The popularity of Bitcoin has caught the imagination of a wide spectrum of people, from tech-savvy programmers, to investors, to point of sale business and the general public. Over time, conflicting ideas around the future of Bitcoin has spurned the creation of two popular ‘forks’ of the original Bitcoin (technically called Bitcoin core in programming circles).
This article will discuss Bitcoin first and finish with an explanation on the two major hard forks.
Bitcoin
Bitcoin is a revolution in many ways, and the timing that brought its existence, in hindsight, was perfect. Many attempts at creating a digital currency in the past had either been too early, insecure or not sufficiently decentralised. Satoshi Nakamoto (the anonymous creator of Bitcoin) managed to solve the biggest problem facing digital currency; the ability to create a decentralised ledger that was infallible. This revolutionary idea was called a blockchain, and was paired with another invention, that allowed Bitcoin to secure itself in a decentralised manner, proof of work (PoW).
Bitcoin began life on the 3rd of January in 2009, with the first transaction embedding the following message: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.”
Initially, Bitcoin became popular with technology enthusiasts, cryptographers, programmers and underground ‘cypherpunk’ type subcultures that existed at the time. As the ecosystem grew, more and more people from outside of these smaller niches began to take an interest, particularly as organic exchanges began trading Bitcoin for Fiat currencies.
The detail behind the decentralisation
Bitcoin is a cryptocurrency, that is decentralised (has no central authority), open sourced (anyone can read the code and contribute to the project), is peer to peer, borderless and theoretically impossible to crack.
The network was designed to be able to be used by anyone in the world, with basic equipment. All that is required to connect and use the Bitcoin network is a computer as simple as a Raspberry Pi, space to store the blockchain and an internet connection. Failing that, individuals can use one of the many mobile applications that allow easy onboarding into the world of Bitcoin.
I alluded to the Blockchain earlier in this article, and its name is an apt description of its use case. Bitcoin stores all its transaction data in ‘blocks’ of data (1MB in size). On average (first half of 2020 data) a block contains approximately 2100 transactions and each block is confirmed on average every 10 minutes. The confirmation (clearance) of these blocks is executed by miners, who solve a cryptographic puzzle that achieves two things:
- Creates more Bitcoin (given as a reward for solving the cryptographic puzzle to make a block, this is the only way new Bitcoin is minted)
- Confirms all the transactions on the block and appends that block cryptographically to the previous block.
This process is called ‘proof of work’ or PoW for short. Miners use PoW through a CPU or dedicated Bitcoin miner (such as an ASIC machine) to solve a puzzle Bitcoin was programmed with, to ensure that it takes a lot of processing power and assets to reverse engineer the blockchain (essentially it is theoretically impossible). Miners and the Bitcoin network use Proof of Work to come to a consensus on which transactions are legitimate and included in the blockchain.
There is a maximum capped supply of 21 million Bitcoin, with, at the time of writing, 18.5 million currently in circulation. Approximately every 4 years, the rewards miners are given for confirming a block is halved, this event is colloquially known as the ‘halving’ or ‘halvening’. This means, that as Bitcoins supply approaches it max supply, it takes more PoW to generate new Bitcoin. Current estimates have 99% of the supply mined by 2034 and the last Bitcoin being created in the year 2137.
The first major fork to gain popularity under the Bitcoin name is Bitcoin Cash
Bitcoin Cash (BCH) came to fruition in August 2017 after ideological differences created splinters within the Bitcoin community around how to scale transaction speed and how this would be met. The catalyst for this change was an improvement proposal to Bitcoin core known as Segregated Witness (or SegWit for short). SegWit proposed removing the data signature from blocks to allow more transactions within a block, thus speeding up processing.
The Bitcoin Cash camp, fronted by Roger Ver, preferred to focus on a block size increase as the preferred option. This would increase Bitcoin’s blocksize to 8MB, up from 1MB. The thought behind this was to increase transactional speed, to allow Bitcoin Cash to be used as a transactional currency with lower fees.
The majority of Bitcoin features are still in use with Bitcoin Cash, for example their proof of work system is based on the SHA-256 cryptographic algorithm, it has pre-determined block reward halving dates and 10-minute blocks.
Since the original fork, Bitcoin Cash implemented a network upgrade to future proof block size, allowing up to 32MB blocks. This occurred in May 2018.
The second major fork to gain popularity using the Bitcoin name is Bitcoin Satoshi’s Vision (BSV)
Shortly after the successful launch of Bitcoin Cash, Bitcoin Satoshi’s Vision was born, with Craig Wright at the helm. This fork of Bitcoin Cash originated primarily from, yet again, a difference in opinion around block size. Bitcoin SV implemented 128MB blocks (which has now been upgraded to allow 2GB blocks) and outlined a vision to restore Bitcoin’s original ideas, whilst allowing scalability, security and a better payment experience.
Both of these major forks have received mixed opinion from the public, but there is no denying their value. Bitcoin Cash and Bitcoin SV are both in or around the middle of the top 10 cryptocurrencies in value by market capitalisation (according to Coinmarketcap). As with any technology, Bitcoin and any fork, will be proven successful with time and adoption, and so far Bitcoin is winning that race.
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