The Bitcoin Split and Boom: All You Need to Know
Since Bitcoin’s inception it has shaken up the economic book significantly, and lately another split in the cryptocurrency could affect the value of hundreds of other digital tokens issued this year, as the worth of bitcoin reaches heights like never before.
Bitcoin’s network is due to endure a significant software upgrade next month to increase transaction speed and reduce costs. But this change could cause disruptions, in a time of uncertainty investors, are choosing to shift funds from other digital currencies into bitcoin instead because it’s a safer bet and offers greater liquidity during such events.
Investors are also hedging their bets and doubling down on bitcoin, confident in the prospect of additional profits from the fork.
It doesn’t hurt that additional coins could also be issued to owners if developers do decide to split the blockchain, i.e., the digitized ledger on which bitcoin is based. This led to the recent creation of bitcoin gold which plunged over 66 percent since it began trading.
With this in mind many companies, like virtual-goods trader Wax are changing the timing of their ICO’s because of the upcoming software change. This hard fork could also cause chaos in online exchange forums like Coinbase, which will halt bitcoin buying and selling for 24 hours before the upgrade.
"Forks are full of uncertainties," said Malcolm CasSelle, president of Wax told Bloomberg Technology. "Many exchanges don’t allow funds to move. That friction means token sales are slowed down."
Miners, whose computers found the network, are on the fence regarding the split, now labeled SegWit2x. A dilemma that could lead to other issues, like slower transaction times.
"These forks are very bad for bitcoin. Saturating the market with different versions of bitcoin is confusing to users, and discredits the claim that there are a limited number of bitcoins — since you can always fork it and double the supply," Sol Lederer, blockchain director at Loomia, said in an emailed statement to CNBC on Tuesday.
Forks have happened before, in July bitcoin underwent a similar transformation that led to bitcoin cash. Which is currently trading at just above $330 after reaching an initial high of $914.45.
Time will tell what happens to the bitcoin when the software is upgraded.
How does Bitcoin work?
For those who don’t know, Bitcoin is a system in which transactions by users are gathered into “blocks” that are then transformed into a complex math solution. “Miners” use high-powered computers which then work the solutions out to see if the transaction is indeed feasible. After an assessment from other miners, the transactions are approved, and everyone is rewarded in bitcoins. One bitcoin is worth close to $6000.
The new fork which created bitcoin gold was a way to expand the network for miners with less high-end tech.
Despite the ruckus this created, many in the industry feel that it’s an equal and healthy part of any cryptocurrency system.
"If a crypto-community has irreconcilable differences, then you can go your separate ways, and that is just fine," Bob Summerwill, leading blockchain developer at SweetBridge, a company creating blockchain solutions, said to CNBC.
Europe is responding to developing countries' proposals on loss and damage payments caused by climate change, but the U.S. has not, and the saga of climate summits continues.