On August 1, the cryptocurrency community experienced a fork that led to the creation of Bitcoin Cash as a new form of cryptocurrency spinning off the original Bitcoin. As a result, Bitcoin prices have surged to record highs, most recently topping at more than $3,400 per coin.
The issues Bitcoin has been dragging are nothing new, and the implications of this split in the system were also expected. The behavior of the two currencies in the market has been somewhat unpredictable and it continues to be up until this Monday.
The Bitcoin Cash experiment might turn into a feasible new form of cryptocurrency, but while miners, users, and investors decide its fate, let us recap the events that led us to this point and take a look at what the future might hold for the community with a quick overview.
— CoinDesk (@coindesk) August 7, 2017
What caused the Bitcoin community to fork?
Creating Bitcoin and making transactions with it all happens in a shared network within a larger system. The software relies on a blockchain, a ledger of “blocks” that represents the ongoing continuity of operations, and each block is limited to 1 megabyte in size.
This inherently restricts the amount of transactions that the network can handle. In average, seven transactions per second is the limit in the main BC system, which in turn makes for a significant congestion given the sheer number of users and operations constantly going on.
A debate sparked among two factions of the community long ago: one that has urged others to preserve the current integrity of the Bitcoin system and another that proposed making simple changes that could bring tangible results. The latter banded together to support and push the creation of Bitcoin Cash (BCH).
Bitcoin Cash went live on August 1 with a standard block size of 7 megabytes, which effectively gave its network seven times the capacity of the original Bitcoin ledger and pushed its initial value to the third highest place among cryptocurrencies worldwide. That starting success, though, quickly spiraled down.
Update on Bitcoin Cashhttps://t.co/FJPoc3tUih
— Coinbase (@coinbase) August 3, 2017
Does Bitcoin Cash have a future?
The price of Bitcoin Cash has nosedived to roughly $270 per coin, in contrast to the $727 peak it reached the day after its market debut. It is important to note that the fork “duplicated” the entire blockchain history of BC, so users also gained from the split the same amount of BCH they had already in their wallets.
In spite of the welcomed gift that represented at least a 20% bump in value for Bitcoin owners, many still saw BCH as a threat to the stability of their infrastructure, quickly sold their new coins and invested the money in more BC.
Although promising, this led to a quick decrease in value over this last couple of days. Adopters of the new standard are also enraged due to the lack of the support from traditional Bitcoin platforms and services, who refuse to host the latest currency in town because of the high risk it represents.
Coinbase, one of the most widely used platforms for digital currency storage and exchange, recently changed its mind about Bitcoin Cash and said that it would support it starting January 1, 2018, if nothing significant happened in the months leading to that date.
This decision goes against everything Coinbase stands for, which means good news for BCH enthusiasts, although apparently, it is not enough for some. A group of supporters has claimed it will sue the company for discrimination, saying that waiting so long threatens the existence and success of the new currency.
The cryptocurrency market is highly volatile and its lack of regulation makes it just as attractive as is dangerous. Including coins like Ethereum and Litecoin, the overall value of the market is close to $120 billion and still on the rise.