- Reuters/Lucas Jackson
Bitcoin power brokers were unable to come behind a single solution that would have preserved a unified cryptocurrency by Tuesday morning’s deadline.
As such, the digital currency has officially forked and split in two: bitcoin cash and bitcoin.
Miners were able to seek out bitcoin cash beginning Tuesday morning, and the cryptocurrency-focused news website CoinDesk said the first bitcoin cash was mined at about 2:20 p.m. ET.
“There seems to be some technical issues that might be slowing it down, but yes, the fork has happened,” Peter Borovykh of Blockchain Driven, a blockchain technology company, told Business Insider earlier on Tuesday.
Miners are the folks who solve complex computer problems using software to unleash digital coins into the market. It took a couple of hours after the official fork for miners to unlock the first bitcoin cash coins.
“It seems as if people overestimated the mining power, or the support from miners – hence, it is taking far longer than most expected,” Iqbal Gandham, the UK managing director at the social investment network eToro, said in a statement sent to Business Insider just before the split.
Bitcoin was the first digital currency built on blockchain technology, in which transactions are independently verified by the network without the need of a middleman like a bank. Bitcoin cash is built on the same blockchain network as bitcoin, but the new software increases the size of the “blocks” that make up the network to allow it to process more information.
Supporters of the newly formed bitcoin cash believe the currency will “breath new life into” the nearly 10-year-old bitcoin by addressing some of the issues facing bitcoin of late, such as slow transaction speeds.
Bitcoin power brokers have been squabbling over the rules that should guide the cryptocurrency’s blockchain network.
On one side are the so-called core developers. They are in favor of smaller bitcoin blocks, which they say are less vulnerable to hacking. On the other side are the miners, who want to increase the size of blocks to make the network faster and more scalable.
Until last week, the solution known as Segwit2x, which would double the size of bitcoin blocks to 2 megabytes, seemed to have universal support.
- Thomson Reuters
Then bitcoin cash came along. The solution is a fork of the bitcoin system. The new software has all the history of the old platform; however, bitcoin cash blocks have a capacity 8 megabytes.
Bitcoin cash came out of left field, according to Charles Morris, a chief investment officer of NextBlock Global, an investment firm with digital assets.
“A group of miners who didn’t like SegWit2x are opting for this new software that will increase the size of blocks from the current 1 megabyte to 8,” Morris told Business Insider.
To be sure, only a minority of bitcoin miners and bitcoin exchanges have said they will support the new currency.
Investors who have their bitcoin on exchanges or wallets that support the new currency will soon see their holdings double, with one unit in bitcoin cash added for every bitcoin. But that doesn’t mean the value of investors’ holdings will double.
Because bitcoin cash will initially draw its value from bitcoin’s market cap, it will most likely cause bitcoin’s value to drop by an amount proportional to its adoption. Bitcoin was already trading down by 5.78% at $2,715 on Tuesday following word that bitcoin cash had gone live. Morris told Business Insider that bitcoin cash was trading in the futures market for about $200 to $400 last week, suggesting that’s the range it would fall in during regular trading.
Kraken, a bitcoin exchange, tweeted Tuesday morning that it was experiencing delays getting bitcoin cash to show on user’s accounts.
“Please note,” the exchange said, that bitcoin cash “balances have not been credit yet.” It added that it was “working to credit as soon as possible.”
Numerous exchanges have said they won’t back bitcoin cash.
“In the event of two separate blockchains after August 1, 2017 we will only support one version,” David Farmer, the director of Biz Ops at Coinbase, a cryptocurrency exchange, wrote in a blog post. “We have no plans to support the bitcoin cash fork.”
Coinbase has served nearly 9 million customers across 32 countries, according to the firm’s website. The firm has enabled the exchange of over $20 billion worth of digital currency.
But just because some big players won’t get behind it doesn’t necessarily mean bitcoin cash will be a dud or that it couldn’t eventually usurp the original bitcoin. Miners may rally behind bitcoin cash if it turns out to be the better digital currency.
“Bitcoin cash has a chance to become the dominant cryptocurrency contingent upon its ability to gain trust and support from both current and new players as well as security of its network,” Borovykh of Blockchain Driven said. “Due to, at least temporary, solution of the scalability issues, bitcoin cash could attract more new capital to the entire crypto space, thus helping increase overall market cap.”
Arthur Hayes, the CEO of BitMex, a bitcoin derivative exchange, told Business Insider he thought a fork would benefit the cryptocurrency in the long run after some short-term volatility and confusion.
“There are people with billions of dollars of skin in the game,” Hayes said. “And they will ultimately go with the superior bitcoin network, and the market will follow.”