The bitcoin blockchain has officially forked, meaning that a subset of bitcoin miners have started to operate a different software to create a new blockchain, but one that shares a transaction history with bitcoin.
This means that where once there was just bitcoin, a single, decentralised digital currency, now there will also be “bitcoin cash”, which shares the same historical blockchain as the original bitcoin but will now diverge from it.
This fork in the original bitcoin blockchain to create this new version of the digital currency is the result of a long-running dispute about how the blockchain should operate, which Profit & Loss has previously covered.
Essentially, proponents of the fork that created bitcoin cash wanted to make each block on the blockchain bigger to enable the cryptocurrency to scale up by processing more transactions at once. Those resisting the change argue that these bigger blocks could reduce miner’s profits and make the network more vulnerable to hackers.
The new bitcoin cash software will expand the size of each block on the blockchain from one megabyte to eight megabytes.
“Fork has happened. Now awaiting first block from Bitcoin Cash. Regardless of opinions, this is very exciting/fascinating day in cryptoland,” said Erik Voorhees, the CEO of ShapeShift, on Twitter at 9:30am EST.
However, even though the bitcoin cash nodes went live on Tuesday morning, at the time of writing – 1:30pm EST – no bitcoin cash had been successfully mined.
Despite the anticipation about the hard fork in the bitcoin blockchain and uncertainty about what this will mean for the cryptocurrency, the price for original bitcoin has remained relatively stable. According to data from CoinDesk, the price of original bitcoin dropped from $2,866 at the beginning of August 1 to $2,749 by 1:30pm EST, only a 2.5% decrease.
While this would represent a large move for some of the more traditional and liquid fiat currencies, cryptocurrencies are subject to greater volatility because of the lack of liquidity in these products.
“It’s been a slow start for bitcoin cash BCC,” says Iqbal Gandham, managing director at eToro UK.
He continues: “The delay in the bitcoin split could be a result of a lack of miner support for the new cryptocurrency. Everyone expected the split to happen at 1.30pm UK time, or thereabouts. What this really meant is that at some point after this time the very first block of the new chain supporting BCC would get mined.
“However, the time it takes to mine that first block is all a function of how much computing power is thrown at mining this block. It seems as if people over-estimated the mining power, or the support from miners, hence it is taking far longer than most expected.”