The upcoming hard fork of the Bitcoin Cash network scheduled for November 15 will prove to be a difficult test for the community of the fourth-largest coin on the market. Many fear that the system will break up into two competing chains as a result of the update, each of which will offer its own version of the further development of the network. DeCenter figured out the essence of the conflict and what to expect from the upcoming update of the Bitcoin Cash network.
The Bitcoin Cash cryptocurrency was supposed to be an improved version of Bitcoin, whose bandwidth had ceased to meet the growing demands of the market. Many Bitcoin users have seen a fundamental problem in a limited block size not exceeding 1MB. To solve this problem, the crypto community had proposed two options:
Bitcoin Unlimited to remove the limit of 1MB. Many miners supported this decision because in this way, not only the long queues of transactions were eliminated, but their profitability increased due to an increase in the total transaction fees per block.
Segregated Witness (SegWit) to store data outside the blockchain. Instead, the information had to be recorded in separate files outside the blockchain. This way, more transactions could be placed in one block, and the speed of confirmations could increase.
As a result, the crypto community came to a compromise in the form of the SegWit2x protocol, which proposed to store part of the data outside the blockchain and increase the block size to 2MB. On July 20, 2017, 95% of miners voted in favor of implementing the SegWit2x protocol, but without immediately increasing the block.
In turn, the development team led by former Facebook engineer Amaury Sechet announced the rejection of SegWit2x in favor of the former blockchain structure, but with an increase in block size to 8MB. They called their branch Bitcoin Cash, which was launched on August 1, 2017, as a result of the hard fork of the Bitcoin network.
The Problematic Hard Fork of Bitcoin Cash
The potential problems with the planned hard fork became known as early as August of this year, shortly after Bitcoin Cash celebrated its first year of separation from the first cryptocurrency. The release of the Bitcoin Cash client software, known as Bitcoin ABC 0.18.0, suggested the introduction of a number of updates that included the possibility of using smart contracts and atomic swaps, which imply the exchange of cryptocurrencies without the participation of a third party. One of the main proponents of this update was the head of Bitcoin.com and Bitcoin evangelist Roger Ver, also known as Bitcoin Jesus. Bitpay, Binance, and Coinbase, as well as mining company Bitmain, also spoke in support of Bitcoin ABC.
The separation of the crypto community came after network miners along with the nChain head and self-proclaimed Satoshi Nakamoto Craig Wright and entrepreneur and founder of the CoinGeek cryptocurrency information website Calvin Ayre spoke out against the Bitcoin ABC update. In response to the proposed update, Wright and Ayre offered their own version of Bitcoin Cash called Bitcoin SV (Satoshi’s Vision). According to the official position of the developers, the Bitcoin SV release supports “Satoshi’s true vision,” in connection with which this update proposes to introduce the original Bitcoin network protocol and increase the block size to 128MB (now the block size of Bitcoin Cash is 32MB) and also implies the implementation of four Satoshi opcodes: OP_MUL, OP_INVERT, OP_LSHIFT, and OP_RSHIFT. It is noteworthy that CoinGeek owns the second-largest Bitcoin Cash mining pool.
The Bitcoin SV protocol was supported by large mining pools such as BMG, SVPool, OKminer, and Mempool. SharkPool, a specially launched mining pool aiming to intentionally create empty blocks of other cryptocurrencies in order to counter unwanted forks of Bitcoin Cash, also supported BCHSV.
Moreover, Wright himself declared war on everyone who supports any other hard fork protocol and, in particular, Bitcoin ABC. Here is what he said in a personal letter to Roger Ver: “If you support ABC, then you hate Bitcoin, you are my enemy. You can’t even imagine how this will turn out for you. But you will find out. I am the real Satoshi. Have a nice life. ”
Causes of the Conflict: Hash Rate vs. Crypto Community
November 15 will show whose version of the Bitcoin Cash network update is supported by the majority of the members of the crypto community. But since the implementations of Bitcoin ABC and Bitcoin SV protocols are incompatible with each other, it becomes evident that a split is inevitable.
So, according to the Coin.Dance analytical service, the Bitcoin ABC protocol is supported by 600% more nodes than Bitcoin SV. Moreover, according to the Poloniex exchange, which on November 8 started a preliminary “pre-fork” trading in Bitcoin Cash ABC (BCHABC) and Bitcoin Cash SV (BCHSV) futures, the traders preferred the Bitcoin ABC protocol. According to the official statement of the trading platform, this step gave Poloniex users the opportunity to express support for one of the coins through trading activity.
Throughout the 12 hours of trading in BCHABCUSDC and BCHSVUSDC pairs, as well as BCHABCBTC and BCHSVBTC, the value of BCHABC was set at $465, and BCHSV at $109. At the same time, the users of the exchange invested $45,785 USDC (the Poloniex stablecoin pegged to U.S. dollar) in BCHABC, while BCHSV received two times less, $21,988 USDC.
The BCHABC and BCHSV coins will be available to users after the planned fork has been passed on the network. At the same time, Craig Wright is sure that this experiment may end up badly for the exchange. According to the head of nChain, Poloniex has violated U.S. law, under which it is obliged to provide derivatives with the delivery of a real asset within three days after its sale.
Nevertheless, despite the choice of traders in favor of the Bitcoin ABC protocol, the supporters of Bitcoin SV control most of the hash rate power. This is evidenced by Coin.Dance data, according to which, pools supporting Bitcoin SV own a significant share of the total Bitcoin Cash network hash rate, totaling over 73%. At the same time, 66% of all miners of the Bitcoin Cash network support Bitcoin SV, while the Bitcoin ABC protocol only has 18%.
As a result, many members of the crypto community fear that miners led by Craig Wright may conduct the so-called “51% attack” during which only Bitcoin SV blocks will be confirmed, and the Bitcoin ABC blockchain may remain empty without having a single confirmed transaction.
Chris Pacia, the lead developer of the OpenBazaar decentralized trading platform, believes that Wright is trying to intimidate the crypto community and gain more support: “Personally, I’m not against the split and separation of Craig Wright, but he threatens to destroy another chain with a 51% attack. This is very unpleasant.” Pacia is sure, however, that no trading platform will give away the BCH ticker as a reward for a successful attack, and the BSV coin will forever remain a BSV coin.
The situation around the hard fork of Bitcoin Cash causes anxiety among many members of the crypto community. Cobra, who co-founded bitcoin.org and bitcointalk.org, shared his opinion with his followers on Twitter:
At the same time, Vitalik Buterin, the founder of Ethereum, warned everyone not to compromise with Craig Wright:
And Peter Rizun, a chief scientist at Bitcoin Unlimited, is confident that the conflict around the hard fork of Bitcoin Cash comes down to power: “I would not like to participate in something that will contribute to the growing influence of nChain and Craig Wright. Ultimately, this dispute is not about technical components. It is about power.”
In turn, a crypto enthusiast and columnist for Bitcoin Magazine, Aaron van Wirdum, described the conflict around the Bitcoin hard forks rather successfully in a few words: