When you have a large distributed community of developers, it gets hard at times to make decisions. Although people coming together via open source to bring a desired project to life is exciting and extraordinarily productive, it becomes exceptionally problematic when a controversial problem arises. With the controversy ensues conflicting ideas regarding how to go about solving the problem at hand.

This phenomenon has been taking place in the Bitcoin community (which has about 393 developers globally). In this case, there are two controversial problems to deal with: high transaction fees and slow transaction processing.

Both of these can be attributed to the maximum size of each block in Bitcoin. To address the block size problem, many have proposed their own solutions, the most popular of which include increasing the maximum block size, separating transactions signatures from the transaction data, and a mix both aforementioned solutions.

But what makes Bitcoin, and many other blockchains, so great is that each node follows a set of rules, called a protocol, very well. In this case, we’ll refer to this as the Bitcoin protocol. But, some of the proposed solutions don’t always follow this protocol.

Separating transaction signatures from the transaction data, as seen in Segregated Witness (SegWit), doesn’t alter the structure of the traditional Bitcoin block. Because the change is not very drastic and blocks created with this structure still follow the Bitcoin protocol, activating SegWit causes a soft fork. That is, a noticeable change has been made to the Bitcoin protocol, but it is backwards compatible and does not require a new chain to be formed to support it.

If the proposed solution doesn’t follow the protocol, such as increasing the maximum block size, miners must decide whether to support the original, faulty chain or mine the new chain. If enough miners join the new chain, then an event known as a hard fork takes place and two versions of Bitcoin later exist.

This is what occurred with Bitcoin Cash: many developers within the community decided to implement a change to the Bitcoin protocol that would not follow the protocol of the original blockchain. This means that blocks mined for Bitcoin Cash are not compatible with blocks mined for Bitcoin. Because of this discrepancy, a literal split occurs in the blockchain, and a new coin then comes into existence.

The original Bitcoin blockchain has activated SegWit, and Bitcoin Cash now exists. But, there is a third proposal that brings the two ideas together: increase the maximum block size and separate transaction data from transaction signatures. This proposal comes to life in the form of Bitcoin SegWit-2X.

It’s true: Bitcoin is splitting again and this time it’s in November. Although I don’t know too much about this fork myself, some interesting discussions about it can be found here and here.

Ultimately, Bitcoin forks demonstrate the open-mindedness of the community and are examples of the lack of central control that the project has. Forks are politically beneficial, because they reinforce the idea that any group of developers and miners can create their own coin if a disagreement arises, a sign of democracy. However, they could prove to be economically detrimental, as non-technical investors in Bitcoin don’t often know the difference between each version and may sell one version because of his or her uncertainty of its competitiveness against the other versions. Although Bitcoin Core and Bitcoin Cash are both doing well, there is not enough data to determine whether the same will be said about Bitcoin SegWit-2x.

Thank you very much for reading!

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