Bitcoin versus Bitcoin Cash (part 1)

Bitcoin VS Bitcoin Cash

Bitcoin VS Bitcoin Cash

 

In the “Two sides to every story” series, we will examine current controversies and issues in the blockchain space. Instead of choosing sides, we will do our best to present information from both (or more!) sides of the argument. Then, you decide!

 

Presenting an article on the intense rivalry between Bitcoin and Bitcoin Cash feels somewhat like taking a short stick and hesitantly jabbing at a hornet’s nest. You just know things are going to get out of hand in short order, and it will not be easy to escape unscathed.

Still, I will do my best in this series to examine this topic as objectively as possible. It’s admittedly a tricky task as people on both sides of the argument tend to be deeply passionate and few remain ambivalent regarding the two solutions. But I’m up for it!

 

Image result for satoshi nakamoto

This conflict stems all the way back to the original whitepaper vision of Bitcoin, conceived by the enigmatic Satoshi Nakamoto, a person or persons who, to this day, is still unknown. Satoshi envisioned a peer-to-peer electronic cash that, through the powers of decentralization and trustless transaction of value, would avoid the pitfalls of corruption and manipulation that was so prevalent at the time of the 2008 economic collapse and has since resulted in massive “quantitative easing” budgetary problems around the world, causing rampant inflation and national debts through the continuous process of printing ever-greater quantities of money.

 

And this is the heart of the conflict. The original vision of Bitcoin as a solution to the problems of corruption, centralization, and manipulation was at stake in the minds of many on both sides of the issue.

Bitcoin, in its attempts to scale and be useful as an efficient means of transaction, came up against a wall of sorts in 2017. It was an ironic problem. It was feared that Bitcoin was becoming too popular for its own good. It risked not being able to handle a surge in popularity, which could result in congested mempools and inordinately high fees. Of course, these fears were warranted, as Bitcoin did indeed struggle under the pressure of its new-found popularity later that year.

As the Bitcoin network labored to keep up with inordinate demand, some tried to spin the perception of Bitcoin as more of a store of value; somewhere to keep your money stored like a digital vault, only to be drawn from in times when one wishes to withdraw a larger sum. Activities like buying a $2 coffee would simply be impractical since the transaction fee would cost more than the coffee itself and it might take hours to complete the transaction. Other “lighter” coins like Litecoin, for example, could serve the needs of transacting value more efficiently and cheaply, at least until the Bitcoin network had successfully scaled to handle the increase in demand. Many balked at this idea as it violated the original vision of a peer-to-peer electronic cash, which necessitates the key characteristic of cheap and easy portability.

 

 

In anticipation of this scalability problem, solutions were proposed. One idea was to increase the block-size of each block. The advantage of this solution was that all transactions would remain “on-chain”, as in, they would not be off-loaded to another mechanism that would require some degree of trust — a key element of the original vision of Satoshi’s design.

Some resisted this bigger-block idea due to the concern that it could theoretically cause a greater degree of centralization — the idea that fewer entities could hold the majority of hashing power of the blockchain due to the increased memory demands of maintaining an entire blockchain with larger blocks. The concept of resisting centralization was yet another element of Satoshi’s original vision, and it was difficult to reconcile this conflict with an “on-chain” solution.

Another proposed solution was entitled “SegWit” (or Segregated Witness); a solution that would reduce the demands on the Bitcoin chain by segregating certain data (transaction signatures). Without getting too technical, this approach enabled the possibility of greatly increasing the transaction capabilities of Bitcoin in terms of speed and throughput once adopted on a broader basis. It also enabled more possibilities of second-layer solutions and smart contracts pegged to the Bitcoin network.

And this is where things get really dicey. Around the same time that Segwit was successfully agreed upon via a User-Activated-Soft-Fork (UASF), a hard fork lacking SegWit capabilities was also created that became known as Bitcoin Cash. This non-SegWit copy of the blockchain was immediately controversial and raised the eyebrows of many in the Bitcoin community as it offered the opportunity for SegWit opponents to jump ship from the anticipated modifications.

Amongst this swirling disagreement, the soon to come blocksize increase, known as SegWit2X, also came up against a major roadblock. Two camps emerged; some supportive of the block-size increase and others wishing to stick with SegWit, off-chain upgrades, and the current smaller block-size. Proponents of the bigger block solution resisted the concept of reliance on second-layer solutions and off-chain networks that, in their perspective, took away from the original vision of the Bitcoin protocol. By depending on layers that, according to big-block “on-chain” proponents, require trust in a way that the original Bitcoin blockchain did not, as it was fully trustless, big-block supporters were very unhappy with this suggested solution. A great debate and passionate arguments ensued in anticipation of the controversial “upgrade”.

Thus, the great forking of Bitcoin took place. It’s true, forks of Bitcoin had taken place in the past, but none were of this scale in terms of community division, and no previous forks had sparked so much controversy.

Now, there were two Bitcoin blockchains with a great deal of volatile disagreement over which was the true embodiment of Satoshi’s vision: Bitcoin, or “Bitcoin Core”, as some in the Bitcoin Cash camp referred to it in order to distinguish the new SegWit-enabled version from what they saw as the original vision of Bitcoin, and the newly-dubbed Bitcoin Cash, proponents of whom identified this new coin as the “true” Bitcoin. On the flip side, those who stood by the SegWit-enabled Bitcoin blockchain sometimes derisively referred to Bitcoin Cash as BCash in order to diminish its connection with the original nomenclature. This naming debate persists to this day and can often be seen in angry and dismissive Twitter and Reddit snipes between disagreeing parties.

In fact, it was not even certain which version of Bitcoin would retain the “Bitcoin” name on exchanges, although eventually exchanges decided to stick with the name “Bitcoin” for the SegWit-enabled blockchain and “Bitcoin Cash” for the bigger-block, non-SegWit blockchain. All holders of Bitcoin received the same amount of the forked Bitcoin Cash at a 1:1 ratio (assuming exchanges and wallets supported the fork), so the original name really could have been up in the air for a short time as it might easily have been attributed to the other blockchain if there was enough agreement. This, of course, was just the beginning of the heated controversy.

 

Phew! You can see there’s already the potential for a ton of disagreement and controversy stemming just from the early stages of these events. Stick around for part 2 where we examine the Bitcoin-Bitcoin Cash forking event in more detail!

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