Screengrab: Pixabay / geralt

The Facts

  • Bitcoin (BTC) reached an all-time high in its exchange rate after a user debate over scale led to the creation of a new version of the digital money. On Tuesday, bitcoin hit $3,522.09 US, according to Coin Desk
    • As of 10:30 AM (ET) Thursday, 10 August, one bitcoin was worth $3,464.24 US, according to Coin Desk.
  • Bitcoin (BTC), the cryptocurrency created by Satoshi Nakamoto (pseudonym) and released to the public in January 2009, “forked” on Tuesday, 1 August, resulting in the creation of a second cryptocurrency called Bitcoin Cash (BCC), according to Coin Desk.
    • Cryptocurrency is a completely digital asset exchanged as a form of money.
    • According to Bitcoin Wiki, not much is known about Satoshi Nakamoto’s identity or nationality.
    • Bitcoin and Bitcoin Cash are digital currencies that can be sent anonymously and directly from person to person, just like an exchange of cash in person. All individual transactions are recorded publicly on a digital ledger called the blockchain.
    • Coin Desk describes Bitcoin as:

“[…] a form of digital currency, created and held electronically. No one controls it. Bitcoins aren’t printed, like dollars or euros – they’re produced by people, and increasingly businesses, running computers all around the world, using software that solves mathematical problems.”

  • Coin Desk tweeted that the first Bitcoin Cash was “mined,” or acquired, shortly after 2:00 PM (ET) on 1 August.
    • One Bitcoin Cash was valued at $298.01 as of As of 10:3 7AM (ET) Thursday, 10 August, according to Coin Market Cap.
      • Note that while most exchanges have assigned the new cryptocurrency the symbol BCC, Coin Market Cap and a few other platforms have assigned Bitcoin Cash the symbol BCH to avoid conflict with other entities operating under the BCC symbol.
      • On the Coin Market Cap exchange, BCC was already assigned to tokens from an exchange called Bitconnect.

The Context

  • The BTC split resulted after Bitcoin “miners” disagreed on the best ways to advance the use of the digital money.
    • According to CNN Money, the primary issue with scaling BTC is that the Bitcoin blockchain cannot process enough transactions quickly enough to compete with other payment services, like credit cards.
    • Some Bitcoin users proposed changing the rules by which transactions are recorded on the public blockchain, in order to speed up transaction processing. This proposal was referred to as the “soft fork” by those in the Bitcoin industry.
    • When the “soft fork” didn’t happen quickly, interested users moved forward with creation of Bitcoin Cash, also known as the “hard fork” (which is what occurred last Tuesday).
      • The proposed rule changes for the Bitcoin blockchain are twofold: referred to as Segregeated Witness (“Segwit”) and Segwit2x, according to Coin Desk.
        • Segwit is a Bitcoin code optimization that would allow more transactions to be recorded on the same amount of digital space in the existing Bitcoin blockchain ledger by removing certain data from each transaction.
        • Segwit2x would go a step further than Segwit by doubling the size of each “block” or portion of digital space in the existing Bitcoin (BTC) blockchain ledger from 1 MB to 2 MB. It would take effect three months after Segwit is implemented.
    • The Bitcoin Cash blockchain can process transactions eight times faster than the Bitcoin blockchain because of the way the code for recording transactions is written, according to CNN Money.
      • If the planned rule changes take effect for Bitcoin transaction processing, the gap in speed between BTC and BCC are expected to reduce.
  • One potential problem facing BCC is that not all Bitcoin exchanges support the new cryptocurrency, according to the blog 99bitcoins.
    • These types of exchanges allow individuals and entities to buy and sell the cryptocurrencies using other forms of money.
  • The valuation of Bitcoin Cash remains uncertain at this time, according to Coin Desk.

Supporters of the Split

  • Linus Lindgren, strategic investor and advisor at BTCXIndia, told CNBC he hopes the split will free up Bitcoin and Bitcoin Cash users to focus on development of their respective cryptocurrencies, rather than arguing over scale. He said:

“[I]f both sides go back to coding instead of arguing, I think that’s likely to be positive for the ecosystem overall.”

  • Bitmain, a mining company which Coin Desk says inspired Bitcoin Cash, released a statement on 24 July that said:

“We are closely observing the ‘BCC’ movement and do not rule out the possibility of supporting both Segwit2x and BCC.”

Critics of the Split

  • David Farmer, Director of Communications of digital currency exchange Coinbase, said in a blog post on 27 July:

“In the event of two separate blockchains after August 1, 2017 we will only support one version. We have no plans to support the Bitcoin Cash fork. We have made this decision because it is hard to predict how long the alternative version of bitcoin will survive and if Bitcoin Cash will have future market value…

This means if there are two separate digital currencies — bitcoin (BTC) and bitcoin cash (BCC) — customers with Bitcoin stored on Coinbase will only have access to the current version of bitcoin we support (BTC). Customers will not have access to, or be able to withdraw, bitcoin cash (BCC)…

Customers who wish to access both bitcoin (BTC) and bitcoin cash (BCC) need to withdraw bitcoin stored on Coinbase before 11:59 PM (PDT) 31 July 2017. If you do not wish to access bitcoin cash (BCC) then no action is required.”

  • Co-founder and CEO of data and research company Brave New Coin, Fran Strajnar, told CNBC over email on 2 August:

“There’s no infrastructure available out of the box, to support BCC. The network needs further support and infrastructure needs to be as easy as bitcoin; otherwise it’s over for BCC.”

  • Bitcoin.com, which is a collection of miners that work togethers and is known as a “mining pool,” said in a public service announcement posted to their site:

“As we have previously stated, Bitcoin.com believes that behaving with integrity and upholding agreements made is always the proper course of action. As such, we continue to remain committed to supporting the Segwit2x proposal, which has received broad support from Bitcoin industry and community alike…

Due to significant demand from our users, the Bitcoin.com Pool will give mining customers the option of supporting the Bitcoin Cash chain (BCC) with their hashrate, but otherwise Bitcoin.com Pool will by default remain pointed at the chain supporting Segwit2x (BTC).”

Stephanie Haney contributed to this report. 

The Whim News Team

The Whim News Desk

We'd rather be second and accurate than be first and wrong. The Whim News Desk is a dedicated team of researchers and investigators committed to presenting the news without bias. Follow us @TheWhimOnline for daily news coverage without the spin!

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