Everything You Need to Know about Bitcoin’s Upcoming Split
Bitcoin continues to turn heads breaching the $6,000 mark for the first time on Friday. But before investing in this financial rampage, there’s something important you need to know. Next month, a change will be made to its Blockchain network. Simply put, the Blockchain, the technology that stores Bitcoin and records all of its transactions, will encounter a split. In the Bitcoin community, this split is called a ‘fork’. In this article, we will break-down the concepts and terminology of the upcoming fork in an effort to better explain how this highly anticipated shift can affect Bitcoin.
As previously mentioned, in the cryptocurrency space, a ‘fork’ is a split in the Blockchain protocol. As such, there are two categories of forks; a hard fork and a soft fork. A hard fork can invalidate valid transactions as well as validate invalid transactions. A soft fork on the other hand, can only invalidate blocks or transactions. On August 1, a software upgrade was needed to address the bitcoin network’s limitations with regards to its high volume of transaction processing. That inspired one faction of Bitcoin users to launch a fork called ‘Bitcoin Cash’ that was designed to upgrade the software accordingly.
Bitcoin Cash was the result of Bitcoin’s last fork back in August. When what happened was, Bitcoin was then called ‘Bitcoin Core’ while its new clone was called ‘Bitcoin Cash’. Truth be told, Bitcoin Cash is nothing more than another modified cryptocurrency. The only real difference between Bitcoin Cash and any other alt-coin is that it was devised as a result of the bitcoin core fork, and wasn’t created from scratch. One other interesting fact about Bitcoin Cash is that anyone who has owned Bitcoin before the fork now has an equal amount of Bitcoin cash which was mistakenly considered to be free money for those users.
Behind next month’s split is a group called Segwit2X. They have proposed to upgrade the Blockchain system and increase its capacity to execute transactions. Their first code optimization proposal involves changing how some of the information is stored on the network. Their other goal is to increase the network’s block size from 1MB to 2MB. Although the upgrade seems like a win-win for Bitcoin owners, Segwit2X has received a lot of pushback from within the Bitcoin community who fear the upgrade will compromise the network’s security.
The ticker symbol for the Segwit2X coin will be ‘BTC1’. BTC1 will be activated by Bitmain and several other contributors
The reason that many believe Bitcoin needs the Segwit2X upgrade is because Bitcoin has a scalability problem. That’s because blocks in the Blockchain are limited to just 1 mega-byte. Any block that is larger than one mega-byte will be automatically denied by the network. Additionally, in its current state, the network’s maximum capacity rate is about three transactions per second. Segwit2X seeks to improve both of those limitations.
Another less reported fork is set to take place on Wednesday. It is driven by a team of miners headed by Jack Liao, CEO of the Hong Kong-based mining equipment manufacturing company, LightningAsic. The new fork will create yet another coin called ‘Bitcoin Gold’. The founders of Bitcoin Gold believe that the process of mining Bitcoin has become too monopolized by one small team of programmers. Bitcoin Gold wants to decentralize the mining power so that laymen will have an easier time mining the coin themselves. It should be noted however that unlike Segwit2X, the Bitcoin Gold fork is taking place without any sort of community consensus.
Largely unaffected by all of these forks are just about every other cryptocurrency besides Bitcoin, otherwise known as ‘Altcoins’. Altcoins (alternative coins), have sprung up in droves following Bitcoin’s success. Some of the more notable Altcoins include Ether, Litecoin and Ripple.
The question of how these changes will affect Bitcoin remains to be seen and there may be more to come. Either way, now can be a great time to get involved in the cryptocurrency phenomenon. To learn more about trading Bitcoin CFDs as well as hundreds of other instruments, check out the iFOREX online platform.
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