BITCOIN SOARS PAST RECORD $4,000 VALUE

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Concerns that the so-called ‘hard fork’ in the Blockchain may cool enthusiasm for Bitcoin proved unwarranted. The cryptocurrency soared past $4,000 for the first time in mid-August, less than a fortnight after the birth of Bitcoin Cash.

A bitter ideological dispute about scaling the Blockchain protocol led to the creation of the breakaway Bitcoin Cash. It arose out of an attempt to address one the Blockchain’s constraints: speed.

The distributed ledger underpinning Blockchain could only have one megabyte of data added to it every ten minutes. This was originally designed to protect the system from attacks. But meant that some users had to wait for days for their transactions to complete at particularly busy times.

Two solutions were proposed. One, to increase the size of each block to allow more transactions to be processed per batch. Two, to relocate some of the information from the Blockchain to a side chain transmitted alongside it.

Segwit2x, short for Segregated Witness, solved the impasse by suggesting the data-splitting step occur in August to be followed by an increase in the block size to two megabytes in November.

Rival Bitcoin Cash was launched on 01 August with a block size of eight megabytes. It had a bumpy start with prices on the first full day of trading fluctuating wildly between $300 and $1,700 across a number of exchanges.

The original Bitcoin started life in 2009, following the publication of a paper Bitcoin: a peer-to-peer electronic cash system by the pseudonymous Satoshi Nakamoto. This set out a method whereby electronic cash could be sent online from one party to another without a
central intermediary.

Instead, a decentralised peer-to-peer network of nodes (or computers) would resolve a cryptographic problem (or ‘proof of work’) to verify each transaction between members of the network. This also helped to prevent the double-spend problem inherent in digital currencies.

In effect, the system would behave like a crowd-sourced, public, bookkeeping system on the internet. It notes transfers of value between participants and adds them to a chain of previous transactions.

“The longest chain not only serves as proof that it came from the largest pool of CPU power,” wrote Nakamoto. “As long as a majority of CPU power is controlled by nodes that are not cooperating to attack the network, they’ll generate the longest chain and
outpace attackers.”

More than eight years after its arrival, Bitcoin has moved further and further from its ideological roots. Economies of scale now mean that a small number of professional miners have disproportionate influence in the community.

The money supply may no longer be fixed at 21 million coins as originally conceived. A number of copycat currencies have emerged. Bitcoin itself is also subject to interest from currency speculators.

Only time will tell if the Bitcoin bubble will burst.

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