August 1 is the first birthday of Bitcoin Cash (BCH), a cryptocurrency launched (forked) from Bitcoin a year ago with the simple purpose of increasing available space through the Bitcoin protocol.
Bitcoin expansion debate leads to BCH hard fork
Bitcoin really burst into the public consciousness last year, but its growing use has also created a growing demand for space on the Bitcoin blockchain. At the beginning of 2017, bitcoin transactions took about 20 minutes to confirm and cost $0.35. Six months later, in June, those numbers had risen to more than six hours of confirmation and 15 times the cost: $5.50. Given the growing popularity of peer-to-peer transactions around the world, the Bitcoin community has faced significant obstacles in expanding its decentralized network to meet demand. While Bitcoin is getting attention, a year later, where is BCH and what is its role in the cryptocurrency ecosystem?
The central mechanism that controls bitcoin transactions – blockchain – is used to describe a large number of projects that utilize the same underlying security devices. The size of the block determines how much information can be stored on any given block. The size limit was originally set at 1MB in response to the threat posed by denial-of-service (DoS) attacks (think spam) in the early wild days of Bitcoin standing two feet on its own.
By June of last year, when confirmation times and transaction costs were skyrocketing, a group of developers decided that the easiest and most natural way to avoid growth was to increase the amount of information that could be registered per block, leading to a “hard cross” that changed bitcoin’s consensus rules. The catalyst for developers seeking this change is the immediate preservation of Bitcoin as an electronic cash system, where small amounts of money can be easily transferred at little cost. This makes Bitcoin a currency, especially as a medium of exchange, where people can’t afford high transaction costs without a bank account — such as In Venezuela, where currency inflation is estimated at more than 40,000 percent.
In June, stakeholders and developers sought to implement a block size increase in the name of BITCOIN ABC, increasing the block size limit to 8MB on August 1, 2017: this rolled out the BCH as a parallel network, with all Bitcoin account balances copied to a new ledger encoded in the larger block size limit. BCH found its first block at 6:15 UTC, trading at around $230. The network processes about 7,000 transactions a day for less than 20 cents (see Block Browser). The hard fork was officially a success, and BCH was born.
Bitcoin Cash goes its own way
Over the next few weeks, mining difficulty was reduced in order to reduce confirmation times using a tool coded by ABC developers called Emergency Difficulty Adjustment (EDA), which was designed to ensure the survival of the BCH blockchain at cryptographic difficulty was too high for the mining power available on the network. Transaction confirmation takes too long if it is too difficult to compete to secure the number of computers for new blocks. The problem was that, after successfully using EDA to balance difficulty, miners began to exploit the differences between BTC and BCH to optimize mining profits. These back-and-forth miners cause spikes in confirmation time in order to make BCH easier and more profitable by triggering the EDA. This causes miners to fluctuate into the BCH network, while EDA reduces the difficulty and will eventually exit once the difficulty is properly adjusted, which has long term implications for the integrity of the network.
By November, the calculations were fixed, ready for implementation, and the groups of developers managing the BCH client got together to implement the protocol, fixing the confirmation time fluctuations caused by the emergency difficulty adjustments. This is crucial because the entire cryptocurrency market is seeing a massive influx of investment that is causing prices to “go up,” which in turn is allowing more people to enter the market, generating an unprecedented bull market that is making global headlines. Fortunately, BCH blocking times stabilized within the correct 10-minute time range and the system performed smoothly in heavy traffic in and out of the market between November and February of this year. BCH saw block sizes of up to 4MB during this period, while keeping transaction costs below $1 during these peaks, demonstrating the immediate utility of the larger block size limits and the role that BCH seeks to achieve. After the price boom rebounded from record highs, developers from different customers running the BCH blockchain came together in May 2018 to increase the block size limit again to 32 MB.
The second major change in the May hard drive is the reactivation of some functionality that was turned off long ago in the protocol scripting language and the introduction of some new functionality. These machine codes are called “Satoshi op-codes” by the BCH community, allowing developers to create different types of metadata implementations, programmable currencies. By having the ability to invoke these functions, developers can create “colored coins” or act as representative tokens for smart contracts. These are tokens that can be programmed by organizations to correspond to bonds, stocks, precious metals, commodities, and any physical or virtual object.
These action codes expand the tools for BCH developers to interact with scripts on top of the blockchain, combined with more space to allow non-payment related information to be written and accessed on the chain. This has led to community participation in innovative applications such as social nets-Memo, as well as a second tier of applications called Wormhole, which runs by linking tokens called Wormhole Cash to the BCH blockchain.
A year after its creation, BCH has expanded to include 19 different services, such as Bitpay, Coingate, ViaBTC, Coinpayments and CoinDance. Bitcoin Cash is also involved in 14 different projects, such as OpenBazaar, Joystream and Counterparty, and can be traded on 41 different exchanges. The eventual use of cryptocurrencies as digital currencies will propel the entire industry forward. #HODL (Hold coins as an investment) has been a rallying call for many within the cryptocurrency community, but I hope that convening #BUIDL (Build blockchain solutions and decentralize businesses) will inspire the sustainable and practical use of Bitcoin and BCH to establish a new era of peer-to-peer financial sovereignty that is open to all. Coin source community Breeze bright moon