Today, Bitcoin Cash will undergo what’s known as a contentious hard fork, potentially resulting in the creation of a new cryptocurrency. Here, we’ll try and provide a bit more background on why this is happening and what you can expect.
What’s a hard fork?
Hard forks are generally the result of a specific type of software upgrade.
Cryptocurrencies like Bitcoin Cash operate using software that is shared by network participants around the world. This software consists of a set of rules that allow network participants to communicate and transact with one another, ultimately keeping the network in-sync.
From time to time, this software and the rules within it, need to be updated to improve the security and functionality of the network. Updates that change these rules are referred to as hard forks.
Contentious hard forks
Bitcoin Cash undergoes two scheduled hard forks per year. In May of 2018, the network underwent a hard fork that changed the rules regarding how many transactions could be included in one block. Since the entire network was on board with this rule change, everyone implemented the hard fork and things continued as normal - this hard fork was not contentious.
Tomorrow’s hard fork is “contentious” because there are two different network upgrades being proposed - popularly referred to as “ABC” and “SV”. These proposals are incompatible, which means that if everyone doesn’t agree on one or the other, the network will split.
Why is this happening?
Cryptocurrencies like Bitcoin Cash are open source software projects that no single person is in charge of. Developers from all over the world contribute to the software to continuously evolve and improve it over time.
The ABC and SV proposals came from two different groups of developers who disagree on the best ways to improve Bitcoin Cash.
Bitcoin Cash itself was created out of a contentious hard fork of Bitcoin over a disagreement on how to improve Bitcoin. Ethereum and Ethereum Classic also emerged as the result of a contentious hard fork. As you can see, these events are not uncommon within the world of cryptocurrencies.
Why does this cause a network split?
Right now, participants in the Bitcoin Cash community are running software that enables everyone to use and maintain a single transaction history - the Bitcoin Cash blockchain.
Where all participants have been working with a single Bitcoin Cash blockchain, participants who upgrade to ABC will move to one blockchain and those who implement SV will move to another. One blockchain will split into two.
What happens to your Bitcoin Cash?
If someone owns 1 Bitcoin Cash and the Bitcoin Cash blockchain splits, there are now two blockchains with exactly the same transaction history. This means that this person still has 1 Bitcoin Cash and an additional token on the second blockchain.
What to expect
Users of the Bitcoin Cash network will have to choose which upgrade to implement - ABC or SV. This means that the outcome of today’s hard fork will be determined based on the independent actions of many different individuals and businesses around the world. As such, it is difficult to predict what exactly will happen.
At this stage, it seems likely that a chain split will occur because both ABC and SV seem to have a meaningful level of support heading into the hard fork. What remains uncertain is whether or not both chains, and the coins they produce, remain “viable.”
What determines viability?
Bitcoin Cash itself emerged as a viable coin after it hard forked from Bitcoin. What determines viability can vary, but for Bitcoin Cash, its viability was determined by the fact that it had enough community support to maintain a stable and secure network. Additionally, businesses, wallets and exchanges within the crypto ecosystem supported it.
While the emergence of a new chain and coin after tomorrow’s hard fork is likely, the sustainability of both chains and the coins they produce is uncertain. Similarly, this will be determined by network stability and support from the broader crypto ecosystem of each chain after the fork occurs.
Circle Invest has committed to supporting any viable chains that emerge and will notify users once the situation clarifies itself.