Today, the cryptocurrency, Bitcoin, split in two as a ‘breakaway’ group of Bitcoin miners and developers plan to create the new Bitcoin cash network that increases the transaction capacity of Bitcoin.
Currently, the Bitcoin network has a limit of 1mb block of transactions every ten minutes, with a plan to scale Bitcoin by evolving it into a settlement network containing only large transactions. For smaller transactions, there will be a network of payment hubs run by organisations or individuals that settle on the blockchain; called the ‘lightning network’.
“While the breakaway plan is argued to be more aligned to the vision of Bitcoin’s original creator and potentially more safe as it doesn’t include a controversial feature to move the digital signatures of transactions off the ledger, it arguably risks the blockchain – the ledger containing every transactions – growing too big,” says Mustafa Al-Bassam, security expert at Secure Trading and also a reformed ex-hacker.
“This will mean that fewer people have the storage space required to run a full Bitcoin client, which may cause Bitcoin to become more centralised, as only organisations with a large amount of resources will be able to store the entire ledger.”
Supporters of the newly formed Bitcoin cash (BCC) believe the currency will “breath new life into” the nearly ten-year-old bitcoin by addressing some of the issues that have underpinned the Bitcoin (BTC) as of late, such as slow transaction speeds.
On one side, there are the so-called core-developers who are in favour of smaller Bitcoin blocks, which make up the network, to protect it against hacks. On the other side, are the miners who want to increase the size of blocks to make the network faster and more scalable.
Until last week, the solution known as Segwit2x, which would increase the size of Bitcoin blocks to two megabytes, was slated to become the standard.
Then, Bitcoin cash came along. The solution is a fork of the Bitcoin system: it’s a new software that has all the history of the old platform but Bitcoin cash blocks will be eight megabytes.
Bitcoin cash came out of left field, according to Charlie Morris, the chief investment officer of NextBlock Global, an investment firm with digital assets.
“A group of miners who didn’t like SegWit2x are opting for this new software that will increase the size of blocks from the current one megabyte to eight,” says Morris.