Bitcoin split into two currencies: how it happened

There was a split in the bitcoin community. A small group of developers separated and created a new Bitcoin Cash crypto currency. The reason for this spin-off was the ideological dispute about how to speed up the system. The split could lead to a chaos in the industry of more than $ 40 billion.
In the past few weeks, the bitcoin exchange rate has fluctuated significantly. June 11, the value of the crypto currency reached a maximum of 3019 dollars for 1 bitcoin. A few days later, the exchange rate fell to $ 2,457, and by mid-July it dropped to $ 1,939. Then again there was a rebound to the level of 2700-2800 dollars.
All this happened against the backdrop of fierce disputes about how to speed up the work of the bitcoin payment system, which has become bigger, more expensive and slower .
As a result, a small fraction of developers of crypto currency has separated, creating a new bitcoin. While this group of "rebels" did not get serious support, but many in the community have not yet decided on who to go to now, so everything can change.
How bitcoin works
Bitcoin is a fully virtual currency. It can be paid for goods and services, but there are relatively few places where bitcoins are being taken. To start using it, you need to install a bitcoin-purse on your computer or mobile phone. You can also create a web-based version of the wallet on sites where bitcoins are accepted.
Crypto currency can be bought for ordinary money on stock exchanges or from other users.
The new bitcoins are brought to the market as a result of so-called mining: this is the process of calculating a complex mathematical problem.
A few years ago, when the crypto currency was just gaining popularity, an ordinary user could engage in mining and create bitcoins. Now this process requires a lot of energy and computer power, so the pools began to form - large communities of miners.
Miners receive new "coins" as a reward for ensuring the work of bitcoin.
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The system is arranged in such a way that each operation requires confirmation, otherwise the scammers could sell counterfeit bitcoins. As soon as a transaction occurs, information about it "runs through" the entire system and is confirmed by the miners.
If the transaction is confirmed, information about it is added to the chain of blocks (block). You can imagine the blockade as a log of the operations performed. It contains information about who, to whom, when and how much he paid. Now the size of the bitcoin is about 126 gigabytes.
Everyone has a copy of the magazine. This ensures decentralized system - the transaction will not be approved until all miners check it. That's why the information in the magazine can not be faked - it is stored on many computers. Thus, bitcoin is not under the control of any one organization (as, for example, the Central Bank in the case of the traditional monetary system).
What is the essence of the conflict?
Now one block is added to the blockroom every 10 minutes. The block size can be no more than one megabyte. This restriction was introduced to protect the system from DDoS attacks. It is because of this restriction that there has been a split.
When the popularity of bitcoin increased, the number of transactions increased, and the speed of processing them, on the contrary, decreased.
In May 2017, the situation worsened dramatically. Some users complained that they had to wait a few days to confirm payments.
To speed up the operation, the user can increase the commission for its confirmation - the miners are faster processing transactions with a high commission.
But this makes bitcoin unprofitable for small payments. In such circumstances it makes no sense to use this currency, for example, in cafes and bars.
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In the community of bitcoin users, two ways of solving the problem have been discussed for a long time: to remove the restriction in 1 MB or to store a part of the information outside of the blockade.
What do the miners offer?
For the abolition of the limit of 1 MB are many miners. They say that such a step will allow to "unload" the system and reduce the commission for operations (the volumes of operations will increase, and the miners will still benefit). This method of solving the problem is called Bitcoin Unlimited.
Part of the community - mostly developers - is against this decision. Withdrawing the limit will result in more and more capacity being required to confirm transactions.
As a result, many small miners will leave the business, and the system will be under the control of large organizations, developers fear. And this contradicts the very idea of ​​bitcoin as a decentralized crypto currency.
What the developers offer
Opponents of Bitcoin Unlimited offer another way. They believe that some of the information stored in the blockroom can be safely transferred outside the chain of blocks and stored in separate files. As a result, a lot of space will be freed up, and the speed of operations will be increased.
This method of solving the problem is called Segregated Witness or SegWit. Supporters of Bitcoin Unlimited believe that SegWit is just a temporary and more complex solution. In addition, the decrease in the volume of information processed by miners will reduce their impact on the market.
More recently, these two camps have come to a compromise. They developed a common solution - SegWit2x.
Some of the information will still be stored outside the block, as the developers wanted. The ministers also managed to partially defend their agenda. The limit for adding new data will not be removed altogether, but will be increased to 2 MB over the next 3 months.
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Bitcoin Cash
SegWit2x supported 95% of the miners, and everyone had already decided that the separation of bitcoin into two competing currencies was avoided.
However, later a group of insiders led by ex-Facebook engineer Amory Szochet announced the launch of Bitcoin Cash crypto currency. This is almost the same as bitcoin, but the limit for adding data is increased to 8 MB.
Supporters of Bitcoin Cash do not believe that within the SegWit2x limit on the addition of new data will increase, so they decided to create their own version of the crypto currency.
What will change
Depending on what part of the community will support Bitcoin Cash, the impact of the new crypto currency on the cost of traditional bitcoin will be determined. Especially important is the support of miners.
If Bitcoin Cash has a future, then for miners it is a good chance to earn - whoever joins the new crypto currency will get more profit due to the increase in the cost of Bitcoin Cash.
Most experts agree that the impact of Bitcoin Cash will not be very large. But it is possible that the course of the traditional bitcoin will fluctuate greatly in the near future. On August 1, the rate was about 2900 dollars. This figure fell below the $ 2,700 mark shortly after the launch of Bitcoin Cash.
Futures on Bitcoin Cash before the start were traded at $ 300. The value of the new currency will clear up when it begins to trade industry exchanges.
Undoubtedly, the instability of bitcoin does not in any way mean that the whole of the crypto currency is threatened. Even with a negative scenario, bitcoin can only lose popularity, and its place will be taken by some of the competitive crypto-currencies - for example, Ethereum.