Why Some People Love Bitcoin Cash

Under the surface of this summer’s lucrative cryptocurrency boom lies a community revolution that will change bitcoin forever. It’s already starting.

On Aug. 1, the network forked into two separate paths to create bitcoin cash, which quickly became one of the most expensive and widely mined cryptocurrencies on the market. According to CoinMarketCap, bcash peaked at $1,000 last weekend and dropped down to almost $675 by Tuesday. This type of fluctuation is normal for such a new currency. Bcash’s estimated market cap is already $11 billion.

The bitcoin network could break into several separate currencies as developers debate the best way to scale the technology. Thousands of new users join the cryptocurrency ecosystem every day, even though for the time being, the bitcoin network can only handle a few transactions per second. “I see bitcoin cash as a tool to help pressure bitcoin to address scaling somehow,” Peter Rizun, chief scientist at the nonprofit software provider Bitcoin Unlimited, told International Business Times.

Another fork may soon be on the way, thanks to a scaling proposal called Segwit2x. There are countless opinions on the best way to scale, plus a few options like SegWit already in the pipeline. In the meantime, most American bitcoin experts don’t believe in the long term value of bcash, which can already handle around two dozen transactions per second. However, a few cryptocurrency heavy weights like Bitmain co-founder Jihan Wu in China are outspoken supporters of bcash's underlying approach. (In an email, Wu declined to comment on bcash itself.) Here’s why a passionate minority are switching to bcash.

“Bitcoin needs bigger blocks in order to succeed,” Rizun said. “A lot of people think SegWit is a negative thing and I am one of those people...I think it will make growing bitcoin in the future more difficult.” To put it simply, bcash increases the capacity for more transactions by making a bigger foundation, the block itself. SegWit solves the same problem by both increasing block size and also adding layers on top of the blockchain. Instead of dealing with the entire history of bitcoin transactions every time, it makes a shelf for easier access to the information needed for this specific transaction. Rizun said the bcash model could be used to almost indefinitely increase capacity instead of adding layers.

Imagine someone saying: “let’s give more people access to stuff inside this box by making a bigger box, and a bigger box after that, every time we want to boost capacity.” SegWit enthusiasts are adding shelves on top of the box, so people can reach the data they need without plunging their hands deep inside the box every time. Rizun argued this makes transactions less secure, which many experts disagree with, plus more complex. He prefers sophisticated simplicity. “In order for new developers to get on board, there will be a steeper learning curve,” Rizun said. However, most engineers agree SegWit actually makes the developer experience more elegant and user-friendly. This Vancouver-based bitcoin expert now owns slightly more bcash than original bitcoins.

A few bitcoin miners use Bitcoin Unlimited’s tools, and now so do some bcash miners. Miners are what keep decentralized networks running, contributing their processing power to the global infrastructure. These days, some experts say it’s slightly more profitable to mine bcash than bitcoin. The new community, spearheaded by former Facebook engineer Amaury Sechet, could theoretically incorporate Segwit2x down the line if they wanted to. It's people who are tricky to adapt, not the software.

Just as a quick reminder, without people to operate nodes and mine bitcoin the network won’t work at all. That’s why miners flocking en masse to a new network could hurt bitcoin. There are already other cryptocurrencies, like litecoin, that are technically very similar to bitcoin yet also use new scaling solutions the original network doesn’t have yet. These alternative coins aren’t a threat to bitcoin, frankly because the creators don’t want them to be. Innovators like litecoin creator Charlie Lee want a multi-blockchain ecosystem where distinct currencies specialize in different types of transactions. The rivalry between bcash and bitcoin supporters is much more intense.

Bitcoin and bcash do pretty much the same thing. So for some people the key question is: who does it better? Many bcash supporters, like Rizun, think the best thing for cryptocurrency is for either bitcoin or bcash to die completely. Widespread adoption will be hard enough for one dominant cryptocurrency. Two or more could delay broader cultural shifts. Rizun said either death would be good for the community overall. To some users, this is blasphemy. Even so, it's hard to deny competition is encouraging bitcoin traditionalists to move faster.

“I think that free market competition will ultimately make bitcoin better and stronger,” Jeff Garzik, CEO of the blockchain service company Bloq and one of the technical leads behind Segwit2x, told IBT. “If you want to make bitcoin into the next Visa, you can’t do that if transactions cost $1 per transaction.”

Both versions of bitcoin are like toll roads where fees are determined by how congested traffic gets. Right now, bcash can handle more traffic and has lower transaction fees. But that is probably because it’s not widely used for payments yet. So far, neither bitcoin nor bcash have a built-in mechanism to keep transaction fees low while scaling up. This could end up being the next issue to challenge the underlying foundations of cryptocurrency.

There’s still one last problem to consider when comparing bcash to bitcoin: nodes. If miners contribute the power to keep the lights on in bitcoin’s house, nodes are a group of landlords providing the space the house sits on. In a decentralized network, participants around the world host network nodes so no one in particular owns the network. There are more than 9,300 bitcoin nodes, keeping this virtual space open for millions of bitcoin users.

Bcash has lower transaction fees, which may on the surface appear more accessible to low-income users. Yet it could be more difficult for average people to host their own bcash node than a bitcoin node. “One of the problems with massive blocks, or unlimited block sizes, which has been proposed over the years, is latency,” bitcoin wallet developer Jack Mallers told IBT. “The idea that this data has to travel to whoever wants to listen and validate it themselves in 10 minutes...We’re dealing with the speed of light and the fact that information has a defined metric of time within which it can travel.”

Rizun said he isn’t worried about bcash having less diverse node hosts as long as multiple universities, private companies and nonprofit centers still can. Nobody wants a monopoly like Google to run a bitcoin network, or one of its offspring. But some bcash supporters are fine with a smaller group of well-funded hosts taking on the majority of nodes. For traditionalist bitcoin supporters, this idea is more offensive than telling a friend she looks fat in that dress, but it doesn't matter because her sister is sexier anyway. The comment on network nodes is first met with a moment of silent disbelief, then explosive outrage on so many levels.

“Running a node with a blocksize that is so, so big, the risk in that is maybe sometimes you’re not going to get the transactions or the blocks, relayed to you in time,” Mallers said. “Can it [the transaction data] travel in time so that everyone who wants to listen and validate can? So we’re not just trusting the people with the biggest computers to do it, which is what bitcoin is based on anyway.”

There are many opinions on why bitcoin exists in the first place. Only time will tell which version of bitcoin will fulfill the dreams of the developers working day and night to bring new cryptography to life.

Correction: This story was updated to clarify SegWit increases block size as well as adding layers to the network. We've also clarified that only a small minority of bitcoin miners use Bitcoin Unlimited software.