When Bitcoin Cash was created as a hard fork of Bitcoin on August 1, 2017, it precipitated a wild bull-run for Bitcoin and the wider crypto market. As Bitcoin Cash itself split into two on November 15, 2018, it sparked an immediate crash in an already firmly-entrenched bear market. Here’s everything you need to know to understand what’s going on right now with the Bitcoin Cash hard fork and its effect on the wider cryptocurrency market.
The Current Crash
After months of characteristic volatility with an overall downward trajectory, Bitcoin’s US Dollar price was largely stable from late August until the Bitcoin Cash hard fork, moving sideways in the mid-$6000 range. That all changed on November 14, when Bitcoin’s value started falling hard. Bitcoin is at just over $4,500 at the time of writing, which is the lowest its been since October 2017. And it seems to be heading further down, with no clear indication of where the bottom lies.
Bitcoin Cash has shown greater volatility since August, while remaining within the $410 to $450 range for most of the month. That is until a sudden rally just before the hard fork, reaching a peak of $636 on November 7. After the hard fork, two tokens were created. Bitcoin Cash ABC, which is trading as Bitcoin Cash on many major exchanges, reached as low as $205, but is currently at $231. Bitcoin Cash SV began at parity with Bitcoin Cash ABC but has fallen sharply since, currently being valued at a little over $50.
The Bitcoin Civil War
The original Bitcoin Cash was created in response to slow transaction times and high fees affecting Bitcoin. Various solutions had been proposed, but without consensus across Bitcoin mining pools and exchanges, a group largely composed of Chinese Bitcoin miners and spearheaded by ex-Facebook developer Amaury Sechet and long-term Bitcoin supporter Roger Ver decided to break away and form their own version of Bitcoin. While proponents of the split initially hoped this would be considered the new “true” Bitcoin, the offshoot was soon referred to by supporters and opponents alike as Bitcoin Cash (although the most strongly opposed insisted on calling it BCash, not wanting the new coin to inherit any of Bitcoin’s name value.)
In the months following the split, both Bitcoin (now referred to by some Bitcoin Cash supporters as “Bitcoin Core”) and Bitcoin Cash grew exponentially in value. Bitcoin hit an all-time high just shy of $20,000 on December 17, while Bitcoin Cash soared briefly above $4000 on December 21. As Bitcoin Cash cloned the Bitcoin blockchain up to the point of its creation, Bitcoin holders held both cryptocurrencies on a one-to-one basis. Those who held Bitcoin prior to the hard fork thus benefited from two massively appreciating crypto assets.
Other Bitcoin offshoots followed, most notably Bitcoin Gold, but these have had a far lesser impact than Bitcoin Cash. Bitcoin Gold peaked at $474 on December 21, coinciding with Bitcoin Cash’s all-time high. Bitcoin Gold has virtually flatlined since the summer of 2018, with a value between $20 and $30.
The Second Civil War
Following months of rumors and acrimonious discussion, a civil war within Bitcoin Cash officially commenced on November 15. The Bitcoin Cash civil war pits two camps against each other: Bitcoin Cash ABC, led by original proponent Roger Ver and others including Bitmain co-founder Jihan Wu; and Bitcoin Cash Satoshi Vision (SV), led by Craig Wright. The “Satoshi Vision” tag refers to Wright’s claim that he is Satoshi Nakamoto, the mysterious creator of the original Bitcoin. Wright’s many detractors have taken to calling him “Faketoshi” in response to this.
As with the Bitcoin/Bitcoin Cash split, the ABC/SV split is on the surface all about the technical capabilities of the cryptocurrency in question. Bitcoin Cash increased Bitcoin’s block limit to 32MB, with consensus-drive yearly forks built into the protocol. Just as Bitcoin Cash originated as a contentious update to Bitcoin, SV began as a controversial proposal that would push Bitcoin Cash’s block size to 128MB. SV also aims to make it easier to implement the type of smart contracts pioneered by Ethereum.
Bitcoin Cash splintering from Bitcoin was highly emotionally charged, but the splitting of Bitcoin Cash has been even more contentious. Bitcoin Cash ABC was quickly declared the winner by many observers, recording higher transaction throughput and trading at around 4x Bitcoin Cash SV’s value.
As for exchanges, a raft of major exchanges have anointed ABC with Bitcoin Cash’s BCH ticker. According to a post on the /r/bch subreddit, exchanges referring to Bitcoin Cash ABC as BCH include Coinbase, Huobi, Kraken, Bittrex, and a majority of Korea’s largest cryptocurrency exchanges. Binance and Poloniex have taken a more cautious stance, launching BCHABC and BCHSV trading pairs in the wake of the split.
Despite seemingly insurmountable momentum in favor of the Bitcoin Cash ABC camp, SV’s Craig Wright warned in a series of acerbic meme-filled Tweets that the fight will go on.
Wright also launched a flurry of attacks and warnings at other projects, including Ripple and any project funded via ICO. Amidst the bluster, Wright has also promised that Bitcoin Cash SV will prevail in the long-term thanks to its increased scalability. By October 2020, Wright claims the new Bitcoin Cash will be capable of processing 10,000 transactions per second.
Since the hard fork, Bitcoin Cash ABV and SV have been engaged in a hash war. SV supporting miners had been planning to mine empty blocks on the Bitcoin Cash ABC network, thus choking the network out of existence. To prevent this, powerful mining pools connected to Roger Ver and Jihan Wu have diverted hash power from Bitcoin to rally in defense of Bitcoin Cash ABC. Wu predicted this would have catastrophic short-term consequencs for Bitcoin’s US Dollar value. Originally Tweeted in Chinese and translated into English by Bitcoin Cash supporters on the /r/bch subreddit, Wu was quoted as saying:
“I have no intention to start a hash war with CSW, because if I do (by relocating hash power from btc mining to bch mining), btc price will dump below yearly support; it may even breach $5000. But since CSW is relentless, I am all in to fight till death!”
This has proven to be true, with Bitcoin plunging to the lowest US Dollar levels seen in over a year. It has also bolstered long-held antipathy to Ver from within the Bitcoin community. Ver has been open in wanting to see Bitcoin flourish as a true transactional cash alternative, rather than as a speculative investment. This was one of the main concerns prompting the creation of Bitcoin Cash. Some on the sidelines of the Bitcoin Cash civil war see this as being hugely damaging to the overall long-term health of what Bitcoin Cash supporters would call Bitcoin Core.
In addition to the main battlefront, new avenues of conflict seem to be opening up anywhere the name ‘Bitcoin’ is in use. The SharkPool mining group is targeting alts that use ‘Bitcoin’ in their names, calling for miners to mine empty blocks and kill off these networks.
What Happens Next?
The battle between Bitcoin Cash ABC and SV looks set to continue for the forseeable future and could get a lot messier. It has caused the bear market afflicting all cryptocurrencies to grow even deeper. How long these effects will be felt is anyone’s guess.
Some may also point to this as another argument against the miner-based Proof of Work consensus mechanism underlying Bitcoin and its various offshoots. We recently wrote about Ethereum’s plans to move away from Proof of Work, and Ethreum’s Vitalik Buterin has Tweeted his opposition to Wright and Bitcoin Cash SV.
The Bitcoin Cash Civil War may all be over by Christmas, or it could turn into the gruelling battle of attrition Wright has said he’s gunning for. Whatever the outcome, this is a fittingly drama-filled start to the second decade of the Bitcoin story.