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Bitcoin Cash: The Hard-Fork And The Blocksize War

The Bitcoin Cash protocol was born as a result of the hard fork of the main Bitcoin protocol over the block size to process transactions on top of the blockchain. This turned into the so-called “blocksize war” which prompted and created a new protocol. 

Bitcoin Cash Origin Story

Bitcoin Cash (BCH) is potentially Bitcoin’s most well-known hard fork, championing itself as the “truer” Bitcoin than Bitcoin itself. Bitcoin Cash intends to be authentic digital money by banking on faster transactions, reduced fees, and optimized scalability.

Bitcoin Cash got released in August 2017. Originating from a fork of Bitcoin, Bitcoin Cash eventually expanded the size of blocks, thereby permitting an increase in the number of transactions to be processed and optimizing overall scalability.

To understand the impact that such change had on the Bitcoin community it is well documented in the book “The Blocksize Wars.” The whole discussion started around enabling a larger size of the block for faster transactions (as Bitcoin grew in popularity, by 2017, it became extremely hard to run transactions on top of it) turned into a religious war. And to be sure, this wasn’t just a religious matter between what are called Bitcoin purists (those strictly sticking to Satoshi Nakamoto White Paper) and those who proposed a fundamental change to the protocol.

Indeed, this change could have also turned into a more centralized protocol, which is the opposite of the mission that Bitcoin proposed. To understand how this is still an open wound in the Bitcoin community, we don’t need to look far behind, we can look at a discussion that happened in May 2021 between billionaire Elon Musk and the Bitcoin community. 

For a bit of context below a timeline of events: 

  • Elon Musk had announced that Tesla would start accepting payments in Bitcoin, and at the same time to enable that, back in February 2021, it had bought $1.5 billion worth of Bitcoins. 
  • Over the months, Elon Musk had tweeted more and more frequently about Bitcoin first, then he started to tweet about crypto meme coins (Dogecoin), gathering more and more interest around the coin who was born as a joke. 
  • By May 2021, suddenly Elon Musk came out with a statement announcing that Tesla would not be accepting anymore Bitcoin payments due to the high coal energy consumption due to the Bitcoin mining process. 
  • That opened a Pandora’s box that also showed the fanaticism around the Bitcoin community. At the same time, Elon Musk announced that he would be working with the Doge developer’s community instead, to make the former meme coin as a potential medium to purchase Tesla in the future.
  • As the debate got heated though some fundamental points came up about the evolution of the Bitcoin’s blockchain. 

As Elon Musk proposed a simple solution to the problem (simply improve block size by 10X), the discussion got interesting:

Source: Twitter

In a series of threads, Adam Back, among the most influential people in the Bitcoin community explained why that might have been a bad idea: 

Source: Twitter

Beyond the discussion itself, it’s interesting to note that changing a protocol is not like adding a feature on top of a company’s platform. This usually requires a massive discussion among the community, as when a fundamental change like block size is implemented, this becomes unchangeable (or at least that might require another hard fork to undo). And making such a change also requires the legitimacy of the whole community, which is willing to jump on the new version of the blockchain protocol, thus accepting en masse such change. 

In 2018, the Bitcoin Cash cryptocurrency went through another fork, splitting in two, namely, Bitcoin Cash ABC and Bitcoin Cash SV (Satoshi Vision). Bitcoin Cash is referred to as it is now — Bitcoin Cash — because it employs the original Bitcoin Cash Client.

Value Model 

As we saw, the Bitcoin Cash coin was primarily born as a result of the blocksize war. Thus, its primary value proposition is based on speeding up transactions to enable Bitcoin to scale up. 

Value Proposition of Bitcoin Cash

The main value propositions claimed by Bitcoin Cash (Image Source: bitcoincash.org)

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Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get The FourWeekMBA Flagship Book "100+ Business Models"