The First Bitcoin Fork
On August 2nd, 2017, Bitcoin – easily the most valuable cryptocurrency to date – forked. “Forked” is a term used to describe when open source software is cloned and replicated by groups of users of want to create their own version of the software. In Bitcoin’s case, a fork led to two different versions of the world’s most popular cryptocurrency.
In recent news, it was announced that Bitcoin would undergo a second fork in November. The fork is now becoming a trident, and there will soon be three versions of Bitcoin. This shocking announcement comes just two weeks after Bitcoin forked during the first week of August.
The first fork occurred because groups of Bitcoiner’s (from casual users to miners) decided they did not want to support upcoming changes to the token’s blockchain system, changes that are purported to make Bitcoin transactions faster and more efficient.
This is basically what led to the two versions we have now: Bitcoin and Bitcoin Cash. What’s the difference?
Right now, Bitcoin Cash is able to support blocks of up to 8 MB (the maximum amount) and uses the segregated witness feature, which stores bits of transaction data outside of the blockchain to free up more space in the blocks for transactions. Standard Bitcoin, however, uses 1 MB size blocks and does utilize the segregated witness feature, though the size of the blocks do not change within the original blockchain. So, as you can see, segregated witness was implemented as a way to speed up the transaction process and reduce blockchain congestion.
Bitcoin Cash was essentially developed and backed by developers and large Bitcoin companies. Skeptics were anticipating for Bitcoin Cash to be a massive failure, but as of now, Bitcoin Cash is trading at over $300 per token, which is a value comparable to the likes of Ethereum.
The Second Bitcoin Fork
In comes a third group of Bitcoin companies, developers, and users who advocate an approach using combinations of both Bitcoin system components. This third group consists of companies like Bitmain, who controls the largest Bitcoin infrastructure on the planet, as well as popular Bitcoin developer Jeff Garzik.
In May, 2017, the group came together to sign the “New York Agreement”, a binding contract that would increase block sizes by 2 MB and would also utilize the segregated witness protocol. The agreement would only be valid if the hard fork took place within six months of the signing.
This second fork is being referred to as Segwit2x.
According to the official announcement posted on the Segwit2x GitHub repository, new Bitcoin blocks between 1 MB and 2 MB will be created at block number 494,784. After this occurs, any user wanting to access the Segwit2x blockchain will be able to create new Bitcoin blocks on top of the 494,784 block.
This will lead to the creation of a brand new Bitcoin blockchain containing its own set of rules and protocols.
The Segwit2x group has made multiple arguments for increasing the size of the chain’s blocks. The potential advantages include lower fees which may lead to more users, the ability to verify and approve a higher number of transactions per second, and freeing up block space for extensions and applications outside the chain.
Pros and Cons of A Second Bitcoin Fork
Some of the potential disadvantages of the new Bitcoin fork may include: Users sticking to the other two forms of Bitcoin that currently exist, creating a more centralized system that is contrary to Bitcoin’s design, and having the network controlled by a small group of big players, which will force users to have more trust in the new cryptocurrency.
A Recap of Bitcoin’s Trident
So, with all this said, in a few months from today it looks like there will be three different versions of Bitcoin, with each one preparing their crypto token for higher traffic and more users.
To make things absolutely clear, here’s a recap of the main differences between the three Bitcoin tokens.
- 1 MB chain blocks
- Newly implemented use of ‘segregated witness’
- 8 MB chain blocks
- No use of segregated witness
- 2 MB chain blocks
- Uses segregated witness
It’s fair to say that these changes and different forms of Bitcoin are the result of different groups of users prioritizing different aspects of the system. Bitcoin Cash, for instance, was in part created because its developers want it for a singular use. Smaller blocks mean more transaction fees and bigger stakeholders, while bigger block sizes favor Bitcoin miners trying to earn a profit. Clearly, each group and token has its own advantages and disadvantages.
While it’s still unclear which Bitcoin is superior, we can say that things are about to get very interesting in the cryptocurrency community. In the meantime, keep an eye out for any incoming developments or changes.