Bitcoin’s Sectarian Battles Heat Up
Amid the rise of bitcoin imitators, a potentially even bigger disruption looms: Bitcoin itself could split next month
As bitcoin imitators proliferate, a bigger disruption looms: Bitcoin itself could split.
As bitcoin imitators proliferate, a bigger disruption looms: Bitcoin itself could split. PHOTO: DAN KITWOOD/GETTY IMAGES
By Paul Vigna
Oct. 25, 2017 4:50 p.m. ET
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The truth is getting messy in the world of cryptocurrencies.
The digital currency bitcoin was created with a unique feature—a public online ledger, not controlled by any one party, that contains the immutable trading history of the entire network. It was seen as a representation of the truth itself.
But several imitators to the original, “legacy” version of bitcoin have popped up recently, all with variations on the name: Bitcoin Cash, Bitcoin Dark, Bitcoin Plus, BitcoinZ. This week, another one, Bitcoin Gold, started trading. They all have their own ledger, their own version of the truth.
A potentially even bigger disruption looms, though: Bitcoin itself could split next month. If that were to happen, one version of bitcoin would be optimized more for payments, the other to be a store of value akin to gold.
Such a split would overshadow the other competitors, most of which have failed to gain much market share from bitcoin itself.
The dollar volume of trading in BitcoinZ during a recent 24-hour period, for example, totaled $18,965, or about 3.5 bitcoins, according to research site coinmarketcap.
The newest entrant, Bitcoin Gold, is hoping a wrinkle will attract more trading: It is designed so that people can “mine” for the currency using nothing more powerful than a computer with a graphics chip.
Bitcoin Gold began trading Monday, changing hands at as high as $540. By Wednesday, the value had fallen to $134. The currency’s 24-hour volume in dollar terms totaled $19.5 million, according to coinmarketcap.
Bitcoin, by contrast, had trading volume of around $2 billion in the 24 hours that ended midday Wednesday. Bitcoin on Wednesday traded around $5,500, down from an all-time high on Saturday of $6,138.
Most of the upstarts are the result of a long-simmering fight over how best to expand the bitcoin network. One side, led mainly by developers, has favored not making any changes, for now at least. The other side, led mainly by businesses, has been in favor of expanding capacity. This would be done via what’s called a “fork,” a term for a new version of existing software.
Forks can be “soft,” meaning the new version is compatible with the old. Or they can be “hard,” meaning the new version isn’t compatible.
Because bitcoin is an open-source software project, there is no constraint on anyone who wants to take the code, tweak it to their liking and release it publicly.
The problem is that a small group of core developers control the keys to bitcoin’s software, which are needed to make changes. And they are refusing to go along with any alterations. That has spurred various groups to create their own versions of bitcoin, doing so via a hard fork.
In some cases, iterations of bitcoin can lead to a windfall. Typically, each new version of bitcoin incorporates the trading history of the legacy version.
This means that existing bitcoin holders suddenly find their balances recorded in two places: the ledger for the legacy version, and the ledger for the new version.
In essence, this creates new digital coins for a bitcoin holder in addition to their original balance. So even if a new version of bitcoin trades at a fraction of the original, it is the equivalent of found money for bitcoin holders.
https://www.wsj.com/articles/bitcoins-sectarian-battles-heat-up-1508964607?mod=e2tw
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