A ‘civil war’ in the bitcoin community has resolved itself with two different currencies, but one appears to be the favourite to outstrip its new sibling.
Bitcoin as we know it is no more, because, as of 1.30pm IST, the currency has split in two. On one side is the technology favoured by traditionalists, called Segwit2x; and on the other side, the splinter currency, simply called ‘bitcoin cash’.
The fork in the bitcoin road has been two years in the making as the cryptocurrency has changed quite a bit since it was first launched in 2009.
Less than a decade later, investment has reached new levels, with a bitcoin passing the $2,000 mark earlier this year, showing signs that its popularity is here to stay.
However, this popularity has brought its own problems as, according to The Telegraph, the blockchain technology that allows bitcoin to be traded is being overburdened with transactions.
Why it was necessary
Currently, there is a limit of 1MB on blocks every 10 minutes, equating to seven bitcoin transactions every second, compared with standard currencies that can handle thousands of trades in the same amount of time.
This has led to a backlog in the system that is leaving more and more people facing delayed transactions – something obviously not ideal in the years to come, let alone in its current state.
Adopted by many of bitcoin’s biggest players, the Segwit2x technology creates a parallel blockchain working alongside the existing one, thereby easing the burden and allowing faster transactions.
It is then expected that the blocks will double in size by the end of this year and increase the speed further.
Bitcoin cash, however, proposes an easier concept to get your head around – instead of creating a parallel track, why not just increase each of the data limits from 1MB to 8MB?
While simpler, it appears as if bitcoin cash is already facing a massive uphill battle to win over users with reports coming through that, as of the time of writing, it is just slightly more than 1pc of the hash rate (rate of bitcoin mining) than that of regular bitcoin.
Not technically split … yet
Bitcoin cash isn’t technically live yet as it still has to achieve a block of more than 1MB in order for it to be officially split, according to CoinDesk.
This doesn’t mean that the currency is doomed to fail. In fact, Peter Borovykh of Blockchain Global told Business Insider that if it proves its worth, it could climb to the top of the digital currency heap.
“Bitcoin cash has a chance to become the dominant cryptocurrency contingent upon its ability to gain trust and support from both current and new players as well as security of its network,” he said.
“Due to (at least temporary) solution of the scalability issues, bitcoin cash could attract more new capital to the entire crypto space, thus helping increase overall market cap.”
For those who may have recently started investing in bitcoin – or those who got in there early – there are obvious concerns about what happens to their nest egg.
Thankfully, the largest online exchanges and wallet providers have said that are proceeding with the Segwit2x system, meaning they should be safe, although some have said they would be open to working with bitcoin cash if it grows in popularity.
Be prepared for a rollercoaster ride in the coming days and weeks.