What Caused The Bitcoin Cash Hard Fork

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3 min read

What Caused The Bitcoin Cash Hard Fork

In 200 CE, merchants across the ancient trade routes of the Silk Road were willing to accept a variety of coins. From Roman Emperors to Eastern Gods, these coins had completely different engravings and depictions on them. Often, coins were not even introduced by a state, but rather the merchants themselves. Therefore, coins in the ancient world derived their value the same way as crypto, by establishing their exchangeability.

Ultimately, the terms on which a coin may be exchanged must be democratically established by all those who use that coin. In simpler terms, if 99% of users believe that a certain coin can only be spent at Disneyland, but 1% believe it can be spent anywhere, then the coin is most likely only going to function in Disneyland since that is the consensus of the majority using the currency. In the world of digital currencies, establishing this democratic consensus can be crucial. Otherwise, a blockchain network can split into multiple coins since its users cannot agree on the underlying terms of exchange. This is precisely what happened to the Bitcoin Cash community in November 2018.

A QUICK FORKING REVIEW

Before delving further into why Bitcoin Cash split up into two new coins, it is important to understand the concept of forking. Here is a quick explanation:

Blockchains run on a distributed ledger technology, and in order for that ledger to operate, all nodes on the network must agree on the series of transactions that existed in previous blocks (the historical chain of blocks) and agree on what features and algorithms are in the current blocks.

If a large portion of the network agrees to change the rules resulting in a fork to a new blockchain that isn’t compatible with the current chain, it’s called a “soft fork”.
If a large group of nodes on the chain wants to start a new chain and branch off of the main chain, it’s called a “hard fork” and this can create an entirely new blockchain and token.

For a deeper understanding of blockchain forks, please read What the Fork? Understanding Blockchain Forks.

THE POLITICAL LANDSCAPE OF BITCOIN CASH

Bitcoin Cash was actually the result of a hard fork in the Bitcoin blockchain. A group of nodes decided to implement a new blockchain protocol, thus establishing a new way of tracking transactions and the birth of a new coin. At the inception of Bitcoin Cash, the largest client was a group called Bitcoin ABC who were publically responsible for introducing and implementing new changes to the underlying protocol.

As a way to push out regular updates, the Bitcoin Cash community implemented a scheduled hard fork every 6 months. A similar update was planned for November 2018.

According to CoinTelegraph, when Bitcoin ABC announced the details of the scheduled hard fork, it caused absolute havoc in the community. Only 19.3% of nodes seemed to be in support. Another major Bitcoin Cash client named nChain had suggested implementing a different protocol, which about a third of the community (29.5%) supported. This protocol promised to revert back to the classic Bitcoin protocol as it was initially released by Satoshi Nakamoto, thus naming their new coin Bitcoin SV for “Satoshi’s Vision”. Lastly, 51.2% did not support either.

Therefore, it became clear that this network was likely to split into multiple coins, and alas, on November 15th 2018, two new coins, Bitcoin ABC and Bitcoin SV were launched.

CONCLUSION

The democratic and open source nature of blockchain technology is essential for maintaining a trustless method of verifying transactions. This is a crucial aspect of this technology. Of course, democratization has some caveats associated with it, as seen by the split in the Bitcoin Cash community. Especially since this technology is so new, there is much debate about how to improve a blockchain network for the sake of decentralization, scalability, and security.

Since nobody has a clear cut answer, there are bound to be differences of opinion within the community. By familiarizing yourself with the underlying technology, you can better understand the cause of the fork and make an informed decision of which side you support. Ultimately, this will help you make sound investment decisions concerning coins that emerge from hard forks.

4 min read

What Caused The Bitcoin Cash Hard Fork

Cryptocurrency seems to be the modern day gold rush. Where once prospectors in the old west traveled to untapped territories in the search for gold, tech wizards and curious investors are flocking to blockchain networks. The search for gold was sparked by its high degree of exchangeability. Regardless of where it was from, gold would always retain its value.

This characteristic can be a lot more difficult to establish in the blockchain universe since the exchangeability of a digital currency depends on how the transaction is recorded in the digital ledger. Therefore, the computer algorithm that validates transactions on the blockchain network must first be democratically agreed upon by a vast majority of nodes on the network. Achieving a democratic consensus is tougher than it sounds. While most of the time updates to the underlying code of a blockchain network easily garner support from its user base, such updates can also cause rifts and splits in the community.

This usually occurs due to disagreements on the changes that are being made, and what they mean for the future of the currency. A good example of this is the Bitcoin Cash hard fork of November 2018.

A FORK IN THE ROAD

Before jumping into the political backdrop of what caused this split, it’s important to recognize how forking occurs in a blockchain network. A fork is just a fancy name for a software upgrade. The algorithm that the blockchain executes to generate a new block and record transactions is what’s being updated. However, this can happen in one of two ways depending on the overarching consensus of the user base:

Soft Fork	Hard Fork
Majority of nodes approve	No majority consensus
Only previous blocks made invalid	Previous blocks and blocks on concurrent chain made invalid
Backwards Compatible: All nodes on the network are still accepted	Only accepts nodes running the new version
Single blockchain after fork	Multiple blockchains after fork

Hard forks are how currencies like Bitcoin Cash and Ethereum Classic are created. There is a fundamental disagreement within a blockchain community that leads to the formation of two completely independent blockchain networks emerging from a single one. In these cases, all nodes still running the previous version of the blockchain will no longer be accepted to make new transactions.

Noteworthy, Bitcoin Cash was birthed due to a hard fork occurring in the Bitcoin blockchain network. Nodes supporting Bitcoin Cash wanted the blockchain network to increase the size of the blocks being generated. The larger block size is seen as a way to increase transaction volume or the number of transactions completed within a set period. This caused a split, and a new coin was born.

BITCOIN CASH PROPOSALS

Bitcoin Cash is normally scheduled to make updates to the blockchain protocol by implementing soft forks every six months. This was expected to occur in November of 2018, when the largest Bitcoin Cash client, Bitcoin ABC, announced changes to its full node implementation of the currency, which included fundamental modifications like adding operation codes and changing the way transactions are ordered. This caused a major stir in the Bitcoin Cash community since these changes were seen as widely unnecessary, and in some cases, completely missing the purpose of Bitcoin as a financial tool.

A large blockchain development firm called nChain announced their own proposal for the upcoming update. The founder, Craig Wright, has claimed to be Satoshi Nakamoto. He suggested a larger number of changes to the protocol for the sake of reverting back to the original as released by Satoshi Nakamoto. They decided to name this new version Bitcoin SV, for Satoshi’s Vision.

Now here’s the tricky part. Both blockchain proposals claimed to have the best interests of the community in mind and were trying to make scaling, securing and stabilizing the network a priority. Bitcoin SV even established a roadmap and four fundamental pillars that would help it become more accessible to businesses. With the community split down the middle, a hard fork started to become inevitable. 19.3% of the nodes openly supported Bitcoin ABC’s proposal and just a slightly larger 29.5% of nodes support Bitcoin SV. This crack in the network solidified, and two coins Bitcoin Cash ABC and Bitcoin Cash SV emerged.

5 min read

What Caused The Bitcoin Cash Hard Fork

HARD FORKS: ACHIEVING A DEMOCRATIC CONSENSUS

The fragmentation of the Bitcoin Cash network continues to fuel the debate against the democratic characteristics of blockchain technology. The instability that is created when large portions of a blockchain network can’t agree on a definitive protocol can make businesses shy away from incorporating digital currency.

Essentially, when the majority of nodes can’t agree on the different terms and conditions required to execute transactions on the distributed ledger, something known as a hard fork occurs. As a result, two coins are produced and they function on concurrent blockchain networks. Even stable crypto assets, like Bitcoin, have undergone multiple hard forking events.

Generally speaking, a fork event indicates a divide in a project’s community and can make it an unattractive buy.

Forks in cryptocurrency are becoming more ubiquitous, making it an important concept to grasp for interested investors. The communal nature of crypto one of the things that makes it attractive to investors, but forks are something that shines a more nuanced light on the risks associated with these democratic currencies. Generally speaking, a fork event indicates a divide in a project’s community and can make it an unattractive buy. Furthermore, a forks event’s effect on price can be incredibly varied based on if it’s soft or hard, and deliberate or accidental.

In the case of Bitcoin Cash, a soft fork planned to be carried out by the currency’s largest network client, Bitcoin ABC, was disputed by other influential parties in the community. Therefore, carrying out simple updates to the protocols used to execute transactions on the network became a moment of contention from others in the community.

A Game of Forks: Bitcoin Cash ABC, SV and Cobra Client
Bitcoin Cash is typically scheduled for a soft fork update every 6 months, which is expected to be carried out without contention. The largest client on the network, Bitcoin ABC, recently announced version 0.18.0 of the blockchain protocol used to carry out transactions. This was not meant to be a major upheaval of the previous protocol, but just made small adjustments, including things like Canonical Transition Ordering and two new operation codes (opcodes).

Opcodes are the part of the computer code which provides instructions on operations to be performed.

The release of this announcement from Bitcoin ABC sparked an opposition asking for more radical change.

Specifically, Craig Wright, who is the founder of the blockchain development platform nChain and also claims to be the real Satoshi Nakamoto, released a different proposal for the protocol to be implemented at the scheduled fork date. In Wright’s proposal, an entire roadmap was laid out outlining a reversion to the original protocol released by Satoshi. This involved implementing four “Satoshi” opcodes. Therefore, this proposal was named, SV for “Satoshi’s Vision”.
Lastly, seeing all the disarray in the Bitcoin Cash community, a controversial mouthpiece in the Bitcoin community, Cobra, who is the anonymous handler of bitcoin.org, joined the chaos. Cobra announced the release of the Cobra Client, which promised to keep the exact same protocol without making any changes. Cobra even claimed to have 25% of the hashing power associated with the network, which would make it the second most favored proposal, behind 29.5% of nodes supporting Bitcoin SV and 19.3% supporting Bitcoin ABC.

The result of this battle royale turned out to be a hard fork and the establishment of two new versions of the Bitcoin Cash network: Bitcoin Cash ABC and Bitcoin Cash SV. The Cobra Client has folded its position and Cobra seems to be showing his support for Bitcoin Cash SV.

THE FAULTS OF DECENTRALIZATION

The faults that formed within the Bitcoin Cash community can reveal some of the disadvantages of a democratized code being executed on the network. Some people have claimed that this is clear evidence of a centralized system being more stable, but that might also be just jumping to conclusions. Considering that updates and forks are not regular occurrences in most blockchains, but carefully planned out steps, it makes sense to democratize this process.

The nodes on the network can then collectively dictate the code used to execute their transactions. However, in order to have a high degree of stability (something that is necessary for mass adoption to occur) it may be fruitful not to update the network too frequently and make controversial changes that may draw concern from pockets of the community. Ultimately, the success of all coins helps lead to the success of the crypto industry as a whole.

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