Interesting article by Forbes.
https://forbes.com/sites/laurashin/2017/10/23/will-this-battle-for-the-soul-of-bitcoin-destroy-it/?c=0&s=trending#73a466721362As Bitcoin hit a new record high less than two weeks ago, long-time “hodlers” (an inside joke in crypto based on a typo in a drunken Bitcoin Talk forum message in 2013) celebrated on Twitter and Reddit with jokes about buying Lambos, and a clip from Wayne’s World where the main characters frolic and chant, “We’ve got $5,000! We’ve got $5,000!”
On Saturday, the price surged to yet another all-time high, $6,194.88, according to Coinmarketcap.com, and the market capitalization briefly exceeded $100 billion.
The reasons for the jumps are unclear, but unless there's negative news, every day, at minimum, the price is likely to rise because of new money coming into the system. Every day on Coinbase alone, about 35,000 new accounts open -- a figure that sometimes reaches 50,000 -- and thousands of people in South Korea and Japan, two countries where Bitcoin has taken off, are also bringing new fiat money into the system.
But the market’s rosy outlook is in stark contrast to the prognosis many insiders give to Bitcoin right now: The almost nine-year-old cryptocurrency is facing its gravest test yet. Whether or not it will survive, or in what form, is anyone’s guess.
On or around November 16, Bitcoin, the original cryptocurrency created by a novel technology called blockchain — a masterpiece of game theory, cryptography and, of all things, the age-old ledger — will split into two chains, each with its own set of coins. Hodlers should be happy about suddenly owning double the number of Bitcoins except for the fact that the question of which of these will be called the true Bitcoin is, for now, up in the air — and that could create turmoil in the market. Anyone willing to bet their money by selling one set of coins for another stands to take a financial hit — either because they’ve picked the wrong side, or, for technical reasons, because selling one set may actually cause a sale on both sides of the chain.
To be sure, Bitcoin has undergone such an event before. In August, a group split the chain to create a Bitcoin that they called Bitcoin Cash. The two blockchains shared a transaction history up until the time of the split, giving anyone who held any number of Bitcoins until the so-called hard fork the equivalent number of Bitcoin Cash on the new fork. (A hard fork is a software change that runs the risk of splitting the blockchain into two, particularly if the community disagrees about it. If you follow Ethereum or cryptocurrency, you may have heard that Ethereum split into Ethereum and Ethereum Classic after a contentious hard fork.) However, many people who didn’t support Bitcoin Cash dumped their coins quickly, and, after initially spiking up to $900, the price has now deflated to about $300. But because Bitcoin itself didn’t suffer much from the split, many people believe that hard forks are no big deal. This one is different.
“At the last fork, it was very clear which fork was the minority chain,” says Olaf Carlson-Wee, founder and CEO of Polychain Capital, a $250 million crypto hedge fund. “With this fork, there is a battle over Bitcoin — the name and brand and which chain is the true Bitcoin. And no one is backing down.”
Since it became clear this hard fork would occur, Bitcoin Twitter has been a toxic stew of name-calling, trolling, bullying, blocking and threats, with some altercations spanning months with replies numbering in the hundreds. No tweet or Bitcoin Talk comment made by anyone is too old to dredge up and hold against them, no quote from Satoshi Nakamoto too out of context (or fictional) to be used to bolster one’s argument. The two Bitcoin subreddits — “hard forked” politically and ideologically long ago by censorship — espouse such different views, switching between them is like passing through the looking glass. In one forum, one side of the hard fork will certainly triumph, and the backers of the other side are vilified; in the other subreddit, the opposite chain will come out on top, and the first subreddit’s villains are heroes. Each side is so convinced it will win that a few insiders made a $4 million bet — though, being denominated in Bitcoin, the amount on the line now is $6 million.
How the first cryptocurrency reached this cliffhanger in its journey is a story that has been many years in the making and finally pits against each other what were strange bedfellows anyway: the cypherpunks who, years before Bitcoin even existed, developed the various technologies that finally resulted in the first true digital asset and the Silicon Valley types who popularized the cryptocurrency that now has at least tens of millions of users and a $100 billion market cap. Whether one side will prevail or their death match will destroy Bitcoin is anyone’s guess.
What Are They Fighting About?
At its most basic level, the question that divides the community is a seemingly trivial one: how to upgrade the network to accommodate more transactions at any given time. It has produced a contentious divide because the various ways to go about it all result in tradeoffs — and which compromises the different sides are willing to make reflect deep philosophical differences. Throw in accusations of censorship, racism, hypocrisy, corporate takeovers and deal-making behind closed doors, and the three-year-long battle has become a geek’s version of a soap opera — if soap operas were mostly about and watched by men.
Bitcoin transactions are grouped into blocks that get processed every 10 minutes. The amount of data that can be included in any given block is limited to 1MB — an arbitrary cap instituted early on to prevent spam on the network. However, transaction volume has been growing, making blocks full, pushing up transaction fees as people compete to ensure that their transaction makes it into the next block or one soon after. While everyone agrees the number of transactions that can be processed at any given time needs to be increased, there is no consensus around how.
If you’re newer to Bitcoin (like if you came here because of Scott Disick’s tweets or you’re a Wall Streeter newly interested in Bitcoin), you can think of the two most-discussed ways to increase the network capacity as two different proposals for enabling more stuff to fit in a house. One side says: Let’s organize the items in it more efficiently. Not every single thing in this house needs to be here. We can put some of it outside in the shed and better organize the objects that need to remain inside. (For future reference, in Bitcoin terms, this proposal is called SegWit.) The other side says: Let’s just make the house bigger. (This solution has gone by different names in the past depending on the size of the increase being suggested, but broadly, it’s known as bigger blocks, and is now most commonly denominated by the block size currently on the table: 2MB or 2x.) Both sides agree that eventually they need to build other, more technically challenging solutions, such as enabling people that want to use the house to whip up and close down temporary shelters for less important items but putting the most important ones in the house. (These are called second-layer or layer 2 solutions, with Lightning Network being one example, that use the Bitcoin blockchain as a settlement layer for transactions.) But these other solutions are a few years off.
Edit: against my better judgement, I edited the post. For full article, click on the link.
