After two years of disagreements over network scalability issues, a user-initiated hard fork occurred, creating two versions of Bitcoin: the existing BTC we all know and love, and the new version called Bitcoin Cash (BCC).
Bitcoin Cash, which increases the blocksize to 8MB, occurred because a faction of the Bitcoin community didn’t approve of the SegWit2x proposal, a way to gradually scale Bitcoin by first segregating digital signatures from blocks (this creates the capacity to handle about 40% more transactions and is also an important step towards other scaling solutions like the Lightning Network), followed by a doubling of the current blocksize limit to 2MB.
Some exchanges, like Coinbase and BitMEX have made it clear they will not support Bitcoin Cash; others, like OKCoin and Kraken have informed users they will list the new token.
Commenting on how will this affect the future of Bitcoin and other cryptocurrencies, Aragon Co-Founder and Project Lead Luis Cuende, said: “I think it will be a huge stress test on community governance — forks are a way to vote, to reclaim independence, and I really look forward to seeing how further development will continue and how the community will react.”
Asked what consequence this will have on investors, he added: “It depends, but probably making BTC holders more wealthy, since Bitcoin is better with SegWit. Plus, the people that were actively trying to stop development on Bitcoin and centralise it, will now have their own chain to do whatever they want with it. I think this will positively impact Bitcoin.
“Short term, I believe Bitcoin Cash will be around for some time, but in the long term, I don’t see Bitcoin Cash going anywhere. Probably a fatal bug will crash the whole network (it already happened with Bitcoin Unlimited, Cash’s predecessor) or people will just lose interest in a currency engineered to look decentralized while being totally centralised,” said Cuende.
Dash Core CEO Ryan Taylor, pointed out that Bitcoin is not forking, but rather the distribution of an altcoin to Bitcoin holders. “There are many misconceptions about Bitcoin Cash and what it represents. To be clear, Bitcoin is not forking. Rather, some developers have created a new digital currency and formulated an effective means of distributing it, by giving it to everyone with an existing Bitcoin balance.
“Nonetheless, the multi-year dispute over how best to increase Bitcoin’s transaction capacity is what led to this moment. Bitcoin lacks an effective governance model to resolve contentious issues, and this is clearly deterring technological progress. When an issue as simple as whether to increase the block size can lead to years of stagnation, something needs to change. In my opinion, governance is an issue that the Bitcoin community needs to take more seriously.”
While the markets will ultimately decide, Taylor doubted Bitcoin Cash will be successful in the long-term. “It may have increased capacity, but several issues remain. First, Bitcoin Cash has not solved scaling. It has merely kicked the can down the road with slightly larger blocks, but still lacks a credible technology to scale to massively larger numbers of users.
“Second, Bitcoin will retain the network of integrated services that make the Bitcoin network useful to businesses and consumers. With no substantial enhancements compared with Bitcoin, Bitcoin Cash is unlikely to be integrated into those same services, given the substantial expense for businesses operating them to do so.
ZenCash Co-Founder, Rob Viglione, hailed the forward progress that will ensue: “The good news is that we’ll see experimentation along two distinct preference clusters. Rather than forcing one way or another, we can see how each idea unfolds in real life. This is the major advantage of cryptocurrency markets: Instead of bickering over theory and assumptions, we can just bring ideas to market and see how they perform.
“Still, there are pros and cons to everything. The downside of a split is that Bitcoin loses part of its ecosystem, and network effects are so important to this industry. That said, this isn’t a zero-sum game and it’s more than possible to see both chains flourish in parallel.”
Node40 CEO Perry Woodin, added: “People who are going to benefit from Bitcoin Cash are the ones who see it as free money, so they can then invest in something else. It’s going to be a race to see who can sell it the fastest.”
Coinsource CEO Sheffield Clark said: “When we look back 30 days from now, this is essentially going to be a non-event. We have absolutely no plans to integrate Bitcoin Cash at our machines at this time.