Bitcoin is, without a doubt, the most popular cryptocurrency in the world. It was the first cryptocurrency to be launched, way back in 2009 and remained number 1 in the market. The success of the bitcoin model is one of the major catalysts for the proliferation of cryptocurrencies today as developers and entrepreneurs attempt to emulate the success of Satoshi Nakamoto’s digital creation. Due to the enormity of the success recorded by bitcoin, it has attracted a substantial following with many people being part of the community. With such large numbers, there are bound to be disagreements which need to be resolved.
In the blockchain environment, disagreements are resolved by means of forks. The Bitcoin blockchain is no stranger to forks as one can almost lose count of all previous and upcoming Bitcoin forks. Before delving into the matter of Bitcoin forks, it is important to understand what forks are. Forks occur on a blockchain network when changes need to be made to the governing protocols of the network. There are basically two types of forks; soft fork and hard fork. In a soft fork, the network does not split but in a hard fork, there is a network split that leads to the creation of a new blockchain. Hard forks on the Bitcoin blockchain are the subject of this article.
A Little Bit of History
Hard forks occur when the participants in a blockchain network are unable to come to a consensus with regard to certain issues of blockchain governance. This lack of consensus is then resolved by splitting the network and a new blockchain is created. The first significant Bitcoin hard fork occurred in August 2017 and it led to the creation of Bitcoin Cash (BCH). Disagreements over the implementation of Bitcoin Improvement Protocol 91 (BIP-91) led to a schism in the Bitcoin blockchain. The core of the disagreement around the BIP-91 was centered on scalability and the introduction of Segregated Witness (SegWit) protocols.
After the emergence of Bitcoin Cash, the Bitcoin blockchain forked two more times to birth Bitcoin Gold (BTG) and Bitcoin Diamond (BCD). Of all of these three initial forks of the Bitcoin blockchain, Bitcoin Cash remains the most successful. In a little under a month, it had become one of the top 10 cryptocurrencies in terms of market cap. At the time of writing this article, Bitcoin Cash is the 4th most valuable cryptocurrency in terms of market capitalization which stands at just over $23 billion, about a fifth of the Bitcoin market capitalization. Bitcoin Gold is 19th on the market capitalization ranking with a value of $2 billion. The Bitcoin Diamond blockchain is not yet live even though BCD futures have been traded.
An Explosion of Bitcoin Forks
The last half of the final quarter of 2017 came with the news of more Bitcoin forks with as many as 6 being slated for December of 2017. These 6 hard forks of the Bitcoin blockchain were Bitcoin Platinum, Super Bitcoin, Lightning Bitcoin, Bitcoin God, Bitcoin Cash Plus, and Bitcoin Uranium. Bitcoin Platinum has since been discovered to be an elaborate scam by a South Korean high school student who wanted to profit off the expected increase in bitcoin prior to the hard fork. Bitcoin Uranium does not yet have an official website.
The justification for many of these Bitcoin forks comes from perceived weaknesses in the architecture of the original Bitcoin blockchain. Scalability, long transaction time, slow transaction speed and the emergence of mining centralization continues to cause serious issues within the Bitcoin blockchain. In the beginning, it could be argued that the earlier Bitcoin hard forks were based on strong philosophical and technical ideologies but it does seem to be a profit-making venture these days.
Bitcoin Forks, the New ICO
With the sheer number and regularity of Bitcoin forks, the phenomenon could become the new cryptocurrency craze, especially for miners and developers. The emergence of so many Bitcoin forks within such a short space of time has given rise to the term “Initial Fork Offering” (IFO). Once there is a strong enough community support for an idea that supposedly improves upon Bitcoin, it can become the basis of a fork that will lead to the creation of a new Bitcoin-derivative blockchain and a new Bitcoin-based cryptocurrency.
There are a number of reasons that have identified for the increase in the number of forks. As the size of the Bitcoin community continues to grow, a great variety of ideologies in terms of philosophy, politics, economics etc begin to manifest themselves within the community. Some of these ideologies are not compatible with each other and as such, disagreements over certain principles begin to occur. The Bitcoin blockchain is constantly evolving and maturing thus necessitating the need for changes, improvements, modifications, and alterations every now and again. Some people are likely to support certain changes and argue against certain others.
The fact that hard forks often also result in users being rewarded with free coins is another likely reason for the increase in the popularity of Bitcoin forks. Some forks of the Bitcoin network reward users who participate in the fork with the equivalent of their Bitcoin holdings. Bitcoin Cash gave every BCH participant the equivalent of their Bitcoin holdings in BCH tokens. For every bitcoin held by a Bitcoin Cash participant, he or she got the same value in BCH in a 1-to-1 ratio. This has led to fears that miners and developers may take advantage of the system to acquire large token holdings and wait for the tokens to appreciate in value before dumping them in massive selloffs.
The Road Ahead
There seems to be no slowing down in the Bitcoin fork craze with more forks slated for 2018. If the entire record of the history of the still fledgling cryptocurrency scene has shown one thing, it is that once a cryptocurrency trend develops, many people are bound to jump on the bandwagon. It is almost inevitable that many scam forks will emerge but forks like Bitcoin Cash prove that a hard fork can achieve success if it is done for the right reasons. The jury is still out on the potential of these new Bitcoin forks as only time will tell whether they will become trailblazers in the market or be abandoned to the cryptocurrency waste bin.
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