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“Bitcoin….. But Not”

Before proceeding, the rise (and fall) of “Bitcoin Cash” perfectly highlights the volatility in the “crypto” market.

Due primarily to the open source nature of the underlying technology, anyone is able to create and deploy a new cryptocurrency such as Bitcoin Cash. This not only means the underlying competitive advantage of the real Bitcoin is hanging by a thread… but the creation and distribution of new cryptocurrencies is nothing special.

As such, the introduction (and eventual adoption) of Bitcoin Cash was not seen by many as that major of an undertaking. The most important aspect of its release was consensus between a number of miners (who are responsible for processing the transactions on the network) in adopting the new currency.

Whilst it means relatively little to the general public, to traders and members of the crypto community, it highlights the highly unsettled nature of both the technological and economic nature of the market

This article is going to explain how Bitcoin Cash was created, who founded it, why it’s being hailed so reverently in the Bitcoin space and whether you may want to track it or not. As ever, this is NOT financial or legal advice.

If you are interested in investing into the crypto space, you’ll need to speak with a regulated financial adviser…

What is Bitcoin Cash?

Bitcoin Cash (as the name suggests) is a fork of the Bitcoin cryptocurrency repository, which went live on August 1, 2017. The system was developed primarily to improve the processing speed of the main Bitcoin infrastructure layer.

Like many other “coins” in the cryptocurrency world, the code for Bitcoin Cash came directly from Bitcoin’s repository, with updates and changes applied directly to the live production code.

The reason this is important is that when you consider the multitude of the coins that have flooded the crypto marketplace, just over 50% of them are almost identical in technology to Bitcoin.

The important factor of this is that it highlights many of the discrepancies with the core Bitcoin infrastructure – namely that it has slow processing times and a limit to the size of each “block” that can be added to the Bitcoin blockchain.

If you’re looking at Bitcoin Cash as a possible vehicle for growth of your capital, the currency has grown to over $1,4xx in price in the 5+ months it’s been online. The two main reasons for this are confusion over its name (most are confusing it with Bitcoin) and also the sentiment in the market that the fork would represent a divergence in the use (and thus profitability) of the main Bitcoin currency.

Ultimately, the key thing to understand with Bitcoin Cash is that it’s one of the “alt” (alternative) coins that has received the most buy-in from developers and miners alike.

This is important as since Bitcoin is a completely autonomous solution (no central management infrastructure), developments are generally the result of community consensus rather than actual technical reasoning. Thus, the prevalence of Bitcoin Cash has drawn ire primarily down to the way in which it was pushed quite heavily by several large mining operations (which many thought was unfair).

Who Created It?

Unlike other currencies, which either had sole or groups of developers working together, Bitcoin Cash seems to have been developed by a consortium of developers.

A consortium is essentially an organized effort of different parties working towards a central goal. This occurred with Bitcoin Cash, with a number of influential miners & developers working together to not just create the applicable functionality but also a viable route to adoption (very important).

Behind the move seems to have been the following:

Bitcoin.com

Bitmain’s Antpool

BTC.top

Viabtc

Connect BTC

These collectively not just deployed the fork but also dedicated processing power to it – allowing for the currency to take effect as a means of exchange.

As mentioned above, this was one of the most disturbing elements of the move as it highlighted the biggest problem with the crypto community, which is that it’s open to influence and turmoil from within.

Why Does it Exist?

To briefly explain the situation, Bitcoin Cash is built upon the Bitcoin infrastructure.

In other words, it uses EXACTLY the same technology, protocols and ideas as Bitcoin except it’s had a number of features changed.

Most specifically, the core change has been to the block sizes the currency will permit on its blockchain. When Bitcoin wasn’t being traded anywhere near as much as it is today, its block size was limited to 1 mb.

Whilst this wasn’t a problem in the early days, today it’s leading to a large number of problems with the likes of slow transaction times, the inability for smaller miners to have the opportunity to process the various transactions on the system and new users having difficulty in developing the core infrastructure for the service.

The other problem was/is that most people have suggested that Bitcoin in its present form is more akin to gold than a currency (in that it will give people the ability to store value for a long period of time, irrespective of governments or societal problems).

Bitcoin Cash was created to encourage faster transactions and more frequent transactional capacity for the Bitcoin infrastructure.

Whilst it has generally succeeded in doing this, it’s split the crypto community over whether it should be considered a compliment to Bitcoin or not.

Ultimately, the safest option is to say that it’s a completely separate offering to the likes of Bitcoin however, it’s so closely tied to the original cryptocurrency that it will likely never shake the affiliation.

Trajectory

The most important thing to consider with Bitcoin Cash is that it’s extremely closely tied with Bitcoin. This makes it difficult to validate its growth as most people who are already committed to using “Bitcoin” will likely be open to using Bitcoin Cash too.

Since the August 1, 2017 release, the growth of Bitcoin Cash’s transactions has been rapid.

By mid December, the growth had steadied out but was evidently mirroring Bitcoin’s performance. As such, the only thing we could conclude would be that a number of the people using Bitcoin have also been drawn to the faster and more lightweight Bitcoin Cash system (which is almost interchangeable with Bitcoin).

Whilst this would seem like a victory, it’s generally regarded as a problem in wider cryptocurrency circles, as many people accuse the creators of BCH of trying to cash in on Bitcoin’s success, leading many to become confused with the direction of the currency.

As mentioned, this lack of direction, and general access to core fundamentals of all cryptocurrencies makes them highly vulnerable to manipulation. Whilst BCH is an interesting proposition, it doesn’t really add much to the Bitcoin offering. The creators could have just worked on fixing the underlying Bitcoin code rather than making their own coin.