Bitcoin Cash hard fork had another unintended consequence.
Bitcoin was already teetering on the brink of another large sell-off. Bitcoin owners already watched the price of Bitcoin plummet from above $6,000 straight through the “psychological price barrier” of $4,000, finally resting around the $3,750 mark. (The BTC price is $3,741 as of this writing.) To be clear, the price of Bitcoin was already heading south, but the uncertainty of the Bitcoin Cash/Bitcoin ABC/Bitcoin SV hard fork added fuel to the fire and helped it on the way.
Compounding the issue is the diversion of mining hash power from Bitcoin to the new cryptocurrencies. Both sides of the Bitcoin Cash hard fork called upon and used large mining pools to give their preferred coin a hash power boost in the early moments of the fork.
Which Is Better: Bitcoin ABC or Bitcoin SV?
As of this writing, it appears that the “original” idea of Bitcoin Cash—that’s Bitcoin ABC—is winning the hash war.
Since inception, BCH ABC has accumulated more proof-of-work than BCH SV. Consequently, the former won the support of several major cryptocurrency exchanges, including Bittrex, Kraken, Bitstamp, and Coinbase. Furthermore, the influential CoinMarketCap merged their BCH and BCH ABC listings, while hardware wallet Ledger now only lists BCH ABC.
The crypto exchange listings aren’t all bad news for BCH SV. Binance CEO, Changpeng Zhao, announced that the massive crypto exchange would support both coins under individual tickers:
One thing about the fork, these symbol names will stay. Binance will not support changing of trading symbols later. If anyone asks for it later, let's refer them back to this tweet. https://t.co/j1h3gb4edQ
— CZ Binance (@cz_binance) November 16, 2018
BCH SV also suffered a different setback when it emerged that they would need to “reorg.” A reorg is a basic term given to a blockchain reorganization. The issue? Coingeek, a cryptocurrency news outlet and supporter of BCH SV, orphaned its own blocks.
Orphaned blocks aren’t unusual, predominately occurring when two miners find a new block at a very similar time. However, it is unusual for a single organization to orphan their own blocks. While there is no suspicion of any wrongdoing regarding Coingeek, it demonstrated that the Coingeek mining operation had enough BCH SV hashing power to revert and modify transactions on the BCH SV blockchain. (If this happened on the main Bitcoin blockchain, there would be a huge amount of panic.)
And finally, if the BitMEX research team is correct, BCH SV miners are sitting atop a mountain of loss:
Hash war estimated costs live update
* Estimated leasing fees: $11.8m
* Combined gross losses: $8.9m
Even assuming cheap energy costs, SV miners have a negative gross margin of 441% & $2.2m of gross losses. pic.twitter.com/ALNMzg5Mgu
— BitMEX Research (@BitMEXResearch) November 21, 2018
Bitcoin Cash: The Choice Is Yours
You now have the choice to support either project. Read the linked roadmaps for each project and decide upon the merits of supporting Bitcoin Cash under its new guise of Bitcoin ABC, or switching to the larger block size offered by Bitcoin SV.
Want to get in on the action? Here are the best Bitcoin mining pools where you can start earning cryptocurrency for yourself.
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