fbpx

Bitcoin, Bitcoin Cash, Bitcoin SV, Bitcoin XT, Bitcoin Gold! Why so many? 🤡

Just as all community-driven projects or even democracies, consensus is rarely perfect. So in the crypto space, we also see this imperfection. 

Bitcoin is the primary and dominant network, but throughout its history disagreements have led to forks and other processes which have seen the emergence of multiple blockchains, including a few that look and sound like Bitcoin, but that are not actually Bitcoin. 

In this context, you can think about Bitcoin Cash (BCH), Bitcoin Satoshi Vision (BSV), but also Litecoin (LTC) and others. 

What is a fork? 

Neo may have been right about spoons, but there are definitely forks. As you know, Bitcoin works through consensus. 

Consensus happens if my code exactly matches yours, his, theirs, and the other thousands of nodes running the bitcoin code. What happens when someone changes their code? What happens if they rearrange balances, alter the protocol, or any other number of things?

Basically, if your AAX app needs to be updated, we could technically force all users to upgrade and set the old version of the app to expire on a certain date. This is the centralized way. 

However, if you were to make changes to the code, and a few miners agree and nodes agree with you, you will basically fork a new chain that looks and sounds like Bitcoin, but it’s not. This forked ledger will need miners and nodes and a community, and so as you can see with BCH and BSV and even LTC it is difficult to grow and so far, no copy or fork of Bitcoin has ever managed to reach its level or beat it. 

Anybody can create a fork, and for the most part they will either be extremely tiny, or nobody will mine them at all and they cease existing shortly after they are created.

Hard Forks vs. Soft Forks

Hard forks and soft forks are the two types of updates or protocol changes that can be executed on a blockchain. It’s quite straightforward: a hard fork leads to an entirely new chain being created, and a soft fork is more of an optional update that is backwards compatible. A soft fork doesn’t lead to any new chain.

What Happens To My Crypto in Case of A Fork?

In a soft fork, since no new chain is created, there is no difference. But, depending on the update, you may not be able to transact with those wallets that have the new update without updating your own wallet first. In the case of most bitcoin wallet providers, this isn’t a problem.

In a Hard Fork, since the chain is forked in two, you have your same balances on the old chain and it is business as usual, but now you also have the equivalent amount of a new coin (BCH, BSV, etc) on the new chain. Soon the value of your new tokens will start to digress from that of Bitcoin. Theoretically, a forked chain could beat a previous version, for example in the case of Ethereum and Ethereum Classic

Famous Forks

To understand famous forks correctly, we need to understand the conditions under which they played out. None of these forks happened without strong differing opinions in the community, and it makes sense. If you were to just come up with your own upgrade, without any else agreeing with you, it’s not going to work. 

Bitcoin forks have been largely motivated by the “Bitcoin Scalability Problem”. This debate boils down to the fact that the bitcoin core block size is currently limited to 1 MB, therefore limiting transactional throughput to 7 tx/s. Now, there are reasons for this limited blocksize which have to do with security and decentralization. Moreover, Bitcoin is perfectly able to be used for daily transactions using a Lightning wallet, and then for bigger trades and transactions, the base layer is more appropriate. 

Bitcoin XT

Bitcoin XT was formed in 2014 by Mike Hearn as a fork of the bitcoin core . Growing public support of Bitcoin XT came in mid 2015 when Gavin Andreesen, one of the first developers working on the bitcoin core with Satoshi, proposed BIP 101 amid increased adoption and transaction volume on the Bitcoin network. BIP 101 proposed a block size increase from 1 – 8 MB, and then steadily increase thereafter to 24 tx/s. This change needed 75% of the network’s support. As this was not reached, Bitcoin forked. 

Bitcoin Gold

Bitcoin Gold was forked in October 2017 to create a new type of Bitcoin that uses a different protocol preventing large Bitcoin miners from switching to the new protocol. It uses equihash (created by Zcash) that doesn’t allow the hardware big miners use (ASICs) to run it profitably. 

Bitcoin Gold has suffered repeated DDOS attacks, and even the infamous 51% attack where a malicious miner took over 51% of the network in 2018 and began rearranging the blockchain at their discretion (largely minting coins).

Bitcoin Cash

Bitcoin Cash is easily the most recognized, promoted, and widely supported split from bitcoin core on August 1, 2017. It carried on the back of Mike Hearn’s work in 2014, proposing to support BIP 91 in order to increase the block limit to 8 MB, and then steadily to a new 32 MB cap. Other than this, it is largely the exact same.

It achieved a lot of coverage because it was supported, and politicized, by some of the largest players in bitcoin, such as Jihan Wu, CEO of Bitmain, the largest mining company, Roger Ver, an early investor and advocate of bitcoin (now pro-bitcoin cash) and Craig Wright. Their political platform was to create larger block sizes in order to better reflect Satoshi’s original vision of a peer-to-peer electronic cash system, which was becoming less and less of a reality as the network gained traction.

Bitcoin SV

As you may infer, there was further conflict about what “Satoshi’s Vision” actually entailed, and so in 2018 Craight Wright, with the support of Calvin Ayre, forked Bitcoin Cash again.

Their revised block size limit is 128 MB. Although Bitcoin SV makes it possible to further increase block size. BSV is also known to have suffered and continues to suffer from attacks on the network. 

Are We Going Towards A Forked Future? 

Crypto history is full of drama and lots of forking around. The first ever bitcoin fork was in October, 2011, to create Litecoin. Since then, we have seen countless forks.

In itself, forks are neither good nor bad. Most chains such as Ethereum regularly undergo protocol upgrades that require a fork, however the difference is, they are mostly based on unanimous decisions and the old chain will quickly die off, like a branch with no sustenance.

When forks lead to two different chains being supported, and community division, often there is high price volatility and conflict within the community. However, done in a professional manner, this debate and conflict resolution is what helps push protocols forward.

Tags

Choose a language