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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.
core bitcoin is also 'soft-forking' to get bigger block sizes a the same time.
This will in the next few hours / days activate a software update giving the official bitcoin chain bigger block sizes.
To see the activation status see: http://segwit.co/
Bitcoin cash does have some interesting ideas but i'd probably stick with bitcoin as they finally have gotten thair act together and implemented a solution to the problem.
Actually, it does not matter. Bitcoin Cash is redundant. They may be correct as to the technical merits of why a change is needed regarding maximum block size but their fork is unnecessary. Ordinary Bitcoin may adopt a larger block size or some other remedy at any time in the future. The argument is only over whether something needs to be done today. Well that and internal developer politics.
Regular Bitcoin is not locked into some doomed course. They can make a block size change on the timeframe they think appropriate; or if Bitcoin Cash does enjoy increasing popularity they can make the change to put an end to the defections to the other side. Either way Bitcoin Cash seems doomed. Although I'm sure some speculators will find a way to make money off the hype.
Some people, like the owner of this address https://bitinfocharts.com/bitc... got $43million richer overnight, if they could cash out all of their bitcoin cash holdings right now.
FTFY
Exactly to destroy it.
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.
There's an extra wrinkle: it's downright trivial to make your own new 'coin'(at least if it's a close clone of one of the existing ones; making more significant architectural changes would obviously be a bigger job). There are even handy web interfaces that will make them for you; just plug in your parameters and go.
However, creating a new variant doesn't affect the scarcity of the existing variant: there are more 'coins' in circulation overall; but 'coins' from one fork can always be distinguished from those of the other; so the scarcity of Fork X 'coins' remains the same; but now there are Fork Y 'coins' as well.
The really scarce resource is interest: as noted, having your own pet 'coin' and blockchain is extremely trivial; but also likely to be worthless because you can't pass it off as being the 'real thing'; and nobody else cares about it. This incident is somewhat notable not in that it's the creation of yet another cryptocurrency variant(which happens all the time); but that there was enough discontent with the existing arrangement that the fork has actually attracted some attention and isn't completely worthless.
So the main feature is that the block size is 8x the size of BTC's. So now instead of the entire network being able to only handle 7 transactions/second it can handle only 56? SWIFT handles ~350 transactions/second on a good day, for comparison. Furthermore, the entire blockchain at this point is currently ~126GB. That's enough to fill up most mobile devices by itself. So with 8x the block size, the blockchain will soon be in the terabytes? Storage isn't getting larger/cheaper at that rate any more. Sounds like someone needs to fix the "you need the entire history of the world's financial transactions" problem next.
Corruption is convincing someone that the selfless ideal is the same as their selfish ideal.
If you're like me, you do, but rejected the correct answer because it seemed so silly.
It's explained reasonably well by analogy with the Parable of the Ox Explained here on the BBC's excellent "More Or Less" radio programme/podcast, but if you prefer to read here's the author's post.
If they were to "cash out" all their bitcoin holdings the price would plummet before selling even more than 1000 btc. Try to cash out and see what happens in a market with no volume.
Seven puppies were harmed during the making of this post.