17 Nov BCH and BTC Rundown
We never imagined we would have to pay attention to Bitcoin Cash, known as BCH/BCC, but with the recent ruckus the project has been causing in the market, it looks like we are going to have to. BCC is the first “successful” hardfork of BTC, boasting itself as the solution to BTC’s scalability issue. Though launched back in August 1st, BCC has recently stolen the spotlight after the failure of Segwit2x.
At the moment, Bitcoin is embroiled in a heavy civil war revolving around the issue of upgrading BTC’s network to increase the amount of transactions the blockchain can accommodate. The community is divided in opinions of which teams’ solution is the best option for Bitcoin, and of course BitcoinCash sees their alternative as the correct answer. The BCH team rejected the SegWit implementation (not to be confused with segwit2x) by BTC, and so BitcoinCash was created.
BitcoinCash believes in BCH as the purest “Bitcoin,” the closest token to Satoshi’s vision. Oppositions to BCH’s proposals are perceived to be direct attacks upon BCH’s position as the true Bitcoin. It is stated that BCH is built just as how Satoshi had envisioned BTC to be, and the on-chain scaling is part of BTC’s original roadmap.
Boasted as an alternative to the Lightning Network proposed by the BTC Core team, BCH aims to be the solution to BTC’s scalability issue by increasing the Max Blocksize Limit parameter of Bitcoin’s blockchain to instead of adopting SegWit.
On average, transactions can take up to 10 minutes to process on the Core chain, at a rate of about 7 transactions per second (tps). In contrast, BitcoinCash’s first 8MB block cleared 37,000 transactions. But how fast is BCH’s blockrate? Block time charts provide some comparison, and it is clear that BTC block times are faster.
BCH still claims an advantage here. Compared to the original BTC chain that can only support up to 6MB, even with BCH’s slower block time, the larger 8MB block size will be able to achieve a higher transaction per second average over time. According to the team, this should provide faster payments and lower fees on BCH compared to the original chain. This is still to be seen, as BitcoinCash still has a lower hashrate than BTC.
Opponents of BCH argue that the increase of block size alone does not make BitcoinCash a more efficient blockchain. In their perspective, BCH does not solve any real problem. Dash, LTC, ETH and various other alternative coins already offer fast, low cost transactions. To them, it is ridiculous that BCH offers no real innovation and is already valued at over $20B USD in a few month’s time, especially since the lower hashrate means BCH is not as secured as BTC. It is possible a small pool of BTC could perform a 51% on BitcoinCash.
Both parties claim the other is flawed and will become centralized. BCH believes users should not be forced onto the 2nd layer, Lightning Network, on the bitcoin blockchain. They also do not support SegWit. Conversely, BTC Core supporters believe that perpetual on-chain scaling by BCH will destroy decentralization.
There were activities of miners switching support to BCH in early November when price was pumping, but it was to be expected since BCH is supported primarily by miners. By exploiting an ASIC exploit (ASICBoost), a small group could mine the coin at a greater efficiency (20%+) than the norm. Some has taken this to mean support is migrating over to BCH completely, but BTC is holding its ground.
It is speculated that this activity was due to Jihan Wu, co-founder of Bitmain. The company’s mining pool, Antpool, holds the largest hash rate among mining pools, and controlled a significant amount of BTC’s hash rate. Taking advantage of this, BTC could be destabilized by switching mining hash rate to BCH. This caused congestion and a backlog of transaction within the BTC blockchain, and fueled BCH propaganda, resulting in BTC’s price dip and BCH’s all-time-high price. Within 24 hrs, BitcoinCash surged from $350 to beyond $2000 USD.
It should also be noted that Bitmain basically has a monopoly on mining hardware, and they are accepting BCH for their rigs and possibly trying to drive demand for the token.
At the very least, BitcoinCash will provide protection against user disruption and safe coexistence by implementing replay and wipeout protection, separating itself from the original BTC chain. Of course, any respectable project has to implement such features. The team claims part of the new BCH replay protection technology will also introduce a new transaction type with additional benefits such as input value signing for improved hardware wallet security and the elimination of the quadratic hashing problem.
The quadratic hashing issue can be simply be described as a small bug, causing the validation of transaction signatures taking longer than expected. On the original BTC blockchain, each signature signs a slightly different version of the entire transaction. This means that if you should have 10 signatures, you need to hash the entire transaction 10 times to sign it. People validating those transactions similarly need to hash the entire transaction 10 times, with minor differences between each run. The consequence of this is that adding another input and associated signatures will cause another read and hashing of the transaction. This means the amount of work validation each transaction takes will grow quadratically and respectively to the numbers of signatures needed for each transaction.
Even with replay protection and its features, many still view BCH as an attack on the BTC blockchain. It is thought BitcoinCash’s recent price movement is a classic case of a pump-and-dump, perpetuated by propaganda. Major BCH proponent, Roger Ver, owns bitcoin.com and has been using the platform to push BCH support. Even the Bitcoin Cash whitepaper listed on the website is called bitcoin.pdf and does not mention the project as BitcoinCash, but simply just Bitcoin. No doubt this has caused confusion in the community.
Perspectives and debates within the community have been heavily opinionated, and it is difficult to determine true market sentiments about the project. There are even two subreddits, r/btc and r/Bitcoin, and they have opposing opinions about the community. One thing is still certain, though: BTC is still the standard. BTC is still king.