Starting to wrap your head around Bitcoin and blockchain? What's this now? Well what the hell is Bitcoin Cash? Simple: it's a fork of Bitcoin. Proper response: what the fork are you talking about? Before we get into exactly what a fork is and how it led to Bitcoin Cash, let's have the cryptocurrency equivalent of the "birds and the bees" talk and discuss how new cryptocurrencies are born.
Ever wonder why there are so many different cryptocurrencies? This is because Bitcoin software is open-sourced. This means that any programmer can download the Bitcoin source code, make some tweaks and then release it on the internet as a completely new cryptocurrency - an "alt-coin.
Altcoins have the same basic architecture as Bitcoin. They have miners that run software that maintains a shared history of the altcoin's transactions on a blockchain.
These miners are paid in the altcoin as a reward for helping to maintain the blockchain and these rewards circulate new supply of the coin. They make new coins that improve speed Litecoin , that are more anonymous and harder to track Monero , that have a niche end user in mind i. PotCoin , or that have functions far beyond just being a digital currency i.
One of the most successful altcoins is Litecoin. He made a more agile version of Bitcoin by making transaction speeds 4 times faster - new blocks of transactions are added to Litecoin's blockchain every 2. Bitcoin Cash however, was not spawned by some enterprising programmer taking the Bitcoin source-code and starting a new coin from scratch.
Bitcoin Cash was created by a faction within the Bitcoin community which disagreed with how Bitcoin was evolving.
They gained enough support to split the Bitcoin blockchain in two - the split that created Bitcoin Cash is called a hard fork. When the Bitcoin network is experiencing heavy traffic, transactions take longer to process and transaction fees paid to miners become more expensive. Transactions are processed once they are added into a new block by a miner - the size of a block is 1 megabyte MB which can only fit about 2, transactions per block.
Blocks are added roughly every 10 minutes so when there are more than 2, transactions pending, people have to wait their turn. Miners pick which transactions to include in a new block. If someone wants to get their transaction processed quicker, they can elect to pay a higher fee so that a miner is more likely to select it.
When the network is busy, the fee needed to get a transaction processed in a timely manner gets bid up higher and higher if you use an exchange like Coinbase, they automatically suggest a fee that will get the transaction processed quickly - that fee fluctuates based on current demand on the network. With the popularity of the Bitcoin network at all time highs, so are wait times and transaction fees. The development community that collectively updates and improves Bitcoin's open-source code has long known that this would be an issue once a certain level of adoption was reached.
The best method for addressing these issues and scaling Bitcoin for a larger user base has been hotly debated for years and ultimately divided the community. Think of a block in the blockchain as the hottest club in town with limited space 1MB - transactions are all the people standing in line to get into the club get processed and the miner is the bouncer who decides who gets in.
Party goers pay a cover charge transaction fee to the bouncer to get into the club. The bouncer gives preference to those willing to pay a higher cover charge. When the line to get into the club gets long, people have to pay a higher cover charge to get in.
The Bitcoin community came up with two methods to reduce the size of the line and get more people into Club Blockchain at once:. So that's the debate - increase the blocksize or implement a solution that would get more transactions into a 1MB block SegWit. Sound pretty technical and boring?
Well, within the Bitcoin community, the debate got highly contentious and political. Opponents to increasing the block size said that an increase would erode Bitcoin's most important feature: decentralization. Increasing the blocksize would greatly increase the computer memory needed, and therefore the cost required to have a computer that validates transactions in the Bitcoin network a full node.
This cost increase would price out most of the smaller operations, leaving the Bitcoin network in the hands of only the most powerful mining pools and companies that could afford it. If control of the Bitcoin network was in the hands of a few, it would be easier for a government or powerful entity to take it over. These opponents favored SegWit as the safest way to scale Bitcoin without compromising decentralization.
Many in the SegWit camp were the developers and engineers who prioritized Bitcoin's security and decentralization over the network's ability to process transactions cheaply.
Proponents of increasing the block size argued that Bitcoin was no longer useful in commerce as originally intended in Satoshi Nakamoto's white paper. Since increasing the blocksize would be an immediate remedy to the congestion and high fees, and SegWit would take years to fully cure the issue, they saw a block size increase as the only option. Many in favor of increasing the block size were business owners and entrepreneurs who were transacting in Bitcoin on a regular basis, frustrated by the high fees.
When it became apparent that the majority of the community was in favor of moving foward with SegWit implementation, the wheels of the Bitcoin Cash hard fork were set in motion. A hard fork is the blockchain equivalent of a software update, reserved for serious changes to the network. The Bitcoin network is maintained by computers all over the world collectively updating the Bitcoin blockchain.
They are all running software that enables this collaboration. When a significant change needs to be made to how the network functions i. If everyone in the network is on board with the change and they all implement it, they can all continue collectively maintaining the blockchain with the change in effect. However, if only half update and half do not, the network becomes out of sync. This causes a chain split, or fork - when the computers update, they begin maintaining a different blockchain from the ones that chose not to update.
This is why hard forks are a risky way of introducing changes to a blockchain network. If a change is proposed that not everyone is on board with, the network is at risk of becoming divided. The Bitcoin Cash hard fork was what's called a "contentious hard fork. They just had to secure enough miners in the network to go along with the upgrade for their forked version of Bitcoin to maintain value.
If they didn't have enough miner support, there would be no one to maintain the network and the 8MB block size version of Bitcoin would have died a quick death. A software update including the 8MB blocksize was pushed to the network and it garnered enough support from the mining community. Bitcoin users were told that however many Bitcoins they held at the time of the fork, they now had an equal amount of Bitcoin Cash.
Well, remember when I said Litecoin is basically a copy of the Bitcoin source code with some tweaks? Bitcoin Cash is also a tweaked version of the Bitcoin code but, unlike Litecoin, Bitcoin Cash also copied the original Bitcoin blockchain. This means that Bitcoin and Bitcoin Cash have a shared transaction history up to August 1.
If the Bitcoin blockchain listed your address as having 1 Bitcoin on August 1, the forked Bitcoin Cash blockchain would indicate the same thing. After August 1, the miners in the network that upgraded to the 8MB began maintaing the Bitcoin Cash blockchain while the miners who did not upgrade continued maintaining the original Bitcoin blockchain - on that date, the Bitcoin blockchain "forked" into two:.
At the time of the fork, no one was really sure what was going to happen with Bitcoin Cash. It was dismissed by many as a gimmick that would be worthless in a matter of months. At the same time, since every person holding Bitcoin was gifted an equal amount of Bitcoin Cash, many people had an automatic interest in its value. Despite many detractors, there was also a vocal group of Bitcoin Cash supporters who began calling for "The Flippening" - a prediction that Bitcoin Cash would overtake the original Bitcoin in value.
They argued that Bitcoin had lost its way and was no longer useable as a currency due to its high fees - they claimed that Bitcoin Cash was the "real Bitcoin" since it was more in line with Satoshi Nakamoto's original vision. Once again, in November , calls for The Flippening grew louder when an initiative to scale Bitcoin called Segwit2x, not to be confused with SegWit, goddam its all so confusing was called off due to lack of consensus in the community.
Bitcoin Cash supporters cited this initiative's failure as further evidence that Bitcoin would never scale. The movement gained steam when programmer Gavin Andresen - who Satoshi Nakamoto left as Bitcoin's lead developer before he disappeared - stated that Bitcoin Cash more closely resembled the project he began working on in The latest Bitcoin Cash boom came on December 20th when Coinbase, one of the most popular cryptocurrency exchanges, made a surprise announcement that it would enable Bitcoin Cash trading.
Since more transactions can be included in a single block, transactions will also get processed quicker. Its difficult to know how exactly the Bitcoin Cash network would respond if faced with a heavier load. At this point, it is just too early to tell. SegWit has been implemented within the Bitcoin network through what's called a soft fork - contrary to a hard fork, soft fork changes can be rolled out to the network without causing a chain split.
However, the potential benefits of Segwit will not be realized until SegWit is activated by those using the Bitcoin network. To go back to our earlier analogy, in order for Segwit to "make the transactions skinnier", the applications that generate Bitcoin transactions need to weave it into their systems.
Coinbase, for example, has not yet done this so the thousands of daily transactions they send over the Bitcoin Blockchain are "fat" and do not help alleviate the congestion. For the fruits of SegWit to be realized, it will need heavier levels of adoption amongst Bitcoin exchanges and wallet developers - something the Bitcoin core developers will continue to push for in SegWit adoption is phase 1 in Bitcoin's long term plan for scalability.
Once SegWit has been adopted, Bitcoin will focus on implementing what's called the Lightning Network. The Lightning Network is a "layer 2" solution that will enable thousands of Bitcoin transactions to take place outside of the Bitcoin blockchain with minimal fees - at regular intervals, the sum of those transactions will settle on the Bitcoin blockchain. A full explanation of how Lightning works merits another post but many in the Bitcoin development community see great promise in it.
It is going to take time to implement these solutions and, given Bitcoin's explosion in popularity, the network will remain congested in the near future.
This means fees and wait times will remain high for now. Further adoption of SegWit and a successful roll out of The Lightning Network will be needed to quiet Bitcoin's doubters. In the meantime, Bitcoin more effectively functions as a "store of value" and is better suited for moving large amounts of value and is unsuitable for small transactions. Bitcoin's current issues with speed and transactions fees are a function of its popularity. A common metaphor used to described the current state of Bitcoin is "the restaurant that no one goes to anymore because its too crowded.
Many on the internet are pronouncing Bitcoin dead because of these issues. A look back into Bitcoin's short history are filled with proclamations of its demise; to date, none of those predictions have come true.
Bitcoin, at its core is a technology - technologies don't remain as they are so long as there are people dedicated to pushing them forward. Bitcoin has highly talented and dedicated developers around the world committed to improving it - as long as they exist, Bitcoin has a chance. Enough people have also disagreed with the direction that the Bitcoin developers have taken the project. Those people have put their efforts and support behind Bitcoin Cash.
The success of Bitcoin Cash will equally depend on their ability to move the project forward.
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I remembered seeing some recent headlines about Bitcoin making a comeback. I figured he must be joking. I found the coin mixed in with some euro pocket change, with the unmistakable B with vertical slashes embossed on it. The coin itself was worthless of course, but the cryptographic private key printed on the back, underneath a tamperproof holographic sticker, was linked to an anonymous digital wallet holding 1. But what software was I supposed to use? Which of the thousands of totally unregulated businesses out there should I trust to store and process my money? What if in my fumbling illiteracy I deleted my keys or opened myself up to hackers? And what if I took too long figuring it out, and the Bitcoin bubble popped before I could sell?
I remembered seeing some recent headlines about Bitcoin making a comeback. I figured he must be joking. I found the coin mixed in with some euro pocket change, with the unmistakable B i vertical slashes embossed on it. The coin itself was worthless of course, but the cryptographic private key printed what the hell is bitcoin cash the back, underneath a tamperproof holographic sticker, was linked to an anonymous digital wallet holding 1.
But what software was I supposed to use? Which of the thousands of totally unregulated businesses out there should I trust to store and process my money? What if in my fumbling illiteracy I deleted my keys or opened myself up to hackers? And what if I took too long figuring it out, and the Bitcoin bubble popped before I could sell? Even back inBitcoin seemed far too speculative for me. At the time, John was starting up a Bitcoin mining operation, and was looking for locations to set up his mining rigs they look a lot like server racks, but with as many GPUs packed into them as possible to get the most parallel processing power.
John asked if I wanted my cut in Bitcoin or cash, and What the hell is bitcoin cash said cash, without hesitation. I took the brass Bitcoin as a small source of my first payout, more as a memento than. Then inthe biggest Bitcoin exchange, Mt. I held on to the coin because I hold on to everything, and ended up being perhaps the least click here investor in the Great Bitcoin Gold Rush of I spent the morning after John contacted me watching YouTube videos on what to do with my coin.
Essentially, any wallet address what the hell is bitcoin cash there in the cloud is secured with a public and private key, both of which are needed to access the bitcoun.
Multiple websites had warned me not share my private key with anyone, since they could use it to trade away my Bitcoins. I breathed a sigh of relief. The balance http://trackmyurl.biz/trade-steam-card-for-bitcoin-4349.html my wallet still said zero.
I started to get concerned when it was still pending the next day. Some dated as far back asbut they really started spiking in and csah, as the value of Bitcoin was reaching to new all time what the hell is bitcoin cash. From what Caah could naively gather, it seemed the Bitcoin network slowed down tje interest in it increased, and the more users were trying to trade, the more the pipes got clogged. It was about then that I made a fateful mistake: I queued up a second whzt to move my Bitcoin from my wallet to an exchange where I could sell it.
Seems logical, right? Things work a bit differently in crypto-land. Most of us are used to paying with credit cards and having our transactions gitcoin in the order that seems most natural: first come, first served. Bitcoin has much more limited processing power available, in the form of miners, who confirm transactions by crunching difficult cryptographic problems.
Miners receive the fees that users pay, so it is in their interest to process what the hell is bitcoin cash that offer higher fees. This has led to a competitive fee market, where, at peak trading hours, traders must offer a much higher percentage of funds as fees bitccoin order for their transaction to be processed. No problem —just cancel the transaction and make a new one with a higher fee, right?
There is only the blockchain, fash distributed ledger which records transactions and declares which funds are associated with which wallet addresses. Being able to erase transactions from the blockchain would destroy hdll integrity of the system, just bitcin cash would have no value if I could make it disappear from your wallet after I gave it to you.
Things looked even worse when fees started spiking higher, as nervous investors started to sell as well as buy. I would have to queue another transaction with a much higher fee, enough to entice vitcoin miner to process my first, low-fee transfer so they could qhat also process the second one.
Technically I had no funds left to make a replacement transaction. My second option was to hire an accelerator. These are transaction miners who accept direct payment to speed up ehat transactions. There csah simply nothing to be. It was entirely possible my transaction would be stuck in limbo indefinitely.
It would eventually be erased as dead data, though it was impossible to tell whether that would take be what the hell is bitcoin cash month or six. By then, I was convinced, the bubble would pop. Experiencing firsthand hel absurdity of the Bitcoin ecosystem had only made me more certain that this particular cryptocurrency had no fundamental value, and had long ago outlived its intended purpose.
And if, as the pundits say, Bitcoin is now a commodity, what sane investor would buy into it, knowing its volatility could well outstrip its liquidity? And unlike casg securities, Bitcoin has no fundamentals to track, zero hard information to give any grounding to predictions about its ascent or decline.
On the other hand, by now I saw opportunities for a quick buck bitclin getting more involved. As with anything so volatile, short-term bets could be incredibly lucrative for traders willing enough to throw the dice. But I had the feeling that those stories of overnight millions either already were or would soon be exceptions to the rule. The house that Bitcoin built was not made to stand, surely. For me, there was nothing left to do but wait.
Knowing for certain that there acsh nothing I could do, no potential solution left undiscovered, was what finally banished my stress and left me in a state of zen. Then, on day seven, I had my first confirmation. A miner had bundled my two transactions, and solved both in a single block. I needed seven more miners to do the same before the transaction actually cleared, but the incentive to solve a block increases greatly once another miner completes it.
Within an hour, I had all confirmations. I was shocked bitcoinn how fast a buyer scooped up my sell offer, and how fast the exchange confirmed the trade. No casy knows what it will do. Post navigation Previous Want a career in the trades? How to choose the right one for you. Leave a comment Hide comments. Comments are closed. Related stories. Why this Canadian caxh resort started accepting bitcoin. Two major problems with bitcoin, and how to solve. The 10 biggest tech hits and misses of Peter Nowak.
Bitcoin vs. Bitcoin Cash: Coexistence or Downfall of Bitcoin Cash
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Archived from the original on 30 November The Economist. The development community that collectively updates and improves Bitcoin's open-source code has long known that this would be an issue once a certain level of adoption was reached. They gained enough support to split the Bitcoin blockchain in two - the split that created Bitcoin Cash is called a hard fork. Archived from the original on 21 August This computation can be done in a split second. Retrieved 13 October This gitcoin is unlike all other blocks in that it does not have a previous what the hell is bitcoin cash to reference. Retrieved 15 February The first regulated bitcoin fund was established in Jersey in July and approved by the Jersey Financial Services Commission. That amount will continue to be halved periodically until all 21 million bitcoin have been released. Th from the original on 19 February Retrieved 28 December Butcoin the same time, since every person holding Bitcoin was what the hell is bitcoin cash an equal amount of Bitcoin Cash, many people had an automatic interest in its wat. Hardware wallets never expose their private keys, keeping bitcoins in cold storage even when used with computers that may be compromised by malware. Retrieved 12 March