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With Bitcoin Likely to Split Again, What Does That Mean for Consumers?
September 24, 2017
For those who do not know what bitcoin is or why it’s relevant….
Bitcoin was invented by an unknown programmer, or a group of programmers, under the name Satoshi Nakamoto. In 2007, Nakamoto claimed to begin work on the writing of the code. In January 2009, Nakamoto released the first bitcoin software that launched the network and the first units of the bitcoin crypto currency, called bitcoins.
It is still disputed whether bitcoin is a currency or not. A more accurate description is that bitcoin is a worldwide cryptocurrency and digital payment system in which peer-to-peer transactions take place between users directly, without an intermediary central repository or single administrator. These bitcoin transactions are verified by network nodes and recorded in a public distributed ledger called a blockchain.
What makes bitcoin important is the technology that makes it work. Its blockchain computing is a system that can securely contain an entire set of records within it, referred to as blocks. The blockchain computing is unique because its ability to create copies of the entire system that can be kept simultaneously on millions of computers located anywhere. Blockchain allows information to reside on multiple systems, even millions of them, simultaneously, instead of it only being stored in a limited number of locations. As new entries are made into the blockchain, the entire system updates in every location, instantly. This allows everyone the ability to add a new record that can be viewed immediately and, in turn, it allows everyone to immediately view this new record anywhere in the world. This means that records are always reliable and up-to-date. In addition, the records are accurate and trustworthy due to the blockchain’s records being stored on millions of computers around the world.
Bitcoin can be exchanged for other currencies products, and services. As of February 2015, over 100,000 merchants and vendors accepted bitcoin as payment. Bitcoin can also be held as an investment.
Some advantages of Bitcoin include:
Low Transaction Fees
Bitcoin costs roughly 1 cent to send to anyone fiat over borders. The fee can be adjusted according to priority.
Money is already Digital
Bitcoin already officially forked and split in two, bitcoin cash and bitcoin, because they were unable to agree on a single solution that would have preserved a unified cryptocurrency. This first split happened on August 1, 2017. Now, bitcoin is looking increasingly likely to splinter off again in November, which would create a third version of the world’s largest cryptocurrency as miners and developers pursue separate visions to scale its rapidly growing marketplace.
The first split in August was due to some technical issues that seemed to be slowing down the original bitcoin. The miners that solve complex computer problems using software to unleash digital coins into the market unlocked the first bitcoin cash coins. The new software increases the size of the "blocks" that make up the network to allow it to process more information for bitcoin cash. It uses the same blockchain network as bitcoin, but was believed that bitcoin cash would benefit by addressing some of the issues facing bitcoin, such as slow transaction speeds.
The division was caused by different solutions from developers and miners. On one side are the so-called core developers. They are in favor of smaller bitcoin blocks, which they say are less vulnerable to hacking. On the other side are the miners, who want to increase the size of blocks to make the network faster and more scalable.
Today, there may be another split that occurs in November unless 92% of the miners support the second phase of SegWit2x. In August, miners agreed to implement the first phase of the proposal, SegWit2x which refers to the compromise proposal developed to deal with the surge in transactions. However, they were expected to increase the blocksize to two megabytes around November in a second phase, but miners and developers seem to be backing away from the proposal.
Key players are warning investors to brace for more turmoil. Core developers say the fork this time could be much more tumultuous and the split is 100% guaranteed. This split will most likely be more disruptive causing more user confusion of what version is the actual “bitcoin.”