The cryptocurrency, Bitcoin, split on August 1with a ‘breakaway’ group of miners and developers plan to create a new network that increases the transaction capacity of Bitcoin. The breakaway group is offering an alternative called Bitcoin Cash.
It appears that the split was triggered by the popularity of the cryptocurrency. As the number of transactions increases, inbuilt limitations in the system are turning into hurdles.
Currently, the Bitcoin network has a limit of 1 mb block of transactions every 10 minutes, with a plan to scale Bitcoin by evolving it into a settlement network containing only large transactions. For smaller transactions, there will be a network of payment hubs run by organisations or individuals that settle on the blockchain; called the ‘lightning network’.
Mustafa Al-Bassam, security expert at Secure Trading and also a reformed ex-hacker, says, “While the breakaway plan is argued to be more aligned to the vision of Bitcoin’s original creator and potentially more safe as it doesn’t include a controversial feature to move the digital signatures of transactions off the ledger, it arguably risks the blockchain – the ledger containing every transactions – growing too big. This will mean that fewer people have the storage space required to run a full Bitcoin client, which may cause Bitcoin to become more centralised, as only organisations with a large amount of resources will be able to store the entire ledger.
“For merchants, if Bitcoin Cash is very successful, there could be a short term reduction in transaction capacity in the current network, as miners shift their hardware to process Bitcoin Cash transactions. To cope with the security implications of this, merchants accepting Bitcoin should temporarily increase the number of confirmations they require before they accept a transaction. That said, there is unlikely to be any major disruption for a while, due to the fork.
“On the whole, the fact that there is disagreement and the freedom to offer a breakaway plan is positive. While it is still a highly experimental and volatile system, the market is being allowed to determine which version of Bitcoin is more valuable – and this is an important precedent to set.”