An updated Exchange, better UI and more languages
10 years of blockchain
Bitcoin in Review Going into 2020
Bitcoin Core vs Bitcoin Cash: Understanding the Civil War Behind Bitcoin’s Evolution
It may come as no surprise that many outside the cryptocurrency world imagine Bitcoin to be a single digital currency, conceived to address the weaknesses of traditional currencies. In reality, however, Bitcoin’s evolution is actually much more multifaceted than people may presume. The promise of efficiency and transparency inherent in an equitable system of decentralisation includes a diverse set of ideas and value systems that might actually be at odds with one another. Blockchain technology works on the assumption of a “universal source of truths,” which is mathematically determined and enforced by consensus. This very consensus — although serving as the core principle of this advanced technology — could also turn out to be a source of entropy. Looking at the cryptocurrency space, many might wonder about the broad span of different versions of of Bitcoin, which, despite may sharing the same general name, are fundamentally different underneath.
It could also be argued that the abundance of different versions of Bitcoin is itself a manifestation of the diverse approaches to solving issues inherent to the system. In order to fully appreciate and understand the roots of Bitcoin, it is vital to understand its evolution. The most prominent chapter in Bitcoin’s relatively infant lifespan is a “civil war” that redefined its evolutionary track.
The History and Evolution of Bitcoin
Bitcoin was conceived in late 2008 as an answer to the financial crisis of that year. With the promise of being a peer-to-peer, electronic cash system, Bitcoin came into being to compete with traditional monetary systems. Leveraging a revolutionary technology called blockchain, Bitcoin facilitated the transfer of value in a transparent and immutable way, without any intermediaries and at a fraction of the cost of money transfers. The fact that the architecture of the technology was decentralised meant that anyone could participate in the network to process, verify and store transactions in the unified Blockchain ledger. Word of Bitcoin’s potential in redefining money and the myriad of applications that its underlying technology comprises, led to exponential growth in usage and adoption.
The Scalability Issue
However, there was an inherent weakness in Bitcoin’s architecture that prevented mass adoption, namely, scalability. Prominent money processing institutions such as Visa and Mastercard were able to process thousands of transactions per second, while Bitcoin’s capacity was capped at a mere seven transactions per second. This meant that Bitcoin was extremely slow in comparison to its traditional counterparts and a solution was needed to address its scalability issue. As Bitcoin’s network grew, it was apparent that waiting times and fees were on the rise, since there was a greater intensity of transactions that needed to be processed and stored. In order for Bitcoin to truly achieve its goal of mainstream adoption, a structural upgrade to its foundational layers was required.
Finding a Solution to Bitcoin’s Scalability Issue
Since the early days of Bitcoin, there have been numerous debates and discussions about the central issue of scalability — trying to figure out ways to enhance Bitcoin’s transaction output. There were two main approaches to this problem in the crypto community:
1. Reduce the amount of data of every transaction for faster and cheaper transactions, since there is less data to process and verify.
2. Increase the size of all blocks on the blockchain, so that more transactions can be processed and stored in each block.
The first approach — that of reducing the data for each transaction — was supported by the majority of mining pools and companies that possessed the lion’s share of Bitcoin’s computing power. Bitcoin’s core developers began working on a solution called “segregated witness” (SegWit), which aimed to reduce the amount of data that needed to be verified on each block, by removing non-essential data (called signature data) and storing them in separate files outside the blockchain. With this solution, the core developers theorised that more storage space would be freed up, additional transactions could be added to a block, and the processing time would significantly decrease.
The second approach entailed removing the block size limit to allow more transactions to be included in each block. This approach was called “Bitcoin Unlimited.” This was initially a popular approach supported by miners, as the removal of the block size limit would prevent a bottleneck of unprocessed transactions while at the same time, providing an increase in overall mining fees that could be generated for each block. However, the majority of Bitcoin’s core developers were against the second proposal, since it could result in small miners dropping out of the network, and ultimately result in the centralisation of the Bitcoin network by large mining institutions.
As an alternative to the two major factions in the discussion, a compromise protocol was reached. SegWit2x was developed to appease both factions; the protocol would store some non-essential data outside the blockchain, and also increase the block size limit to two megabytes (MB), from its default capacity of 1 MB. However, in reality, the network did not see an increase in its block size limit, and it seemed as if the problem of scalability had not been addressed in the right way, merely “kicking the can down the road.” A group of developers decided to abandon the Segwit2x protocol and venture into a new path. They decided to create a new offshoot coin called Bitcoin Cash.
The Birth of Bitcoin Cash
A group of developers and miners decided to take matters into their own hands and try to advance the issue of expanding Bitcoin’s block size limit. Although the Segwit2x proposal was developed as a compromise between the two approaches mentioned earlier, there were reservations concerning the adoption of the SegWit technology, and the associated (lack of) transparency which could derail the basic foundation of Bitcoin’s decentralisation concept. In addition, this group of individuals perceived that SegWit2x did little to address the fundamental issue of scalability, nor was the Bitcoin roadmap the accurate manifestation as outlined by Satoshi Nakamoto, the anonymous developer of Bitcoin.
For these reasons, the aforementioned group of developers and miners decided to initiate a “hard fork” and created a new cryptocurrency called Bitcoin Cash in August 2017. A hard fork is a split from the network by altering the underlying source codes of the original Bitcoin source code. The altered rules of the new blockchain creates a new cryptocurrency, with different features from the original blockchain. A fundamental feature of Bitcoin Cash is an increase in the Bitcoin block size from 1MB to 8MB, allowing for faster verification and processing. This is the main reason that Bitcoin Cash is able to process transactions significantly faster than Bitcoin; Bitcoin Cash can process more than 100 transactions per seconds as compared to Bitcoin’s seven. In addition, Bitcoin Cash transactions were also much cheaper than a transaction on the Bitcoin blockchain after the split.
Controversy Between the Sides
After the creation of Bitcoin Cash, there was inevitably a “war of words” between the sides. Roger Ver, a prominent advocate of Bitcoin Cash and an early adopter of Bitcoin, believed that Bitcoin Cash was “the real Bitcoin,’ since it is closer in spirit to Satoshi’s original vision for Bitcoin, namely, a peer-to-peer digital cash.
However, some people disagree with the direction of Bitcoin Cash. Eric Voorhees, the CEO of Shapeshift, claimed that: “Bitcoin is the chain originating from the genesis block with the highest accumulated proof of work. The Bitcoin Cash fork failed to gain a majority, therefore it is not Bitcoin.” The core developers of Bitcoin have also explicitly expressed their disdain regarding Bitcoin Cash’s efforts to brand itself as the ‘real Bitcoin,’ causing confusion among new users in the space.
The division in the Bitcoin community has turned into a toxic breeding ground with each side trying to discredit the other so as to keep the title of “the true Bitcoin.” There are deep scars in the Bitcoin community emanating from the network split. The debate on the best approach to scalability has progressed even further than the Bitcoin Cash vs Bitcoin debacle. For instance, Bitcoin SV was created at the end of 2018 as the result of a hard fork from Bitcoin Cash’s blockchain. Bitcoin SV claims that it is staying true to Satoshi’s vision as described in the original white paper by facilitating higher scalability capacities.
The civil war between the two factions in the Bitcoin community emanated from each side’s unfettered belief that their approach was the best way forward to advance Satoshi’s visionand address the inherent issue of scalability. However, this diversity in thought (and implementation) can also be seen as a positive side effect of a decentralised network, where anyone is free to create a cryptocurrency according to a set of justifications that has a following.