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Bitcoin and Bitcoin Cash: A Scaling Debate Retrospective
DISCLAIMER: None of the following is intended to be investment advice. This is only meant to be a description of what has worked well for me so far, and my own opinions. Also, full disclosure, my links to Coinbase and Binance, etc., include referrals. It actually benefits you to use them because we will both get an extra $10 worth of BTC for free if you deposit at least $100 to Coinbase. Thanks in advance if you follow the links when you make your accounts — and even if you don’t, I hope this guide helps you out!
Whether you’re new to cryptocurrency or are a veteran, you’ve probably heard of something called the “scaling debate.” The scaling debate is the reason that Bitcoin Cash (BCH) exists, and it was the jumping-off point for many other such “forks” of Bitcoin (BTC) such as Bitcoin Gold, Bitcoin Private, Bitcoin Diamond, BitcoinX, and so on. Now, before I go on, I must ask the veterans in the crowd to bear with me — for the sake of newer readers, I would be remiss if I didn’t explain a little about forks!
What is a fork?
Forks are exactly what they sound like — you can think of them as a fork in a road. Two paths diverge, but they share a common history. Computer people are usually familiar with this even if they aren’t Bitcoin fans, because software projects “fork” all the time. To take the technical aspects out of this, let’s say you are writing a story with someone. You both agree on the first page. Later, you have irreconcilable creative differences with your partner, and you each proceed with your own stories which keep the first page. These might end up as very different stories, but they share a common beginning. They are forks of the original story!
The basic consequences of a Bitcoin fork are usually simple. At a particular date and time (or more specifically, at a particular “block”), the fork happens. After that point, if you had any number of bitcoins on the Bitcoin blockchain, you keep them — but you also have the same number of whatever coins (Bitcoin Cash, Bitcoin Gold, etc.) on the newly forked blockchain. It looks a little something like this:
The concept of forking has given some members of the media the wrong impression about Bitcoin, leading to specious articles about how it’s possible for anyone to make as many new bitcoins as they want. This is objectively false; there will only ever be a maximum of 21 million bitcoins in the world — ever. Likewise, some people think of these forks as a sort of “dividend” where you can sell them for piles of free money when they come along. While you can certainly try to do that, there would need to be an exchange that supports trading that particular forked coin, and people who are willing to buy it. The reality is that most of these forks are basically ignored by most cryptocurrency enthusiasts, and their prices reflect this.
Personally, I am pretty skeptical of most forks — this is why I sold off my Bitcoin Gold very early on and released an article explaining the process to people who wanted to do the same thing. Time seems to have proven me right on this; I sold when it was worth several hundred dollars, and at the time of this writing it’s now worth $32.07. However, Bitcoin Cash is — in my opinion — a very different animal than most of the forks that came after it.
What’s the point of all this forking? What is Bitcoin Cash?
When it comes to Bitcoin, forks — the serious ones that aren’t just a misguided attempt at some sort of cash grab, anyway — usually happen for ideological reasons. Many people have many different opinions on what Bitcoin is and what it should be. This is how Bitcoin Cash, the first Bitcoin hard fork, came into existence on August 1st, 2017.
The gist of the inciting problem is this: Bitcoin had — and continues to have — a serious scaling problem. On-chain transaction processing is currently limited to something like 3.3 to 7 transactions per second. To put this in perspective, Visa and MasterCard handle around two thousand transactions per second. If Bitcoin is ever meant to be widely adopted as a regularly used currency, this is something that needs to change or at least be worked around. Of course, there are even disagreements about whether this is desirable — after all, some people think that Bitcoin is meant to be more of a store of value (like gold) than electronic cash. In any event, one thing is certain: when the Bitcoin network has too many transactions at any given time, transaction times grow longer and fees grow larger.
The history of this problem is convoluted, so I will do my best to simplify it. There are basically two sides — “small blockers” and “big blockers.” If you ask one side what the problem was, they’re going to give you a number of different reasons than the other side. To clear things up, I’m going to give it to you from both perspectives. However, if you want to boil it down to the essentials, the central point of contention in all of this is the question of how Bitcoin should scale.
The Small Blockers
Small blockers are known as supporters of “Core,” a group of developers best known for maintaining Bitcoin Core, an implementation of the bitcoin protocol which was originally created by the mysterious Satoshi Nakamoto. Satoshi is long-missing and his true identity remains a secret; Bitcoin Core is instead now made up of such individuals as Wladimir J. van der Laan, Luke Jr, and many more.
While many events lead to the Bitcoin/Bitcoin Cash fork, the name “small blocker” comes from the idea that they believe that blocks — the fundamental units of a blockchain which make transactions possible — should remain small in size (currently 1mb). There were several declared benefits to this solution, including but not limited to:
- Avoids a “hard fork.” Changing the block size would have required a strong consensus, something which often is difficult to achieve and, some argue, is dangerous.
- Allows more people to easily run nodes, which assists in decentralization. This is point of fierce contention, however.
- Avoids a short-sighted solution in favor of focusing on a longer term, sustainable one. Increasing the “max block size” only takes you so far — you would probably not be able to achieve Visa/Mastercard levels of transactions per second without some off-chain solutions.
Small blockers are generally (but not always) known for the following:
- Supporters of “Core” developers like Luke Jr and other personalities such as Charlie Lee (of Litecoin fame).
- Associated with /r/bitcoin and bitcoin.org.
- Pro “Bitcoin,” opposed to “Bitcoin Cash” and tends to argue that “Bitcoin Cash” is a worthless fork of “the real Bitcoin.” Views the whitepaper as more of a loose guideline than a proscribed set of permanent, set-in-stone rules for Bitcoin. Tends towards the belief that Bitcoin ought to be more of a “store of value” (an asset which resists inflation, comparable to gold) than “electronic cash” (something you can buy a coffee with).
- In favor of off-chain solutions (such as the Lightning Network) as a primary solution for the scaling problem.
The Big Blockers
Big blockers are known as supporters of Roger Ver, an early investor in various Bitcoin startups. While I must reiterate that many events lead to the Bitcoin/Bitcoin Cash fork, the name “big blocker” comes from the idea that they believe that blocks should be increased in size in order to quickly resolve the most immediate scaling problems. There were many declared benefits to this solution, including but not limited to:
- Quickly provides an immediate increase in transaction capacity, leaving space for longer-term solutions later.
- Lowers on-chain fees due to the fact that more transactions exist in each block.
Big blockers are generally (but not always) known for the following:
- Supporters of people like Roger Ver, Gavin Andresen (former, now ousted “Core” developer), Craig Wright (who has claimed to be Satoshi, though this has been strongly disputed), and Jihan Wu/Bitmain.
- Associated with /r/btc and bitcoin.com.
- Pro “Bitcoin Cash” as opposed to “Bitcoin.” Tends to argue that “Bitcoin Cash” is the real Bitcoin and is more in line with Satoshi’s original vision of electronic cash as depicted in the whitepaper.
- Against off-chain scaling, at least as a primary solution. Tends to regard off-chain scaling as a setup for future rent-seeking by Core — very skeptical of Lightning Network. Prefers on-chain scaling via big blocks.
The Holy War Continues
This article might be labeled as a “retrospective” but the reality is that the debate rages on hotter than ever. It doesn’t really matter that the fork happened a long time ago (in Internet years, anyway)— for ideologues on both sides, this is something of a battle for Bitcoin’s soul.
None of the above is comprehensive, either. I’ve actually left out a significant — maybe the most significant — point of contention known as “SegWit,” or “Segregated Witness.” To a small blocker, SegWit was a useful scaling solution and a necessary means to stop the Chinese Bitcoin mining company Bitmain from having an unfair “AsicBoost” mining advantage, among other things. To a big blocker, SegWit was an overly-complex fix which was shoehorned into Bitcoin without proper consensus. I’ve even seen it called a “bandaid to a problem that doesn’t exist!” You can see how these things can get complicated, even without getting into the technicalities of what Segregated Witness is!
When it comes to all of these controversies, I have done my best to remain neutral, and hopefully that’s been at least somewhat obvious from the overall tone of this article so far. The reality, though, is that we’re talking about two groups of people that tend to despise each other. When I called this a “holy war,” I’m only being a little facetious. The vitriol sent back and forth between the /r/bitcoin crowd and the /r/btc crowd could melt a hole in a block of steel.
With regards to the name “Bitcoin,” there are many Bitcoin Cash hardliners — Roger Ver himself, for instance — who are going further than insisting that Bitcoin Cash is “the real Bitcoin.” At various points they have actually labeled Bitcoin Cash as “Bitcoin” on sites like bitcoin.com, while referring to BTC as “Bitcoin Core” rather than Bitcoin. Confused yet?
They aren’t alone, of course. There has been a lot of unfortunate shenanigans on both sides of the aisles here. Some small blockers started calling Bitcoin Cash “bcash” — as far as I can tell, this was for no other reason than to annoy the BCH crowd. This lead to them retaliating by calling BTC “bcore.” In the end, I think this sort of behavior isn’t persuading anybody; in fact, I’d argue that it’s making cryptocurrency enthusiasts look like children. Because of that, I’d like to make some humble suggestions — ones which, I hope, will help lead to more productive communications between proponents of BTC and proponents of BCH.
A Productive Way Forward
You now have an idea — a very rough one, admittedly — of what led to the Bitcoin/Bitcoin Cash fork and how the fight persists into the present. What can we do to make the future a better place for all cryptocurrency enthusiasts?
Here’s my advice to Roger Ver and his allies: accept that you’ve lost the name Bitcoin. The masses are not going to start calling Bitcoin Cash “Bitcoin” anytime soon. This is only going to serve to confuse people who are new to the crypto-space, and this is NOT good for adoption of either coin. It also gives the Core supporters ammunition to use against you; they’ll point and say “look, these big blockers are trying to defraud new investors!” I know what you’re going to say — that it’s actually the Core people who are defrauding investors because they’re pushing an illegitimate coin which spits on Satoshi’s vision. However, even if we take that as the gospel truth, I promise you that this doesn’t matter one whit to your average nontechnical person.
That person is unprepared to hear about forks at all. Forks? What’s a fork? Imagine that this guy doesn’t even have a clue how Bitcoin works, and you’re asking him to care about something called a “scaling debate!” The fact is that crypto-space has done a woefully inadequate job of creating educational tools for people who aren’t already tech geeks — and frankly, this is one of the biggest reasons I write these articles. The hypothetical “normal guy” probably doesn’t care about your ideological vision for “Bitcoin” — he mostly cares about the number that comes up when he Googles “bitcoin price.” Like it or not, that number is not the price of Bitcoin Cash and it probably will never be.
All in all, this behavior is probably making more enemies than friends every time the naming issue is pushed. Whether you’d like to admit it or not, that battle is over. I’m not making a statement about “right” or “wrong” here. I understand that many of you believe it’s completely outrageous that Core has established a sort of de facto ownership over the Bitcoin “brand,” and I’m not suggesting that you’re right or wrong on that point. All I am saying is that hammering on that particular dead horse is not a winning play. Instead, focus on productive things, like increasing the adoption of BCH and creating ingenious projects which use and promote BCH.
Here’s my advice to Core followers: antagonizing the BCH crew is not a winning play either. When you go around calling BCH “bcash” specifically to irritate the big blockers, it doesn’t reflect well on you. Forget the fact that it’s a childish — think about what you hope to accomplish with this rhetoric. Do you think you’re going to annoy them into submission? Or is it possible that doing this sort of thing is just going to motivate them to respond in kind by attempting to get Bitcoin labeled as “bcore” anywhere they can? Could it even motivate them to try to cause more serious problems for you? Look, no matter which side it’s coming from, this is sort of thing is beyond silly and there are better uses of your time. Just like the Bitcoin Cash people, you should be focusing on productive things, like increased adoption of BTC, as well as SegWit and Lightning Network. How many big exchanges are still ignoring SegWit? How many have even considered using the Lightning Network? Focus on that stuff — productive things — over getting into online turf wars.
Allow me to risk even more enmity than I already have by quoting an extremely controversial figure: Donald Trump.
“Sometimes by losing a battle you find a new way to win the war.”
The bottom line is this: very few people actually wanted a fork. They just wanted “Bitcoin” to be their specific ideological vision. The battle is over, and in some ways, we all lost. However, what really matters is the war — the overall war for wide-scale cryptocurrency adoption. Now that the dust has settled, the best thing to do is for each group to move on and advance their own Bitcoin vision as far as it can go; in this way, we can all win the war. Believe it or not, there are neutral people — like myself! — who believe that there is room in this world for both Bitcoin and Bitcoin Cash to coexist.
Before you go…
Know of any other hot-button issues with cryptocurrencies? Want me to write about them? Let me know! I love to hear feedback from people and get ideas on what cryptocurrency topics I should research. You never know, I might even write an article about your suggestion!
If you’re new to cryptocurrencies, don’t worry — it’s easy to get in on this! Here are the basic steps if you’re interested in Bitcoin or altcoins:
- Buy some Bitcoin or Ethereum from Coinbase.
- Trade them for altcoins on Binance, KuCoin, HitBTC, or Changelly. Out of these, Binance is my preferred exchange. Skip this step if you’re uninterested in altcoins, of course!
- If feasible, store your coins offline in a wallet for security purposes. Use an inexpensive Android phone with the Coinomi wallet app, or go ultra secure with a hardware wallet like the Ledger Nano S or Trezor.
If you’re looking for a more lengthy guide to purchasing coins from start to finish, just take a look at my page — I’ve written a lot about this! Any of my instructional altcoin articles (such as this one) will first explain in detail how to get Bitcoin if that’s all you want.
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