Unless you are new to Cryptocurrency and more specifically Bitcoin you will need no explanation to the topic at hand here. But for those new to the scene who are unsure just what Bitcoin Cash is and who Roger Ver is than here is a quick catch up:
Bitcoin Cash is Bitcoins First Hard Fork
On August 1st 2017 we saw Bitcoin Cash fork from the Bitcoin Legacy chain, all of those holding Bitcoin at the time of the fork were also now in possession of an equal number of Bitcoin Cash tokens. The idea of Bitcoin Cash was formed primarily due to the proposed and now implemented Segregated Witness[BIP 91], many in the community felt that the decision not to increase the Blocksize failed to tackle the scaling problem seriously and effectively making Bitcoin an investment asset rather than the ‘Digital Cash‘ it was designed to be by it’s anonymous creator Satoshi Nakamoto.
The plan to do a hard fork was first announced by Bitmain. The project was originally referred to as UAHF: A contingency plan against UASF (BIP148) by Bitmain on their corporate blog, which the ASIC bitcoin mining hardware manufacturer would launch if BIP 148(a User Activated Soft Fork) succeeded. Subsequently, developers took interest in the project. The Bitcoin Cash name was originally proposed by Chinese mining pool ViaBTC. – Wikipedia
Bitcoin cash saw it’s first block mined at block 478559, the new chain saw an increase in block size from the current 1 MB to 8MB. This radically increased the speed of transactions with very low fees.
To put things in perspective Bitcoin can process around 5 transactions a second, whereas Bitcoin Cash can process about 40 transactions a second. So we have an 8x improvement in performance, however this is still way off the required speed needed to achieve the efficiency required of a fully adopted currency.
Who is Roger Ver?
Roger Ver is an early Bitcoin adopter and also probably the largest investor in cryptocurrency startup businesses historically. He is also the CEO of Bitcoin.com, one of the first media outlets for Bitcoin and Crypto. However if you thought Roger made his millions from being an early bitcoin adopter you’d be wrong, Ver was a millionaire by the age of 25 via his MemoryDealers.com business.
Some of the startups Roger Ver has helped fund include Charlie Shrem’s Bitinstant, Ripple, Blockchain.info, Bitpay and Kraken.
He is also one of the five founding members of the Bitcoin Foundation.
So what’s up with Bitcoin?
Before we continue here we would like to point out that we support both Bitcoin and Bitcoin Cash, likewise we have issues with both protocols and those pushing their prefered chain. We are in no way affiliated with anyone from Bitcoin Core or Bitcoin Cash, we hold both an equal amount of Bitcoin and Bitcoin Cash therefore from a financial standpoint we are not biased either way.
Right, so what’s the problem with Bitcoin? Well, transaction speed and cost is the main issue, Bitcoin has scaling issues and as demand skyrockets so does both the cost of each transaction and also time it takes to transfer.
If you visit Bitcoin.org you will see the following three definitions to define what Bitcoin can offer:
Now although all these statements used to be true of Bitcoin, now only one is currently true and even this one is debatable as the other two now false statements are making ‘World Payments’ a less likely offering by many merchants.
Bitcoin in it’s early days was virtually free to transact and instant to process, however as the network activity has increased so has the cost of transaction and the speed.
But, as much as it is becoming increasingly expensive and slow to transact it’s not as bad as the propaganda would have you believe
Bitcoin as a Digital Cash
Bitcoin is indeed expensive to transact, if you want to have your transaction confirmed in the next block it can cost up to $55, these are the figures you will see thrown about by the Bitcoin Cash community, however in reality the fee’s will be considerably smaller for the majority of transactions. Also it’s worth baring in mind to send $10million in Bitcoin would still only cost you around $55. This is a very small transaction fee for such a transfer of wealth.
The problem arises with Bitcoin when you introduce micro-payments, for example buying a coffee at your local cafe. To buy a $3.50 cappuccino would cost you closer to $25 which clearly removes Bitcoin as a form of payment for such things at this present moment in time.
Many people currently holding Bitcoin are not to bothered with the high transaction fees because of the huge gains most have made from their initial investment into Bitcoin. But, in order for Bitcoin to continue it’s growth we have to consider the rest of society and whether they are going to take seriously a currency which can only process 5 transactions a second and costs $20 in transaction fees to purchase a $3.50 coffee. To put it simply they will not take it seriously and this is why Bitcoin Cash was born.
The Lightning Network
There are of course solutions to Bitcoin’s scaling issue, primarily the lightning network has been pegged as the saviour of Bitcoin. All this without even touching the Bitcoin protocol. However, the Bitcoin ethos – well maybe.
So what is the Lightning Network?
The Lightning network is an off-chain solution to Bitcoins scaling problem, in simple terms this is how it works.
Merchant creates a payment channel
Consumers such as you and I setup a payment channel and load it with Bitcoin – let’s think of this as like opening a new bank account and depositing £10 or in this case the equivalent in Bitcoin. A Bitcoin transaction fee is charged at this point.
You pop into your local coffee shop and purchase a coffee, your payment channel is linked to the merchants and an IOU (I Owe You) is signed and sent to the merchant to the value of 0.001BTC. This amount is deducted from your bank balance, the value is added to the merchants balance.
The only other time a fee is charged is when you load more bitcoin funds to your account, or alternatively when close a payment channel as all off chain transactions will need to be processed.
So Bitcoin will remain as it is, however an offchain solution provides merchants with an option for accepting Bitcoin with low fees.
Now, I don’t really have an issue with modular systems, i.e rather than modifying perfectly functionable processes, build additional processes to work with these existing proven systems – however, it cannot be argued that in doing so with Bitcoin we are taking a decentralised payment platform which was designed to hand the power of wealth, no matter how small back to the beholder, with no third party. Whats more the Bitcoin Whitepaper’s first paragraph clearly contradicts what the lightning network will do to Bitcoin:
A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.
Well, if we take a look at who’s behind ‘The Lightning Network’ you’ll see what we mean.
Well one of the development teams behind this proposed network is Blockstream, blockstream is a company wholeheartedly dedicated to creating and developing sidechains for Bitcoin. It’s investors include AME Cloud Ventures, AXA Strategic Ventures, Blockchain Capital, Digital Currency Group, Digital Garage, Future\Perfect Ventures, Horizons Ventures, Innovation Endeavors, Khosla Ventures, Mosaic Ventures, Real Ventures, Reid Hoffman, and Seven Seas Venture Partners.
The main investor which people focus on here are AXA Strategic Ventures, they are connected to the huge multi-national insurance provider AXA, however it’s worth noting they are merely a subsidiary. That said, with so many third party investors on board, regardless of their motives at this point it is hard to ignore that the Lightning Network does potentially ‘contaminate’ Bitcoin with interests which conflict it’s initial purpose.
The Lightning Network in a nutshell
The following video explains just how the Lightning Network works far better than I can, clearly the video’s creator is opposed to the network, however the basis of the video is correct and it provides a true representation of just how the LN will work.
To say that the Banks have ‘bought Bitcoin’ is more an assumption, rather than fact, based on financial influences within the Bitcoin Core development, however this alone is enough of a reason to be concerned. By using side-chains to advance Bitcoin to beyond it’s current capabilities we are introducing more and more people (thus outside interests) to the chain, it is no longer ‘peer-to-peer’, but ‘peer-to-Company A-to-Company B-to-peer’.
Ultimately what you end up with is a Bank. A bank which can block access, forcibly deduct funds from accounts automatically for things such as state taxation, monitor and trace your every purchase and so on.
‘The Flippening’ was a term used to describe the potential dominant chain swap between Bitcoin (BTC) and Bitcoin Cash (BCH), it is believed this process could happen and already we have seen a couple of times where the value of Bitcoin Cash has increased dramatically while Bitcoin (Core) has devalued in proportion to the Bitcoin Cash value increase. Many believe much of this was due to controlled pump into the Bitcoin Cash market by Roger Ver, however no proof of these allegations has been brought to light.
Personally I don’t believe the flippening will occur, I think both are now operating on different playing fields. If Bitcoin is indeed being infiltrated by big banks then we can assume they have a large financial capacity to ensure success, we can also assume because of this that Bitcoin Core is not going away anytime soon. Bitcoin Cash on the other hand is now being pushed by Roger Ver, who’s principles are still in-tact and aligned with that of satoshi’s whitepaper. Many core promoters will claim he is driving this BCH push merely to feed his own greed, however do you really think Roger needs more cash, i’m not so sure he does?
Personally I think Roger is genuine in his beliefs, he clearly is passionate about Bitcoin and he honestly believes that Bitcoin Cash is the true Bitcoin. We can disagree and throw insults as much as we like, however, personal chain preference aside – can we honestly say he doesn’t have a point?
What makes this debate even more complicated is the various financial positions people are in, there are those that bought Bitcoin before the split and now hold both variants of Bitcoin, there are also those that bought both before the split, but sold their Bitcoin Cash as soon as possible. Then there are those that bought before the split and then once the hard fork occurred sold all their Bitcoin Core tokens. Finally there are those buying in after the fork who have little knowledge really of what’s going on and just buy what they believe to be Bitcoin.
Because of this huge variance in financial interests we also have a huge variance in opinion, however the truest opinion, is that of those who held bitcoin prior to the hard fork and didn’t sell their Bitcoin Cash. These people are unaffected by financial interests and the emotions attached to these interests.
As one of these people it does indeed make looking upon both chains a far less emotional task. Though what I see in both communities supporting each of the chains is sad, it’s a shame the debate has become so aggressive with the majority of communication based around name calling and propaganda.
Censorship and Community Divide
Watching the divisions grow between the Bitcoin Cash and Bitcoin Core community has been a little like getting sucked into the latest T.V soap opera, with active censorship of anti-core and cash and pro-cash and core statements made on both sides on various sub-reddits and other forums it has been a truly entertaining, yet saddening experience to behold.
Just to backup a little, the Bitcoin Community has been divided for sometime, in fact this is not a debate which arose this year, the battle for larger block sizes has been around for a while now, here’s an excerpt from a medium post back in 2016:
Anyone who has been following Bitcoin closely over the past couple of years should by now be well aware of the issues being debated and the existence of censorship in some of Bitcoin’s most prominent communities. For the unaware, here is a primer:
The Bitcoin network is currently at max load, and today is capable of processing approximately three transactions per second. This was not part of the original design of the Bitcoin protocol, and the 1MB block size limit was added in 2010 by Satoshi Nakamoto himself as a temporary anti-spam measure.
Because bitcoins were so cheap at the time, and the number of bitcoin users so few, making transactions on the bitcoin network was effectively free. The concern was that a malicious entity could simply flood the network with transactions, filling up blocks and bogging down transaction speeds for legitimate users. Because transactions were so cheap to make, such an attack would have cost the perpetrator very little to pull off, and could have crippled the entire bitcoin network while it was still in its infancy. Former bitcoin lead maintainer Gavin Andresen addressed this attack in a blog post, writing:
The block reward was 50 BTC back then, so miners could sell a block’s worth of coin for about $1.50. That gives a rough idea of how much it would cost an attacker to produce a ‘poisonous block’ to disrupt the network– a dollar or two. Lots of people are willing to spend a dollar or two “for the lulz” — they enjoy causing trouble, and are willing to spend either lots of time or a modest amount of money to cause trouble.
Today the block reward is 25 BTC and the price is over $400; miners get over $10,000 for the blocks they produce. An attacker would have to spend close to that amount to produce a ‘poisonous block.’
But even this one megabyte limit was hardly restrictive; at the time the average block size ranged from 200 bytes to occasional peaks of around one kilobyte. The one megabyte limit was meant to handle new user influx and peak period transactions up to several thousand times what the average daily transaction volume was at the time. In October 2010, Satoshi Nakamoto even laid out his plan for increasing the maximum block size:
It can be phased in, like:
if (blocknumber > 115000) maxblocksize = largerlimit
It can start being in versions way ahead, so by the time it reaches that block number and goes into effect, the older versions that don’t have it are already obsolete.
Pretty simple, right?
One would think. Since the limit was introduced in 2010, there have been countless discussions on the necessity as well as the methods that would be used to increase this limit, and Bitcoin’s transaction processing capabilities with it. Those attempts have repeatedly been blocked by a small group of developers, and in recent years discussion of increasing the limit has been censored from some of Bitcoin’s largest discussion forums, all of which are moderated by the same individual, who posts using the handle Theymos. What is forbidden includes any discussion of code changes that propose increasing the limitation.
The article goes on to display those who appear to show little concern for this blatant censorship of discussion and progression in what is supposed to be an open-source decentralized protocol. It shows the little concern from Blockstream and Core developers about transaction speed and cost, it also shows the little regard that Bitcoin Core developers, such as Peter Todd have for any opinion that Roger Ver may have:
Well, as it is No. Bitcoin Cash offers a larger block size of 8MB, however this only increases the network capacity by 8x, so if we were to consider Bitcoin Cash had as many transactions as Bitcoin (core) currently has then Bitcoin Cash would still have 28152 outstanding transaction based on the Bitcoin as it is at time of writing.
This is considerably less than Bitcoins transactions memory pool, however it is still a backlog of transactions which is present before mainstream adoption has even taken place. So this begs the question, does Bitcoin Cash offer the solution to Bitcoins transaction problem. The answer in my honest opinion is no. However, the fact they do believe Bitcoin should be whats it was designed to be, which is digital cash and their have concerns over Bitcoin transaction fees and processing times is reassuring, as the Bitcoin Core developers seems to not be overly concerned with this major flaw in Bitcoin.
But in reality Bitcoin Cash still isn’t really up to the job of becoming a fully adopted currency on its own, by using third-party sidechains it would be possible, but then we are back to the same issues we see with Bitcoin.
Is Bitcoin Cash Just a Scam?
Many within the Bitcoin community simply call Bitcoin Cash a ‘scam’, but how in fact they have determined that Bitcoin Cash is a scam is beyond me. Clearly it’s not, yes their is price manipulation as there has been with Bitcoin (core) and other altcoins over the years – but scam, no. Do I think Roger Ver is trying to con people in order to make himself richer, as many are suggesting – No, this does not seem to coincide with everything Roger has done for the Cryptocurrency space over the past few years. I’d have to agree that he has behaved irresponsibly at times and the way in which he’s pushing Bitcoin Cash is doing more damage to the Bitcoin space (core and cash) then good.
We have to remember that it is no longer just long time Bitcoin enthusiasts in this space, we are seeing normal everyday people wanting to get involved with Bitcoin, however as these people flow in they are being confronted with some confusing information, it is entirely possible people could end up investing in Bitcoin Cash rather than Bitcoin, or Vice versa. There is also the possibility that people could of purchased some Bitcoin on an exchange such as coinbase, then after being advised to do so, sent their newly purchase Bitcoin over to a personal Bitcoin Cash wallet.
Whether any of this confusion was by design is unknown and i’d like to think it wasn’t. But the fact remains that it is confusing for people coming into the space. Their will be an update to Bitcoin Cash shortly that will change the wallet address format, this should prevent people accidentally sending Bitcoin to a Bitcoin Cash wallet (which by the way is one sure way to loose your Bitcoin forever).
The Interview from Bitcoin Errorlog
If your active in the cryptospace you will of most likely seen the following interview from Bitcoin Errorlog with Roger Ver, the subject was of course Bitcoin Cash and the purpose was clearly to antagonise Roger. Roger reacted poorly and to be honest acted a little like a petulant child, however in his defence the interview was designed to piss him off. Roger did apologise in a youtube statement for his behaviour in this interview, however I fear he may of ensured that Bitcoin Cash will forever be called BCash to many:
So What Advice Should We Give to New Investors in Bitcoin?
Well firstly they need to know what they are getting involved with, regardless of what team your on, the entire asset class is still highly volatile and any investment should be treated as a gamble. If anyone guarantees you gains you know this person cannot be trusted, no one can promise gains in the cryptospace.
Another important aspect to get through to any newbie in my opinion is the reason for getting involved. For those wanting to merely get rich quick, I have little time for you. Yes you can get rich quick, as you can also become poor very quick – but this is not what Bitcoin and Cryptocurrency is all about.
Bitcoin and Cryptocurrency is about removing the middle man of economics, the Banks. These parasites have dominated our society for 1000’s of years by profiting on the debt and inequality. The effectively control the World as we know it. Bitcoin has shown us there is another way, a way without banks, without a middle man. Bitcoin, a digital peer-to-peer cash. Opening up the gates for the billions of people in this World who do not have access to money, for the first time in history we can level the financial playing field, or at least begin to. This is what your investing in, freedom from centralised authorities and the banking cartels that feed them.
Decentralization is the key to humanities awakening, Cryptocurrency is powerful tool which can help us achieve it.
As for whether to invest in Bitcoin or Bitcoin Cash, well we can only inform others of the history of Bitcoin and the reasons why the Hard Fork to Bitcoin Cash occurred. Probably the safest position to hold is an equal amount of both, i’d be very surprised if this position would cause any fiat losses, even if one dies off as the other dominates, the gains made by the dominate Bitcoin will far outweigh any losses incurred by holding a position in both. Of course more gains could of be made if you just held the winning chain only, but at this point in time dismissing Bitcoin Cash would be prudent to say the least.