CoinWorld reports:
Author: Kiara Taylor, Bitcoin Magazine; Translation: Wuzhu.
Since its inception in 2009, Bitcoin has experienced multiple forks, resulting in new cryptocurrencies and variations of the original protocol. As of May 2024, there have been over 100 Bitcoin forks, each with varying levels of adoption and success.
These forks have sparked intense debates within the cryptocurrency community. Some see them as catalysts for innovation and progress, while others view them as disruptive forces that undermine network stability and core values.
It is this dichotomy that we will focus on today. We will examine the reasons behind these forks, their accomplishments, and what they mean for the future of Bitcoin.
Major Bitcoin Forks and Their Impact
Despite a lack of cohesion within the nascent Bitcoin community, progress has still been made towards realizing Satoshi Nakamoto’s vision. However, the first significant crack appeared with the emergence of Bitcoin XT in 2014, which led to a divisive split but provided valuable lessons in governance.
This cryptocurrency split occurred because developers wanted to increase the block size from 1 megabyte to 8 megabytes, which some deemed excessive. As a result, Bitcoin Classic (which had a 2MB block size) was born, followed by Bitcoin Unlimited, which aimed for massive 16MB blocks.
Subsequently, there have been forks with lasting impacts. These include:
Bitcoin Cash (BCH)
Bitcoin Cash (BCH) was created on August 1, 2017, as a result of a hard fork of Bitcoin. The main motivation behind this fork was to address Bitcoin’s scalability issues, particularly the slow transaction times and high fees caused by the 1MB block size limit.
Supporters of Bitcoin Cash, including influential figures like Roger Ver, believed that increasing the block size would allow for more transactions per block, thereby reducing fees and speeding up transaction times.
Bitcoin Cash quickly gained attention upon its creation and was adopted by several exchanges and merchants. Its value also experienced an initial surge, reaching a significant market capitalization.
Over time, Bitcoin Cash has continued to evolve with ongoing development and updates aimed at improving its functionality and scalability. It has a loyal community of supporters who believe in its potential as a peer-to-peer electronic cash system.
However, it faces competition from other cryptocurrencies that also aim to provide low fees and fast transaction times. The ongoing debate over scalability and transaction fees continues to shape the direction and development of Bitcoin Cash.
Bitcoin SV (BSV)
Bitcoin SV (Satoshi Vision) emerged on November 15, 2018, following a contentious split from Bitcoin Cash.
This fork was driven by internal divisions within the Bitcoin Cash community, particularly regarding further increases in block size and development direction. The project was led by Craig Wright and Calvin Ayre, who aimed to restore what they believed to be Satoshi Nakamoto’s original vision for Bitcoin.
Bitcoin SV significantly increased the block size limit, initially to 128MB and later to 2GB, allowing for larger transaction volumes. Supporters of BSV argue that these large block sizes are necessary to support enterprise-level applications and high transaction throughput.
However, the significant increase in block size also raised concerns about centralization, as running full nodes became more resource-intensive.
Bitcoin SV remains a controversial fork within the broader Bitcoin and cryptocurrency community. It distinguishes itself by focusing on large block sizes and high transaction throughput. However, it continues to face ongoing challenges in gaining widespread recognition, with Coinbase ultimately delisting it in 2023.
Bitcoin Gold (BTG)
Bitcoin Gold was created on October 24, 2017, with the aim of decentralizing Bitcoin mining. It achieved this by changing the mining algorithm from Bitcoin’s SHA-256 to Equihash, which is more resistant to ASIC mining.
This change was intended to allow more people to mine BTG using regular GPUs, reducing the dominance of large mining farms and promoting true democratization of the token.
Bitcoin Gold utilizes the Equihash algorithm, which is designed to consume a significant amount of memory and resist ASIC mining hardware. This fork aimed to achieve democratization by making mining more accessible to individuals.
Bitcoin Gold initially received enthusiastic support and was adopted by several exchanges. However, it has faced security challenges, including a major 51% attack in 2018 that resulted in double-spending worth $70,000.
Today, Bitcoin Gold continues to exist as a smaller player in the cryptocurrency market. While it has struggled to achieve the same level of adoption and market share as Bitcoin Cash and Bitcoin SV, its focus on decentralized mining remains a key feature.
Motivations Behind Bitcoin Forks
Bitcoin forks occur for various reasons, driven by ideological, technical, and economic motivations.
For example, one of the significant driving factors behind Bitcoin forks is the need to address scalability issues. As Bitcoin gained popularity, the network faced challenges in handling an increasing number of transactions, resulting in longer confirmation times and higher fees.
Forks are also initiated to introduce technical improvements or new features into the Bitcoin protocol. These may include changes to the consensus mechanism, enhanced privacy features, or the introduction of smart contract functionality.
In some cases, personal motivations such as power struggles, ideological differences, or financial incentives contribute to the creation of Bitcoin forks. If you look at the historical volatility of forks like Bitcoin SV and Bitcoin Cash, you’ll find that some people see them as investment opportunities.
For example, Bitcoin Cash, which split from Bitcoin in August 2017, saw its price skyrocket to around $4,355 in December 2017 shortly after its creation. However, it later stabilized and traded within the range of $200 to $500 over the next few years.
The Impact of These Major Forks on Bitcoin
Aside from the obvious impact of increased threat to OG BTC, major forks have had tangible and intangible effects on the wider cryptocurrency community. While these forks have not provided legitimate solutions to cash flow issues, their influences persist.
Market Volatility
Bitcoin forks often lead to increased market volatility. For instance, the Bitcoin Cash (BCH) fork in August 2017 resulted in significant price fluctuations for both Bitcoin and the newly created Bitcoin Cash. Prior to the fork, Bitcoin was priced at around $2,800, but immediately dropped to $2,700 post-fork. On the other hand, Bitcoin Cash started trading at around $555.
Similarly, the price of Bitcoin SV (BSV), which split from Bitcoin Cash in 2018, also experienced significant fluctuations. It reached its peak at around $441.20 in January 2020 but has since dropped to around $63 by June 2024. These fluctuations are often driven by investor speculation and market manipulation, with some viewing these forks as opportunities for financial gain.
Scalability and Development of the Network
Forks have also sparked significant debates and developments regarding Bitcoin’s scalability.
The original Bitcoin network had limitations such as a 1MB block size and 10-minute block creation time, which impacted its transaction throughput. As mentioned earlier, these limitations led to the creation of Bitcoin Cash, which increased the block size to 8MB to accommodate more transactions per block.
Forks have highlighted the need for scalability solutions, prompting various projects and protocols to enhance Bitcoin’s transaction capabilities. One prominent example is the Lightning Network, a layer-two solution designed to facilitate faster and cheaper transactions by creating off-chain payment channels.
Security Concerns
Some forks have introduced security vulnerabilities. For example, the lower hash rate and interest in Bitcoin SV made it more susceptible to 51% attacks, where malicious actors can control a majority of the mining power, jeopardizing network security.
Unfortunately, this has raised concerns about the long-term viability and security of certain Bitcoin forks. If organized malicious actors can easily take control, what is the point of further forking?
Conclusion
As the cryptocurrency market matures and increasingly integrates with traditional financial systems, the impact of Bitcoin forks on the broader economy cannot be underestimated. The success or failure of these forks will not only affect individual investors and businesses but may also have implications for the stability and security of the global financial infrastructure.
Ultimately, the future of Bitcoin and its forks will depend on the ability of the community to find common ground and work towards a shared vision of a decentralized, inclusive, and resilient financial system.
