Author: Kiara Taylor, Bitcoin Magazine; Translator: Wuzhu, Golden Finance
Since its birth in 2009, Bitcoin has undergone multiple forks, resulting in new cryptocurrencies and variants of the original protocol. As of May 2024, there have been more than 100 Bitcoin forks, with varying degrees of adoption and success.
These forks have sparked heated debate in the cryptocurrency community. Some see them as catalysts for innovation and progress, while others see them as destructive forces that undermine the stability and core values of the network.
And this dichotomy is what we're going to focus on today. We'll look at why these forks happened, what they achieved, and what they mean for the future of Bitcoin.
Major Forks of Bitcoin and Their Impact
Despite the lack of cohesion in the nascent Bitcoin community, people still had some success in realizing Satoshi Nakamoto's vision. However, with the birth of Bitcoin XT in 2014, the first crack appeared, which split the community but also provided valuable lessons for governance.
This cryptocurrency split occurred because developers wanted to increase the block size from 1 megabyte to 8 megabytes, but others thought that was too much. As a result, Bitcoin Classic (now closed) was born with a block size of 2MB, and then Bitcoin Unlimited went in the exact opposite direction with gargantuan 16MB blocks.
However, some truly influential forks followed, the effects of which continue to this day. These include:
Bitcoin Cash (BCH)
Bitcoin Cash (BCH) was created on August 1, 2017, as a result of a hard fork of Bitcoin. The main motivation for this fork was to address Bitcoin's scalability issues, specifically the slow transaction times and high fees caused by Bitcoin's 1MB block size limit.
Bitcoin Cash supporters, including influential figures such as Roger Ver, argue that increasing the block size will allow for more transactions per block, thereby reducing fees and speeding up transaction times.
Once created, Bitcoin Cash quickly gained traction and was adopted by multiple exchanges and merchants. It also saw an initial surge in value, reaching a significant market cap.
Over time, Bitcoin Cash has continued to evolve, with ongoing development and updates designed to improve its functionality and scalability. It has a loyal community of supporters who believe in its potential as a peer-to-peer electronic cash system.
However, it faces competition from other cryptocurrencies that also aim to offer low fees and fast transaction times. Today, the debate over scalability and transaction fees continues to influence the direction and development of Bitcoin Cash.
Bitcoin SV (BSV)
Bitcoin SV (Satoshi Vision) emerged on November 15, 2018, following a violent divergence from Bitcoin Cash.
The fork was driven by disagreements within the Bitcoin Cash community, specifically over further increases in block size and direction. The project was led by Craig Wright and Calvin Ayre, who aimed to restore what they viewed as Satoshi Nakamoto's original vision for Bitcoin.
Bitcoin SV significantly increased the block size limit, initially to 128MB and then 2GB, allowing for larger transaction volumes. BSV supporters argue that this large block size is necessary for the network to support enterprise-level applications and large transaction volumes.
Similarly, the significant increase in block size also raised concerns about centralization, as running a full node becomes more resource-intensive.
Bitcoin SV remains a controversial fork within the broader Bitcoin and cryptocurrency community. Its focus on large block sizes and high transaction throughput makes it unique among the major cryptocurrencies. However, it faced ongoing challenges in gaining widespread acceptance, and Coinbase ultimately dropped it for good in 2023.
Bitcoin Gold (BTG)
Bitcoin Gold was created on October 24, 2017, with the goal of making Bitcoin mining more decentralized. It did this by changing the mining algorithm from Bitcoin's SHA-256 to Equihash, which is more resistant to ASIC mining.
This change was intended to allow more people to mine BTG using regular GPUs, reducing the dominance of large mining farms and truly democratizing the coin.
Bitcoin Gold uses the Equihash algorithm, which is designed to be memory-intensive and resistant to ASIC mining hardware. This fork was intended to democratize mining by making it more accessible to individuals.
Bitcoin Gold was initially enthusiastically followed and adopted by multiple exchanges. However, it has faced security challenges, including a major 51% attack in 2018 that resulted in a double spend worth $70,000.
Today, Bitcoin Gold continues to exist as a smaller player in the cryptocurrency market. Although it has struggled to gain the same adoption and market share as Bitcoin Cash and Bitcoin SV, its focus on distributed mining remains its main feature.
Motivations behind Bitcoin Forks
Bitcoin forks occur for a variety of reasons, driven by a combination of ideological, technical, and economic motivations.
For example, one of the main drivers of Bitcoin forks was the need to address scalability issues. As Bitcoin grew in popularity, the network faced challenges in processing an increasing number of transactions, resulting in longer confirmation times and higher fees.
Forks are also initiated to introduce technical improvements or new features to the Bitcoin protocol. These may include changes to the consensus mechanism, enhanced privacy features, or the introduction of smart contract functionality.
In some cases, personal motivations such as power struggles, ideological differences, or financial incentives have led to the creation of Bitcoin forks. If you follow the historical fluctuations of forks such as Bitcoin SV and Bitcoin Cash, you will find that some people view them as investment vehicles.
For example, Bitcoin Cash, which split from Bitcoin in August 2017, saw its price soar to around $4,355 in December 2017, shortly after its creation. However, it later stabilized, trading in the $200 to $500 range for the next few years.
The Impact of These Major Forks on Bitcoin
Besides the obvious effect, which is the increased threat to OG BTC, major forks have had both tangible and intangible effects on the crypto community as a whole. To be honest, none of these forks have become legitimate solutions to cash flow problems, but their impact is still there.
Market Volatility
Bitcoin forks often lead to increased market volatility. For example, the Bitcoin Cash (BCH) fork in August 2017 led to significant price fluctuations in both Bitcoin and the newly created Bitcoin Cash. Before the fork, Bitcoin was priced at around $2,800, but immediately after the fork it dropped to $2,700. Bitcoin Cash, on the other hand, started trading at around $555.
Similarly, Bitcoin SV (BSV), which split from Bitcoin Cash in 2018, has seen significant price fluctuations. In January 2020, BSV peaked at approximately $441.20, but by June 2024, its price had fallen to approximately $63. These fluctuations are often driven by investor speculation and market manipulation, with some viewing these forks as opportunities for financial gain.
Network Scalability and Development
Forks have also led to significant debate and development regarding Bitcoin’s scalability.
The original Bitcoin network had limitations, such as a 1MB block size and 10-minute block creation time, that affected its transaction throughput. As mentioned earlier, these limitations led to the creation of Bitcoin Cash, which increased the block size to 8MB in order to process more transactions per block.
Forks highlighted the need for scalability solutions, prompting various projects and protocols to enhance Bitcoin’s transaction capacity. One prominent example is the Lightning Network, a second-layer solution that aims to facilitate faster and cheaper transactions by creating off-chain payment channels.
Security Concerns
Some forks have introduced security vulnerabilities. For example, the lower hash rate and interest in Bitcoin SV makes it more vulnerable to 51% attacks, where malicious actors can control a majority of the network’s mining power, compromising the network’s security.
Unfortunately, this has raised concerns about the long-term viability and security of certain Bitcoin forks. If organized malicious actors can so easily seize control, what is the point of further forks?
Conclusion
As the cryptocurrency market matures and becomes increasingly integrated with the traditional financial system, the impact of Bitcoin forks on the broader economy cannot be underestimated. The success or failure of these forks will not only affect the fate of individual investors and businesses, but could also have implications for the stability and security of the global financial infrastructure.
Ultimately, the future of Bitcoin and its forks will depend on whether the community can find common ground and work towards a shared vision of a decentralized, inclusive, and resilient financial system.
JinseFinance
Cointelegraph
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