The Bitcoin Cash Hard Fork Explained – What do You Need to Know?
- On November 15th, a Bitcoin Cash hard fork is scheduled which may see Bitcoin Cash Split into three different forms of cryptocurrency
- A Bitcoin Cash hard fork takes place twice a year. However, at present, there is no consensus among BCH miners, concerning which of three proposed Bitcoin Cash upgrades will benefit from mainstream support
- The Bitcoin Cash hard fork could increase the transaction capacity of blocks on the BCH blockchain from 32MB to 128MB
What do You Need to Know About Novembers Bitcoin Cash Hard Fork?
Bitcoin cash value has spiked 26% in anticipation of a new Bitcoin Cash hard fork which will take place on November 15th. However, confusion abounds concerning what the new Bitcoin Cash hard fork means and why it is taking place at all.
The Bitcoin Cash Hard Fork Explained
When a cryptocurrency developers make changes to the rules which govern how transactions are processed, doing so requires hard forking the blockchain in question. In this event, a copy of the original blockchain is created. Transaction protocols on the new blockchain are amended slightly. Once changes are made, the new blockchain is released. Where all miners and developers agree with new protocol updates, the new blockchain then supersedes the former version.
Where Things get Complicated
When all developers and miners agree with protocol updates, no new cryptocurrency coins are created. Instead, miners support the new blockchain, while the other fades into obscurity due to lack of support. However, the Bitcoin Cash community is currently divided. As a result, the Bitcoin Cash hard fork scheduled for November 15th may see BCH spit into three different cryptocurrency variants.
Why is the Bitcoin Cash Hard Fork Happening?
At present, transaction block sizes on the Bitcoin Cash (BCH) blockchain stand at 32MB. This means that BCH can process transactions considerably faster than Bitcoin. (Bitcoin currently has a fixed block size of just 2MB.) However, Bitcoin ABC, the core developers of the Bitcoin Cash network, now want to add new features to Bitcoin Cash, including the ability for users to execute smart contracts.
Three Possible Outcomes
Bitcoin ABC wants to add what is essentially a suite of new features to Bitcoin Cash. However, 23% of BCH miners are happy with Bitcoin Cash as it already is. If these miners continue to support the existing BCH blockchain, this will lead to two Bitcoin Cash variants. (Similar to how Bitcoin Cash was created by forking Bitcoin.)
To make matters more complicated, a third group of developers Bitcoin SV, want to take a different course of action. Bitcoin SV wants to keep Bitcoin Cash essentially the same. They just want to increase transaction block sizes from 32M to 128MB.
How will Bitcoin Cash Value be Affected by the Hard Fork?
If the Bitcoin Cash hard fork results in 3 different BCH variants, prices may fluctuate. However, anyone currently holding BCH will automatically be credited with equivocal tokens on each new blockchain. In this case, average investors would be wise to continue holding coins on each new chain, until it is clear which coins will benefit from the most support going forward.
Bitcoin Cash Vs Bitcoin
Bitcoin Cash value has increased sharply in anticipation of the November 15th hard fork. However, every hard fork inevitably leads to investor confusion. Some proponents of the original Bitcoin believe that this weakens coin brand identities long-term. Others argue that hard forks like the present one are mostly unnecessary and little more than a money making cash grab by different groups of developers.
How Should You Prepare for the Bitcoin Cash Hard Fork?
The easiest and safest way to prepare for any hard fork, involves making sure that any coins are stored in offline paper or hardware wallets. Exchanges where coins are held won’t always credit users with equivocal amounts of new forked coins. Also, it is important to remember that many scams surface during forking periods. In this case, users may want to consider continuing to hold BCH they already own, before only claiming new coins when it is clear how they may do so safely.