Currently, there is a lot of talk in the cryptocurrency scene going on about hardforks and softforks. A hardfork happens when a single cryptocurrency splits in two. It occurs when a cryptocurrency’s existing code is changed, resulting in both an old and new version. The hardfork introduces new rule to the network that is not compatible with the older software. On contrast, soft forks are a temporary divergence in the blockchain caused by non-upgraded nodes not following new consensus rule. Both forks create a split, but the hard fork is meant to create two cryptocurrencies and soft fork is meant to result in one.
Bitcoin Cash (BCH)
On July 20, 2017, the bitcoin miners voted, 97% in favor, on the Bitcoin Improvement Proposal (BIP) 91 to activate Segregated Witness. Some members of the bitcoin community felt that adopting BIP 91 without increasing the block-size limit would simply delay confronting the issue and that it favored people who wanted to treat bitcoin as a digital investment rather than as a transactional currency. They announced implementation of Bitcoin Cash on August 1, 2017. It inherited the transaction history of the bitcoin currency on that date, but all later transactions were separate. Within its first 24 hours, BCH nearly doubled, surging from from roughly $394 to $757. Because of this robust price increase, BCH quickly became on one of the top three cryptocurrencies in terms of market capitalization. At the time of writing, Bitcoin Cash commanded a market cap of just over $22 billion with a 24 hour volume of $3.7 billion and trading at a price of $1316.80
The hard fork was arrived at in bid to ease mining difficulties. It featured a block size limit of 8MB compared to bitcoin’s 1 MB. The 8 MB block size limit enables BCH miners to process more transactions on the payment network. Proponents argue that BCH’s larger block size leads to faster transactions, lower fees and improved scalability. It’s argued that bitcoin cash is more suited as a payment network, similar to Visa or PayPal. When you add to this bitcoin cash’s advantages as a cryptocurrency, you get something truly remarkable.
Analysts offer mixed responses concerning the cryptocurrency. The cryptocurrency trader Marius Rupsys described Bitcoin Cash future as being less certain than of Bitcoin. He emphasized that the cryptocurrency’s fork was unilaterally initiated by one miner, unexpected. Rupsys also asserted that BCH has failed to generate widespread support stating that all the other market participants are either against it or neutral. He emphasized that the alternative asset protocol will need to overcome many challenges such as making wallets compatible for it to succeed. However, other analyst emphasized that BCH is still young and has great potential.
Brad Chun, chief investment officer of Shuttle Fund Advisor predicted that further down the line, BCH could potentially eclipse Bitcoin , should it provide a better method for scaling. Going forwad, he said, the cryptocurrency community will need will need to decide whether Bitcoin or Bitcoin Cash is more optimal.
Coinbase initially announced that it would not support BCH. This led to consumer backlash and speculation about a class action lawsuit from consumers. On Auggust 3, Coinbase announced that it would start supporting BCH transactions by January 1, 2018 and that users who had any amount of Bitcoin at the time of the fork were credited an equal amount of BCH though they could start transacting in it only once Coinbase was ready to transact.
Bitcoin Gold (BTG)
Bitcoin Gold, launched on 12th November, 2017, is a hard fork of Bitcoin. The fork occurred on 23rd October, 2017 on block 491407. The purpose of the fork is to create an ASIC resistant Bitcoin. The cryptocurrency fork of Bitcoin blockchain aims at making it possible for anyone with GPU graphics cards to mine BTG by just using their home computer, which they believe will make mining more democratic. This is opposed to big companies that mine Bitcoin using computers called ASICs that costs thousands of dollars each, and because of the prohibitive costs of mining Bitcoin, this pools hashing power into a select group of companies. The price of Bitcoin took a hit after the fork seeing its value plunge over 60%. Bitcoin hit a low of $5,374.60 before recovering nearly $300. At the time of writing, BTG was $ 215.8, and had a 24 hour total volume exchange of $37,303,800.
BTG will keep most properties of the original bitcoin protocol. However, it will restrict the use of certain specialized chips for mining, and it will make changes to the way in which transactions are added to a blockchain. This new project is also an example of a so-called “airdropped” digital currency, as it is one that will distribute new coins to any prior bitcoin owners who held the original cryptocurrency at the time of the split. These users will receive bitcoin gold up until the date the ledger of transactions started to differ between the two cryptocurrencies.
The open project has been gaining traction and support in the wider cryptocurrency space since, with a dedicated Slack as a main hub for discussion and organization. BTG is currently being developed by the pseudonymous developer “h4x3rotab” along with a small group of volunteers contributing to the project in other ways. The attention BTG has attracted is probably in part because anyone who owns bitcoin on October 25th will receive the equivalent amount of BTG. While this model has been criticized, particularly because it presents a burden on service providers and users, it has also proven successful. With the launch of BTC in particular, users eagerly accepted their batch of free money, while exchanges, wallets and other service providers proved relatively willing to integrate the new coin.
Further, the BTG team believes that this distribution method should also benefit Bitcoin over altcoins as it provides an extra incentive to hold BTC on particular dates. As opposed to the BTC and, especially, the upcoming SegWit2X forks, BTG very specifically does not make a claim to be the “real” Bitcoin. Instead, the BTG project hopes it can prove a valuable exercise for Bitcoin; a sort of test case for a hard fork that Bitcoin itself may one day require.
Since the new blockchain network was formally created in October, the development team was found to have been mining blocks in isolation, setting aside a certain number of coins to support development. This move garnered some criticism by others in the industry. Most significantly, there appears to be much less interest in BTG than there was in BTC ahead of its fork date, as measured by Google searches. Bitcoin gold did see a brief interest spike around the date of its blockchain snapshot, but interest declined leading into November as the network launch approached.
It’s likely that BTG will rock the rest of the cryptocurrency market, although the exact impact is one that investors will have to wait to see. Exchanges will likely be monitoring the cryptocurrency closely. For comparison, shortly after bitcoin cash was released in August, it accumulated a market value of about $4 billion. It’s likely that traders will be anticipating the possibility of a similar result in this case, although it is by no means guaranteed.