Bitcoin Cash's Survival in Question as Possible Split Looms
Bitcoin Cash's Survival in Question as Possible Split Looms
(Bloomberg) -- When it split off a year ago, Bitcoin Cash jump-started the forking craze in which dozens of software-development teams sought to create money out of thin air by tweaking the original computer code and releasing coins with “Bitcoin” in their names (hello, Bitcoin Diamond).
Bitcoin Cash now faces its own fork, and the backers of the fourth-biggest virtual currency that once advocated splitting as democratic are anything but sanguine in their protests. At the center of the dispute are cryptocurrency mining giant Bitmain Technologies Ltd., whose co-founder Jihan Wu is planning an initial public offering of as much as $3 billion, and rival mining heavyweight, CoinGeek, helmed by billionaire Calvin Ayre.
At stake is Bitcoin Cash’s future -- and even survival in the wake of this year’s crypto market crash. While it’s not yet clear how much support each faction will have by the time a split takes place (if it does) on Nov. 15, the tension has even led to bickering by self-proclaimed Bitcoin inventor Craig S. Wright and confusion on the direction sought by advocates like Roger Ver, two of the biggest Bitcoin Cash promoters.
“It is ironic how the very same philosophy that led to the creation of Bitcoin Cash is now the cause of its demise,” Lucas Nuzzi, director of technology research at Digital Asset Research, said in an email. “The only reason why Bitcoin Cash lasted this long was because of the mining support of Jihan Wu and Calvin Ayre, coupled with the marketing efforts of Roger Ver and CSW.”
Tempers reached a boiling point in July when leading Bitcoin Cash developer Amaury Sechet said he was going to include a change in how transactions are ordered in the next update of the network’s software on Nov. 15. While the transaction-ordering change was long on Bitcoin Cash’s roadmap and this so-called ABC proposal is supported by Bitmain, which holds nearly $600 million of Bitcoin Cash, opposition has mounted.
“Any change to the consensus layer of Bitcoin is a big deal," said Peter Rizun, lead scientist for Bitcoin Unlimited, a version of Bitcoin Cash run by about 40 percent of all miners, who are awarded new coins for processing the transactions that keep the network functioning. “My view is that we should only be making forking changes if we only have a really good reason to make the change.”
Ayre, meanwhile, is set against a feature Bitmain has introduced that lets developers issue tokens on the network, similarly to rival Ethereum -- but that involves destroying some Bitcoin Cash coins.
"We do not believe miners will approve Bitmain’s reckless direction," Ayre said in an emailed response.
So Ayre’s CoinGeek -- one of the largest Bitcoin Cash miners -- is rallying behind a different software upgrade, called Bitcoin SV, for Satoshi Vision. Announced by Wright’s nChain in August, it proposes to revert back to many of the technical characteristics of the original Bitcoin network, and to quadruple Bitcoin Cash’s maximum block size to 128 megabytes, potentially making transactions on the network speedier and cheaper.
Both parties hope to list their coin as Bitcoin Cash on exchanges, adding even more ambiguity to the process. Unless one of the potential two rival Bitcoin Cash coins that emerge dies quickly, "it can create confusion in the marketplace, on the exchanges, and the price of Bitcoin Cash will suffer," Rizun said.
The supporters could also watch one or both of the coins languish, or decrease in price.
"We hope this won’t become a fork but, as said previously, if they do choose to fork-off and create the 609th alt coin then we wish them well," Ayre said in an emailed statement. "Bitcoin BCH will remain the only true coin that’s a low-fee, peer-to-peer, digital currency."
Some supporters expect that the factions will unite before Nov. 15, and a fork will be avoided.
“I don’t think the differences are big enough currently to warrant a split," Ver, a large holder of the cryptocurrency, said in an email. He threw his support behind Bitcoin Cash when it split off from Bitcoin in August of 2017, with the idea of increasing its block size to become a cheap and fast method for transacting.
But exchanges on Twitter suggest a peace accord won’t be easy. In a Sept. 7 post, Wright said he mistrusts Bitmain’s claims that it burns some Bitcoin Cash to increase its value. Bitmain’s Wu, meanwhile, said on Sept. 6 that miner “SBI threaten to attack BCH with their hashing power, to help CSW control BCH. They are bad people, and they will fail." He also accused CoinGeek of hiring "fiction writers, but not news reporters." Wright posted a picture likening ABC with toilet paper.
“There are definitely financial incentives involved since, historically, forks tend to have short term-term price momentum,” Nuzzi said. “However, the main driver still seems to be primarily driven by a difference of opinion.”
To contact the reporter on this story: Olga Kharif in Portland at okharif@bloomberg.net
To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net, ;Jeremy Herron at jherron8@bloomberg.net, Dave Liedtka, Eric J. Weiner
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