After months of buildup, fighting, and controversy, the potential forkers of Bitcoin have blinked. Thankfully, they’ve called off their plans to cause a potentially damaging and very contentious schism to the Bitcoin network. Today, several of the “Segwit2X” developers appear to have written an email canceling the much ballyhooed “upgrade” that was attempting to become the “real” bitcoin.
I wrote a very detailed article explaining what was happening with this potential fork and you can read that here to get caught up. Here’s a brief recap of how we got to where we are:
Bitcoin has been going through some ugly growing pains. Its network is full of transactions. Fees have been skyrocketing as a result. Bitcoin transactions that a few years ago were no more than a few cents are now regularly $3-5 dollars. This has killed Bitcoin’s usefulness for small transactions. After arguing online for years about how to solve the issue technically, a group of dozens of companies and mining pool operators came together in May to propose a compromise called “Segwit2X”. This would implement “Segregated Witness” and then three months later increase the block size to 2 MB from 1 MB. Both of these changes were supposed to increase capacity.
Segwit was implemented by late August via “soft fork”, which means that nodes on the network who don’t update their software are still okay, because soft forks are backwards-compatible. New features added in the fork still support all the old features in the previous software version. The fork that was coming next week and is now supposedly canceled was to be a “hard fork”, which means software prior to the fork would no longer be compatible with the changes made, in this case increasing the block size to two megabytes. In theory this should have doubled the headroom in the network, decreasing fees. However, the plans are now off, after multiple original signers of the “New York Agreement” have backed out.
Thank goodness. I’d hoped that Segwit2X would fail. We don’t need more competing bitcoin networks than we already have. Bitcoin already forked into two competing currencies for the first time in its near-decade of existence on August 1st when Bitcoin Cash was born. There’s a strong argument that Bitcoin Cash is the “real” Bitcoin, the one that most closely matches its anonymous designer’s original vision. Whether you agree with that or not, there’s no arguing that Bitcoin Cash has been a success. At the time of this writing, one Bitcoin Cash (aka BCH, or BCC) is worth about 8% of a Bitcoin Core (aka “Bitcoin”, or BTC). Bitcoin Cash is the number three cryptocurrency in the world by market cap, that is, the total global value of the entire cryptocurrency in question. Bitcoin Cash’s market cap right now is over 9.8 Billion USD. Bitcoin Core, the #1 crypto, has a market cap of over $120 Billion USD.
More importantly, Bitcoin Cash has already implemented a block size increase up to eight megabytes when it forked from Bitcoin Core back on August 1st. Its fees are already much lower than Bitcoin Core. Since Bitcoin Cash’s network is built to scale up to 8 MB blocks (the places where transactions are stored on the public ledger known as a “blockchain” that is the guts of the Bitcoin network), Bitcoin Cash should not create a “fee market” like happened to Bitcoin Core once its network became full. The fee market means people using Bitcoin Core are having to increase their fees to get their transactions processed sooner rather than later or even never. This is what is resulting in insane fees of, right now $4.90 for a median Bitcoin Core transaction. By comparison, today Bitcoin Cash’s median transaction fee is about $0.03.
Bitcoin Cash has a hard fork coming up in a few days, but it’s not contentious. Basically, they are upgrading the Bitcoin Cash software to adjust the mining difficulty every day rather than every two weeks, as is the case with Bitcoin Core.
And what about “Bitcoin Gold”, the second-ever hard fork that happened quietly at the end of October? Their blog says they are still in a test net. Bitcoin Gold can and should fizzle out. Its failure would prevent others from trying the same scheme. Bitcoin Cash came out and hit the ground running with mining support. It doesn’t appear you can even trade Bitcoin Gold (if you have it) yet, since its network isn’t operating publicly. Bitcoin Gold’s futures price is worth $135 at the time of this writing. Its a dud so far.
At $613 right now, Bitcoin Cash on the other hand is worth your time to extract from your old bitcoin wallets. Remember, when bitcoin goes through a hard fork, the network can split in two based on what the miners decide to do. So, if you had Bitcoin (what should probably now be referred to as Bitcoin Core, as I have through the article, but back then it was just, “Bitcoin”) before August 1st, then you should have an equal amount of Bitcoin Cash. Depending on the wallet(s) you are using, the process of getting access to your Bitcoin Cash may be more or less complicated. Some wallet providers will break out the Bitcoin Cash automatically for you, like Blockchain.info has now done (though its buried in the Settings on their web admin). You may want to google for specific instructions for your wallet regarding Bitcoin Cash. Some may not have implemented a simple method as-of-yet. If you have a non-Bitcoin Cash-supporting wallet where you wrote down the 12 backup words, you can try entering those in a Bitcoin Cash compatible wallet. If you’re stuck, you can always reach out to other local area bitcoiners for help, like the meetup group we have for the Keene, NH area. Or check out the NH Crypto forums here.
Interestingly, the mining profitability of both Bitcoin Cash and Bitcoin Core is right now about at parity. Now that the Bitcoin Cash network is going to be upgraded, supposedly, in less than a week it may be able to be even more competitive with Bitcoin Core’s network, meaning that if Bitcoin Cash becomes more profitable to mine, miners who are in search of profit (most of them) could move to Bitcoin Cash. This would do interesting things to the prices of both coins.
Though the plague of Segwit2X is behind us, the upcoming months and years will continue to be interesting times. Recently, the total market cap of all the world’s cryptocurrencies exceeded 200 billion USD. According to the charts, it exceeded 100 Billion USD for the first time in early June of this year. That’s just five months for 100 Billion more USD in value. The chart of the the total market cap for all cryptos is encouraging. Back in November of 2013, Bitcoin hit a then-all-time-high of around $1100 and proceeded over several months to fall down into the low $200 range. Lots of people felt burned on that dive, but others knew that if they held through it, they’d come out ahead in the long run. Time proved them right. But look at what more time has done – now that record spike and all the hullabaloo surrounding it in November 2013 is but a pebble in the road compared to the mountainous wealth accumulated now.
Whether Bitcoin Core stays on top forever or its displaced by a competitor like DASH or Bitcoin Cash or something we haven’t even seen yet, cryptocurrency is a tremendous success and it’s here to stay, in one form or another. You’d be wise to put some money into it that you can afford to lose. Because, you can’t predict the future, it *could* fail, whatever crypto(s) you choose. That said, things are constantly looking up over time, in my opinion. I intend to continue to hold, on behalf of the Shire Free Church, both Bitcoin Core and Bitcoin Cash. It should be an interesting fight for technical and financial dominance. Grab your popcorn.