|
Bitcoin is making quite a name for itself. Once understood as a niche financial product intended to facilitate peer to peer (P2P) transactions, Bitcoin has skyrocketed more than 1,000% to become one of the most valuable and coveted commodities on earth. As a result, Bitcoin is attracting attention from mainstream financial institutions including Goldman Sachs, CMO Group Inc., and Cboe Inc. Last week, Cboe announced that it would begin trading Bitcoin futures on December 10th, which promptedCNBC to declare a Bitcoin futures race. All of this attention is excellent news for Bitcoin investors, but it does little to proliferate Bitcoin’s original vision of facilitating P2P transactions. After all, nobody wants to spend Bitcoin when it could be worth exponentially more in a very short time.
I’m sure that the unfortunate developer who spent 10,000 Bitcoins on two pizzas in 2010 would much prefer the $100 million that those tokens are worth today. Moreover, with so much attention clogging the Bitcoin blockchain and critical technological adjustments necessary for the currency to thrive, Bitcoin had to make a change. When Bitcoin developers failed to achieve consensus on practical next steps, a hard fork became necessary. To help Bitcoin maintain an iteration of itself that prioritizes its original vision of facilitating P2P transactions, Bitcoin Cash emerged this fall from a hard fork of the Bitcoin blockchain.
Bitcoin Cash: A Necessary Change
Bitcoin Cash launched in August 2017 or, in Bitcoin parlance, as of block 478558. The most noticeable change is a radical upgrade in the size of the blockchain nodes. Bitcoin founder, Satoshi Nakamoto, envisioned Bitcoin as a decentralized P2P transaction facilitator that is equipped with unprecedented security. As a result, Bitcoin’s blockchain nodes are restricted to 1MB. However, given Bitcoin’s popularity, that safety feature became more of a hindrance than an asset. This year, transaction confirmation times slowed considerably, and the increasing price of mining Bitcoin meant that it was becoming impossible for Bitcoin to fulfill its vision.
Bitcoin Cash extends node capacity to 8MB with the ability to further expand in the future. Low fees and faster confirmation times are trademarks of the new currency. By increasing the speed and capability of the blockchain, Bitcoin Cash is attempting to compete with financial juggernauts like Visa and PayPal. In addition to increasing the blockchain node size, Bitcoin Cash strips some of the technology from the original Bitcoin protocol. Segregated Witness (SegWit), which is a protocol for verifying Bitcoin purchases, is removed to help improve transaction speed. In short, Bitcoin cash is all about speed and efficiency.
It’s an Improvement. Mostly.
Of course, not everyone sees Bitcoin Cash as the savior of the Bitcoin brand. Bitcoin Cash has undoubtedly made significant adjustments to the blockchain technology, but there are some tradeoffs. The larger blockchain nodes require more energy and computing capability than the smaller, 1MB Bitcoin blocks. This leaves Bitcoin Cash vulnerable to large companies who can afford the technology to mine the currency. AsInvestopedia remarks, “critics worry that adopting Bitcoin Cash’s approach will lead to power being concentrated in the hands of companies that can afford more and better equipment.” This is antithetical to Bitcoin’s decentralized ethos, and it could compromise its independent nature. More immediately, Bitcoin Cash just doesn’t have the usability of Bitcoin. As a relatively new cryptocurrency, As an unproven hard fork, Bitcoin Cash lacks the status of its predecessor, and that’s something that can only be developed with time.
What Happens Now?
A lot of energy is being expelled trying to answer this question. Some, including Maksim Balashevich, CEO of Santiment, believe that Bitcoin will ultimately lose value because of other P2P currencies including Bitcoin Cash. “The Bitcoin Core [developers] should feel the real pressure and pain for what they’ve been denying,” Balashevich tellsCoinTelegraph.
However, there seems to be more extensive support for the idea that multiple cryptocurrencies can coexist and even thrive together. Digital tokens can serve different purposes, so a diverse ecosystem is more of an advantage than a threat. CapLinked CEO notes that “The very notion that Wall Street is developing derivatives of Bitcoin also suggests that it is on its way to becoming the world’s first digital commodity.” During last week,Bitcoin Cash was trading between $1,300 and $1,600, and now appears to be finding its identity after the intense price fluctuations that accompany a hard fork. Now it will be interesting to see if Bitcoin Cash captures Nakamoto’s original P2P vision or if it will follow Bitcoin and become a functional commodity.
| |
