What Happened to Bitcoin on August 1, 2017?

Here’s a short history of the block size debate and the recent inception of the cryptocurrency called Bitcoin Cash (BCH). This exciting topic has years of history bringing us to where we are today.

 

The History of the Block Size Debate

What Happened to Bitcoin on August 1, 2017 ?

For years, the Bitcoin community has tirelessly debated various methods of scaling Bitcoin’s blockchain to enable it to handle many more transactions and be accessible to everyone in the world. When I first discovered Bitcoin in 2014, transaction fees were only a few cents, and because there were fewer users at the time, every single transaction would confirm in the next block found. Today, Bitcoin is much more popular and there is no longer enough space in each block to clear every transaction. Because of this, bitcoin users find themselves waiting hours, and sometimes even days, for their transaction to confirm. This creates problems for merchants and consumers alike.

The source of this problem is that the Bitcoin protocol currently has a hard-coded 1MB block size limit, which translates to the ability to process around three transactions per second, paling in comparison to major payment networks like Visa and Paypal, which process thousands of transactions per second. Further, because there’s a limited amount of space in one block, Bitcoin users must increase their transaction fees to outbid one another to get their transaction into the next block. This effect has caused transaction fees to rise exponentially, from $0.01 per transaction in 2014 to $5 per transaction in May of 2017.

There are two main groups on either side of the block size limit debate. One side prefers to increase the capacity of the network, preserving low fees and fast confirmation times for all users. This group (commonly known as “big block supporters”) believes that Bitcoin was meant to be a peer-to-peer digital cash system as explained in Bitcoin inventor Satoshi Nakamoto’s white paper. The other group, known as “small block supporters” believe that blocks should remain restricted to 1MB, and that capacity can be increased through future technologies like Segregated Witness (Segwit) and the Lightning Network. A subset of this group believe that Bitcoin should be a “settlement layer,” not used for commerce, where transaction fees are always costly and ideas like side-chains could theoretically make transactions a bit cheaper.

 

The August 1st Hard Fork

What Happened to Bitcoin on August 1, 2017 ?

Because the debate was never resolved and the small block supporters/Core developers would not compromise on increasing the block size limit, a group of big block supporters decided to create an alternate version of Bitcoin to retain the low fees and fast confirmations. This process, called a hard fork, created two incompatible blockchains sharing a previous history. One chain (BTC) continues to retain the 1MB block size limit, and the other blockchain, Bitcoin Cash (BCH) supports a larger block size limit of 8MB. The fork created two versions of Bitcoin that share the same ledger history through August 1, and diverge from there. The two chains can now compete for market dominance.

 

What You Should Know About Bitcoin Cash

What Happened to Bitcoin on August 1, 2017 ?

If you owned Bitcoin before the split on August 1st, then you also have an equal amount of Bitcoin Cash. Essentially, if you owned 1.5 BTC prior to the fork, you now also own 1.5 BCH. If your bitcoin was stored on a non-custodial wallet (like the Bitcoin.com wallet, for instance), you can access your BCH by using the same private keys. Most popular wallets have already or will soon upgrade to supporting BCH. Most Bitcoin wallets will let you export your private keys, which can be used to move your Bitcoin Cash into a BCH wallet. There are many tutorials on the subject of splitting your bitcoins, but please make sure it’s a trustworthy source. Bitcoin.com published a tutorial on how to do this, available here.

Wallets supporting Bitcoin Cash now include Electron Cash, Ledger Wallet, and Trezor, along with the Bitcoin ABC, Bitcoin Unlimited, Bitcoin Classic, and Bitcoin-XT full node clients. Other popular wallets like Jaxx, Bitgo, Breadwallet have stated they will provide full BCH support in the near future. Well-known exchanges supporting BCH include Bittrex, Kraken, ViaBTC, CEX.io, Huobi, Shapeshift, and many more! A full list of bitcoin exchanges and wallets that support the BCH ecosystem can be found on the Bitcoin Cash website.

What to Expect from Bitcoin Cash and the Upcoming Segwit2x Hard Fork
Bitcoin Cash will continue to operate as a separate currency and will have a different future from BTC. BCH supporters hope that Bitcoin Cash will perform as Bitcoin was originally designed: as a peer-to-peer cash system, not an expensive settlement layer.

What Happened to Bitcoin on August 1, 2017 ?

In the next three months, BTC (but not BCH) will experience another hard fork with the upcoming Segwit2x upgrade, which could also cause another split into two currencies. Segwit2x is a compromise between the two groups that implements the Segwit protocol into the Bitcoin network and follows with a block size limit increase to 2MB in November. Most major businesses in the Bitcoin industry have voiced support for the agreement, and 90 percent of Bitcoin’s mining power is backing this proposal. However, the small block supporters and Core developers remain vehemently opposed to the November hard fork to 2MB, even after Segwit was adopted. This means that in November, this group could also split off from the network if they don’t acknowledge the 2MB blocks as valid, creating a third bitcoin.

Just like with the August 1st split, those who want to ensure access to this new token should store their bitcoin in a wallet that gives users control of their own private keys (we recommend the Bitcoin.com wallet). If your Bitcoins are stored on an exchange or similar service, what happens with your funds after the fork will be at the discretion of that platform.

 

Here’s a quick recap:

Everyone who held bitcoin before August 1 is entitled to Bitcoin Cash (BCH).
Always keep your private keys in your control. This will allow you to access BCH and control over your funds during the next hard fork, and is safer in general.
Always make sure that you are dealing with a reputable service when splitting your bitcoins for BCH. Use a reliable exchange and wallet provider to store or trade your BCH.

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