When Thursday finally arrived, the long-anticipated hard fork of bitcoin cash (BCH) looked less like an all-out war, as some had feared, and more like the start of a race. Whether it winds up being a sprint or a marathon, though, remains to be seen.
A hard fork occurs when the protocols that govern a blockchain are upgraded, essentially replacing the old blockchain software with new code in order to address security issues or change course. When the blockchain’s participants don’t agree, however, completely new chains can be spun off as a result. That’s what happened Thursday after it became clear large players in the bitcoin cash community were at odds over the upgrade, splitting the crpytocurrency’s blockchain into two.
The dispute between rival bitcoin cash camps is convoluted and involves a who’s who of large players.
To hear bitcoin backers tell it, these kinds of schisms aren’t a bug but are a feature of bitcoin and the broader blockchain ecosystem. Bitcoin cash was the end product of an August 2017 hard fork of the original bitcoin blockchain involving similar questions about block size and, more broadly, the purpose of the cryptocurrency.
“The ability to fork bitcoin at will is critical to its long-term success,” Zack Voell, an analyst at Messari, tells ThirtyK. He predicts that both of the new bitcoin cash chains “have roughly equivalent long-term implications for bitcoin.”
The Horse Race
Technically, block 556766 was the last one mined before the hard fork occurred at 1:02 p.m. EST Thursday. From that moment on, livestreams and Twitter feeds breathlessly provided up-to-the-minute updates on the progress of Bitcoin SV and Bitcoin ABC, the two rival chains created in the wake of the hard fork, tracking each time a new block was mined on either chain. As of Thursday evening in the U.S., fears of significant intentional sabotage across the chains hadn’t materialized, and it appeared both sides were settling in for the long haul, continuing to mine their respective chains.
For the most part, cryptocurrency exchanges were holding their breath, essentially pausing transactions in bitcoin cash until clarity emerges. Some bitcoin cash-focused companies, like Money Button, created temporary measures to keep them operational.
The dispute between rival bitcoin cash camps is convoluted and involves a who’s who of large players, including mining hardware producer Bitmain, which is a large bitcoin cash miner in its own right and is loosely affiliated with the ABC chain, and nChain chief scientist Craig Wright, who has claimed to be bitcoin founder Satoshi Nakamoto (the SV chain stands for “Satoshi’s Vision”).
Technically, the schism involves questions about the block size of each transaction, but broader philosophical questions, including ones about the frequency of hard forks, also drove the rift.
Up to the moment of the hard fork, it appeared that most of the mining power (or hash rate) was lining up on the side of Bitcoin SV. Yet, the balance of mining power appears to have seesawed back and forth following the fork. The nodes driving the processing of blockchain transactions, however, tell a different story. ABC had the lion’s share of the nodes supporting its implementation of bitcoin cash as of Thursday evening, with 1,105 nodes to SV’s 192. Another large-scale implementation, bitcoin unlimited, has nearly 800 nodes but has generally aligned itself with ABC.
All this back-and-forth represents the way the blockchain was designed to deal with conflict, proponents say. As one Twitter user put it, “Bitcoin’s immune system at work is something to behold.”
Taking the Long View
As of Thursday evening, there were more questions than answers about the endgame for the rival bitcoin cash chains. Presumably the chain that mines the most blocks over time as a result of that mining power will “win.”
However, it’s not clear whether the two rival blockchains will continue to operate side by side for the long haul or – if that happens – whether cryptocurrency exchanges will choose one or offer both to customers. By Friday morning, several exchanges, including Bitfinex and Poloniex, were distributing both coins to bitcoin cash holders but holding off on assigning the BCH ticker to either. Nor is it clear whether the turmoil will contribute to price drops for the original bitcoin or other cryptocurrencies.
“Say you manage a very large portfolio invested in multiple assets. You are considering adding bitcoin to your portfolio,” economist Alex Kruger tweeted Thursday. “Would the BCH fork madness inspire confidence?”
An informal Twitter poll by Money Button CEO Ryan X. Charles had participants nearly evenly split on whether the schism would take a day or a week to resolve, although slightly more fell in the longer camp, and some thought it could take a year. But blockchain purists urge observers to take the long view.
“The bitcoin cash fork drama is somewhat amusing and debatably educational to observe from a distance, but essentially meaningless to ongoing bitcoin protocol and application development,” Voell tells ThirtyK.