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Why the Bitcoin Network Just Split In Half and Why It Matters (arstechnica.com)
In a report via Ars Technica, Timothy B. Lee explains why the Bitcoin network split into two and why it matters: On Tuesday, a faction of the Bitcoin community launched an audacious experiment: a new version of Bitcoin called Bitcoin Cash that's incompatible with the standard version. As a result, the Bitcoin network split into two mutually incompatible networks that will operate side-by-side. The confusing result is that if you owned one bitcoin before the split you own two bitcoins now: one coin on the original Bitcoin network, and a second coin on the new Bitcoin Cash network. The two coins have the same cryptographic credentials, but they have very different values if you sell them for old-fashioned dollars. On Wednesday morning, one standard Bitcoin was worth about $2,700, while -- on paper at least -- a unit of Bitcoin Cash was worth around $600. [...]
For over a year, the Bitcoin network has been bumping up against a capacity limit hard-coded into the Bitcoin software. Each block in the Bitcoin blockchain -- the network's public, shared transaction ledger -- is limited to 1 megabyte. That artificial limit prevents the network from processing more than about seven transactions per second. Technically speaking, it would be trivial to change that 1 megabyte limit to a higher value. But proposals to do so have faced opposition from traditionalists who argue the limit is actually an important feature of Bitcoin's design that protects the network's democratic character. To participate in the network's peer-to-peer process for clearing transactions, a computer needs a copy of every transaction ever made on the Bitcoin network, which adds up to gigabytes of data per month. This argument has dragged on for more than two years with no resolution. So instead of continuing to bicker, a group of big-block supporters took matters into their own hands. They forked the standard, open-source Bitcoin client to create a rival version of the software.
For over a year, the Bitcoin network has been bumping up against a capacity limit hard-coded into the Bitcoin software. Each block in the Bitcoin blockchain -- the network's public, shared transaction ledger -- is limited to 1 megabyte. That artificial limit prevents the network from processing more than about seven transactions per second. Technically speaking, it would be trivial to change that 1 megabyte limit to a higher value. But proposals to do so have faced opposition from traditionalists who argue the limit is actually an important feature of Bitcoin's design that protects the network's democratic character. To participate in the network's peer-to-peer process for clearing transactions, a computer needs a copy of every transaction ever made on the Bitcoin network, which adds up to gigabytes of data per month. This argument has dragged on for more than two years with no resolution. So instead of continuing to bicker, a group of big-block supporters took matters into their own hands. They forked the standard, open-source Bitcoin client to create a rival version of the software.
It sound more like that they created what is effectively an entirely new currency, after all the two are incompatible.
So somehow, they created a huge amount of value (on paper, at least - good luck converting all these "coins" in real world cash) unless the original BTC has dropped by USD 600 per coin at the same time. Nothing like it is mentioned in TFS.
So originally you had one BTC valued at USD 2,700. After the split you still have your BTC valued at USD 2,700, but on top of that a BTC-Cash that's valued at USD 600. So now your holding has a paper value of USD 3,300.
Weird. But then I've also never really understood the speculation going on in stock markets and futures and commodities and whatnot.
The original bitcoin had no blocksize limit. Bitcoin Cash simply increased the blocksize from 1MB to 8MB. Bitcoin Cash is the real bitcoin. Bitcoin Segwit changes the way the formula works and should actually be considered an altcoin.
The crux of the politics comes down to the future revenue streams from transactions. 81% of current hashing power is Chinese and that online wallets/exchanges/gateways do not want to send future transaction fees to china. The Bitcoin name is being usurped by an altcoin and a media campaign is supporting this.
Look, I'm not happy with chinese getting 81% of hashing power and subsequent control, i'm also not happy with the wallets and exchanges getting control. I might-as-well stick with VISA for my banking settlement as it is regulated and protects me. The crux about cash in your hand is that you can spend it however you want without regard. The future BTC will not be able to transact as it will become a settlement layer with all real business transactions moving off the chain.
I'll stick with VISA instead of moving to LN.
Even if Bitcoin does raise the block size one day, it's still not clear to me how it's ever going to scale high enough to become a general purpose currency. Going from 7 transactions/second to 56 sounds nice and all, but Visa and Mastercard handle about 2000 transactions/second. Each.
Are they going to eventually go to a 600+ MB block size? Or are a sizeable number of transactions going to have to go through bank-like intermediaries?
And as soon as they attempted to, the value of them would plummet.