A two-year debate over the future of bitcoin erupted earlier today into a “hard fork” of the cryptocurrency, with traditionalists standing their ground and reformers introducing a rival version called “bitcoin cash.” While the value of the upstart cryptocurrency rose as high as $400 in volatile early trading, the tectonic break caused bitcoin’s value to drop around 3%. Bitcoin is currently trading at U.S. $2,766.
Bitmain, a Beijing-based operator of the world’s largest bitcoin mining pool, has been among the organizers driving the revolt. Its leader, Jihan Wu, wants to make bitcoin’s transaction speed near-instantaneous in order to encourage its broader adoption. (Bitcoin can process just seven transactions per second, due to constraints imposed by creator Satoshi Nakamoto.) Wu, a bitcoin millionaire, also stands to see his fortune grow if the cryptocurrency gains traction.
BREAKING: The Bitcoin Cash blockchain has mined its first block
— CoinDesk (@coindesk) August 1, 2017
Traditionalists, on the other hand, favor a cautious approach to growth. They are wary of government intervention, which could have a stifling effect on the overall ecosystem, if bitcoin grows too big too fast—a possibility that Wu and his allies shrug off. Traditionalists also caution that bitcoin cash’s approach to increasing transaction speed could allow large organizations to control the network, at the expense of individuals.
To some, the split is the byproduct of differences in language and context as much as it is the result of philosophical disagreements about governance and scale. Proponents of bitcoin cash are predominantly based in China, where, by some estimates, more than 60% of mining power is generated; Nakamoto purists reside in the U.S. and Europe. The two blocs have struggled to discuss their differences via (sometimes garbled) translations of chat and code.
“I think [Western exchanges] will support it eventually,” Haipo Yang, CEO of Shenzhen-based mining pool operator ViaBTC, told Coindesk. “That’s a fight for the users. They have no other choice, or they will lose the market share.”
ViaBTC introduced futures trading for bitcoin cash last week, in a show of support for the fledgling currency. U.S. exchange Coinbase, in contrast, said last Thursday that it would not support bitcoin cash.
Cryptocurrencies like bitcoin, ripple, and litecoin—plus hundreds more—are digital alternatives to our existing, state-run system. Instead of printing dollars, bitcoin users “mine” the currency using the processing power in their computers. Once a coin has been “mined,” it lives in a distributed ledger called the blockchain, which serves as a shared record of accounts and transactions. Proponents of the system argue that it offers greater efficiency and transparency by obviating the financial system’s dependence on middlemen, like banks.
Bitcoin, and cryptocurrencies more broadly, remain a niche corner of the financial world. Bitcoins issued to date are worth a collective $47 billion. Daily transactions are averaging roughly 300,000, according to the Economist.