Fork me! What happened to Bitcoin?
Yesterday something big happened in the world of fintech. Like, godzilla big. So we thought we would let you know what went down in plain English.
We are in the process of updating the Bitcoin section on our fintech course but in the meantime here's a break down.
For some time now, Bitcoin users and miners have been trying to figure out a solution to the problem of increasingly slow transaction times. The way Bitcoin is currently run allows for 7 transactions per second (VISA allows for 2000). Peak time transactions were taking hours to go through. So after months of talking about solutions, yesterday miners hard forked the network and created Bitcoin Cash. This new currency allows for 8 times as many transactions per second.
What does this mean for Bitcoin owners?
Anyone who owns Bitcoin will now also own the same number of Bitcoin Cash units. However, not all Bitcoin exchanges (where people store their Bitcoin) will accept Bitcoin Cash, and this could slow down widespread adoption of Bitcoin Cash. In order for Bitcoin Cash to be used for mainstream transactions such as buying a coffee, businesses will have to adopt it, regardless of whether they already accept Bitcoin or not.
What's the difference between the two?
Both currencies work off the same blockchain. Bitcoin Cash is basically a software upgraded version of the original Bitcoin. This is done by increasing the amount of data in each block in the Bitcoin blockchain. Bitcoin developers and miners have agreed to use a new technology called SegWit to double the amount of transactions Bitcoin can handle, but there is a worry that this is essentially a short term solution, hence the creation of Bitcoin Cash.
How might this affect things in the future?
It kind of depends on how you see Bitcoin. If you see Bitcoin as an asset more like gold, then Bitcoin will be good to go for a long time. However if you believe it should be an easily transacted currency (e.g. people can buy anything from bananas to buildings with it) then Bitcoin would seem to have a limited runway. Bitcoin Cash, on the other hand, could be much better for the latter use.
Ultimately how this plays out is anybody's guess. As of this morning Bitcoin Cash has risen from around $300 to around $400 already!