History Behind Bitcoin Cash Split

The idea of Bitcoin Cash was born from disagreements around how to scale the Bitcoin network to increase transaction volumes. This ultimately led to a hard fork and the emergence of Bitcoin Cash as a new cryptocurrency.

In this article, learn the chain of events that caused Bitcoin Cash to split from Bitcoin. Readers will learn about the core issues like block size that created two diverging blockchains - Bitcoin and Bitcoin Cash.

Brief Overview of Pre-Fork Bitcoin

Bitcoin launched in 2009 as a digital currency, allowing users to send direct peer-to-peer payments without needing a financial institution. It was created by the pseudonymous Satoshi Nakamoto, who stepped away from the project early on.

In the early years after its launch, Bitcoin attracted a community that believed strongly in decentralization and censorship resistance. Bitcoin runs on a blockchain, a distributed public ledger recording all transactions. This decentralized structure means no single entity, including governments, controls the network.

In the first few years, Bitcoin transactions were cheap and confirmed quickly. However, by early 2017, two related issues arose – long transaction confirmation times and high fees. Confirmation times topped out at over 20 hours, and transaction fees reached over $50 on some days.

These issues occurred due to the technical limitations of Bitcoin’s blockchain. Specifically, there is a hard-coded 1 megabyte (MB) limit to how many transactions can fit into each block on the Bitcoin network.

With only 1MB of space and heavy demand, there was intense competition to get one’s transaction included in the next block. People began paying higher and higher fees to incentivize miners to prioritize their transactions.

Consider giving this a look: Bitcoin Mining Explained

Debate Over Increasing the Block Size Limit

In early 2017, the median time for a BTC transaction was 16 hours, confirming that congestion had become a significant issue. The apparent solution was increasing the 1MB block size limit to allow more transactions per block.

However, the topic has turned highly contentious among developers and users. Many maximalists insisted that raising or removing the limit went against Bitcoin’s ethos of decentralization.

They argued that only high-powered computers could operate bigger blocks, handing control over transactions to the few wealthy players to run these nodes.

Opponents saw it differently, arguing that failing digital currencies need the flexibility to make changes. If transactions were unreliable and expensive, regular people would stop using Bitcoin.

Both sides made heated arguments throughout 2015-2017. The group opposing any block size limit increases maintained control over the Bitcoin code.

It became clear there would be no easy compromises or quick solutions to solve the congestion issues plaguing the Bitcoin network at the time.

Read this article for more insights: Bitcoin’s Legal Status Around the World

The Hard Fork Split of Bitcoin Cash

A hard fork refers to radical software changes that validate previously invalid blockchain data. Nodes that upgrade to the newest software can interact with and recognize this new data. But nodes still running the old software will no longer be compatible with these updates.

A group of big blockers decided their views were irreconcilable with the team in charge of Bitcoin. They decided to execute a hard fork – everybody owning BTC would automatically get an equivalent amount of BCH on the new forked blockchain.

They quickly developed code that allowed 8MB blocks to be much bigger and deployed this software, creating Bitcoin Cash on August 1, 2017. People interested in fast and cheap crypto transactions switched support to the new BCH network.

First Two Years of Bitcoin Cash

In 2018 and 2019, the BCH network supported significantly higher transaction capacity than Bitcoin. Fees were usually less than a few cents per transaction, compared to highs over $50 for BTC transfers. This allowed the growing ecosystem to provide better support for micropayments and everyday transactions.

However, during this early timeframe, the BCH community faced debates over proposed protocol upgrades.

One specific argument centred around adding new functionality to enable smart contracts on the blockchain, as with previous arguments over Bitcoin’s path, common ground between conflicting visions for BCH was hard to find.

In November 2018, the smart contract disagreements came to a head, resulting in another split and a new Bitcoin fork – Bitcoin Satoshi’s Vision (BSV).

This left Bitcoin Cash on its path, moving forward with an 8MB block size limit. The BCH network also implemented the Difficulty Adjustment Algorithm to help maintain consistent block production speeds, regardless of fluctuations in hash rate.

You might also like to read: The Evolution of Bitcoin’s Value

Final Thoughts on the Bitcoin Cash Split

The contentious hard fork that birthed Bitcoin Cash stemmed from opposing viewpoints that were unlikely to find common ground. On one side were the maximalists who wanted to preserve Bitcoin’s decentralized ethos at all costs.

On the other were those who believed payment usability was essential for any currency hoping to see global adoption.

These differing ideologies live on today through the ongoing Bitcoin vs Bitcoin Cash debate. Understanding the history helps provide context around why the two developer communities prioritize different capabilities for their respective cryptocurrencies.

The ideals behind each blockchain are less relevant for traders interested in speculating on price movements. However, the technical capabilities supported by each network may impact volatility and adoption patterns. Therefore, observing rare cases like this in the Bitcoin space is still noteworthy.

Always read the latest news about cryptocurrency to take advantage of the market sentiment that could affect the prices.

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