In the beginning Satoshi Nakamoto created bitcoin and the blockchain. And the blockchain was without rival and bitcoin was without worth and only a fringe group known as cypher punks saw the technology and said that it was good. When the Genesis Block of bitcoin appeared in January 2009, two months after a paper describing the “peer-to-peer electronic cash system”, its small group of followers realised the cryptocurrency held the potential to rip a hole right through the traditional financial system.
At the time, the world was still reeling from the worst financial crisis since the Great Depression, a historical moment noted by bitcoin’s pseudonymous creator in a message embedded in the first block of bitcoins: “Chancellor on brink of second bailout for banks.” Bitcoin’s promise lay in the fact that as the world’s first decentralized digital currency, it was a payment outside the scope of banks and governments and therefore immune to the pressures and whims of such institutions.
But almost 10 years on, while its potential to disrupt the established financial order is still being realised, the only thing that has actually torn apart is bitcoin itself.
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On 1 August 2017, the blockchain of bitcoin – an online ledger that documents every transaction – was split in two, spawning a brand new rival to the original cryptocurrency called bitcoin cash. The process, known as a hard fork, meant both versions of bitcoin shared the same blockchain history up until that date but from that point on would be two entirely separate entities.
There has since been more hard forks splitting the cryptocurrency, such as bitcoin gold and bitcoin private, however none were as truly divisive as that of bitcoin cash. Its purpose was to solve the two main issues that had arisen with bitcoin as its popularity grew: slow transaction times and high fees.
The scalability problem, as it is known, has served to split not just the cryptocurrency itself, but the entire community that has helped develop it over the last nine years.
The new cryptocurrency is currently only worth around 15 per cent of the original bitcoin – or bitcoin core – yet its improved functionality means some of the original cypher punks believe it is “the one true bitcoin”. Its most prominent advocate is Roger Ver, whose involvement with bitcoin since its early days earned him the moniker ‘Bitcoin Jesus’.
“Bitcoin cash has more of the characteristics that make bitcoin bitcoin, than bitcoin core,” Mr Ver tells The Independent. “What matters is if it works as a peer-to-peer electronic cash system – and bitcoin cash simply works better.”
The disillusionment Mr Ver felt with the original bitcoin began in 2015 when he realised that some bitcoin core supporters were in favour of high fees. Increased fees meant increased profits for some cryptocurrency companies, despite it going against the founding principles of bitcoin. The average fee for a single transaction last year was $28, making it entirely impractical for use as digital cash.
A view of Ducatus cafe, a cashless cafe that accepts cryptocurrencies such as bitcoin, on their opening day in Singapore December 21, 2017 (Reuters)
Another vocal supporter of bitcoin cash is James Howells. The IT specialist from Newport, Wales, made headlines in 2013 after it emerged he had accidentally thrown away a computer hard drive containing 7,500 bitcoins, worth around £4 million at the time. At today’s prices, the value of the hard drive is worth more than £50 million – it sits buried beneath trash in a landfill site near his home in south Wales for anyone who fancies a treasure hunt.
“At the time of the split in August 2017, as an early bitcoin adopter I felt I had to step up and defend the original goals and vision of bitcoin,” Mr Howells tells The Independent.
“Bitcoin core has leaned towards catering to investors and financial companies and is no longer interested in being a usable day-to-day cryptocurrency, but wants to stay as a store of value. Unfortunately, it is the use-case as digital cash that gives it the store of value in the first place. If you cannot easily transact with bitcoin due to high fees, then how can it be a good store of value? Bitcoin cash is both.”
Mr Howell describes an online battle between the two sides, with each side trying to discredit the other and claim the bitcoin brand.
The most prominent battlegrounds have been the forums of Reddit, the social news site that has helped foster cryptocurrency communities since bitcoin’s beginnings.
Along with the gripes about bitcoin core’s technology, the bitcoin cash side has claimed it is the victim of censorship through posts being deleted in the main bitcoin forum.
On the other side, the bitcoin core community claims bitcoin cash advocates are partaking in a campaign of misinformation in an attempt to steal bitcoin’s brand.
“They’re trying to rewrite history and make use of the Bitcoin.com domain name, the r/btc Reddit section, and the @Bitcoin Twitter [account] to create a sense of ambiguation between the two coins,” says cryptocurrency blogger Vlad Kostea in a detailed post on the feud.
“The entire scenario is very much like the propaganda you’d read from the Ministry of Truth in George Orwell’s Nineteen Eighty-Four: Repetition creates intellectual consent, history must be rewritten after every minor change according to the will of those in power, and words change their meaning for the sake of imposing an agenda.”
The bitcoin core side also claims that any issues with slow transactions and high fees can be solved by building new technology on top of it, such as the Lightning Network – a ‘second layer’ payment protocol that operates on top of a blockchain to enable instant transactions.
Ultimately, by sticking to Satoshi Nakamoto’s original vision, bitcoin cash supporters believe the new cryptocurrency will overtake bitcoin as the world’s most valuable digital currency, an event referred to as “the flippening”.
Among those offering bold predictions for bitcoin cash is Mr Ver, AKA Bitcoin Jesus, who believes bitcoin cash will overtake bitcoin core’s market cap by 2020.
“When we’re talking about upper limits, hundreds of thousands of dollars are well within the realm of possibility,” he says, citing big investors getting involved in the new cryptocurrency. “People love to chase a rising star.”
Beyond investors, bitcoin cash already shares some of the same characteristics as bitcoin in its early years. It has many of the same developers, together with the same kind of grassroots movement pushing for greater merchant acceptance and wider adoption. Enthusiasts have even set up a bitcoin cash ‘faucet’ offering free units of the cryptocurrency to encourage new users. With all this, the price of bitcoin cash is already catching up with the original and a flippening is not beyond the realm of possibility.
But bitcoin cash is just one of more than 1,500 other cryptocurrencies that have emerged since bitcoin’s inception in 2009, according to Coinmarketcap. It was not the first and will likely not be the last to attempt to overcome bitcoin’s perceived limitations. Cryptocurrencies like ethereum and dash offer similar functionality, but without widespread adoption none will be able to fully realise bitcoin’s promise of being the dominant electronic cash system.
“The limitations of bitcoin core has seen a lot of developers jump ship and move onto these newer cryptocurrencies,” Mr Ver says, referring to a “brain drain” that means many of the best developers have moved away from bitcoin core.
“Ultimately, not even bitcoin cash is the one and only true version of bitcoin – People will have to read Satoshi’s original white paper and decide for themselves what really defines it.”
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