The Bitcoin Cash Conundrum: Is The Newly-Minted Altcoin A Band-Aid Fix To A Deeper Problem?
Southeast Asian start-ups are having mixed reactions about the new crypto on the block
PHOTO CREDIT: Getty Images
Market movements following last week’s official Bitcoin breakup have been interesting, to say the least.
Bitcoin (BTC) hit its highest trading price to date, climbing beyond the $3,300 level for the first time last August 6, and pushed past $50 billion in collective market capitalization. Ethereum regained the traction it lost following its June 13 high of $391.51. And Bitcoin Cash (BCC), which came out among the top three cryptocurrencies within a day of entering the marketplace, had a very dramatic first week of trading: it plunged 30 percent from pricing above $700 last Wednesday, before crashing below $300 on Friday. As of press time, the new crypto on the block is at the fourth spot, trading behind Ripple.
Whether the Bitcoin split is good for the industry remains to be seen. For its part, the camp in favor of splitting into BCC did so for arguably rational reasons: increasing the block size from 1MB to 8MB means an eight-fold increase in the number of transactions within a block, thereby addressing bottleneck issues plaguing the Bitcoin blockchain in recent years.
John Bailon, co-founder and CEO of Satoshi Citadel Industries, shares that while he would rather the two factions just get along, ultimately the fork is a good thing. “The fork separates two competing ideas into their own chains, and time will tell which one is better. Competition is always good for hammering out the best ideas and executions,” says Bailon, whose fintech start-up is helping build out the blockchain ecosystem in the Philippines.
Neeraj Murarka, co-founder and CTO of Bluzelle, a blockchain company based in Singapore, sings a different tune. Murarka sees BCC as a temporary stopper to a deeper, architectural problem. “History has shown that technology is generally created with the best of intentions. When BTC was created 1MB seemed more than enough. Today, 8MB seems enough. Yet general human population usage of Bitcoin as a technology is insignificant. If and when Bitcoin was to gain even a slight increase in general population usage, the 8MB limit will quickly become the new bottleneck. The problem BCC is solving is therefore not really solved, just postponed,” he says.
What should have been done, furthers Murarka, is an architectural design change where the limit would grow in tandem with needs. “This would have been a far more radical change than the one BCC made. It would also be sustainable and supports the ‘mass adoption’ needed for Bitcoin to really disrupt Fintech,” he says, adding the two camps should have taken longer and come to a compromise. “The existing BTC should have been extended in a way that kept everyone happy, and where existing BTC was properly re-architected to be sustainable,” he says.
A polarized mining community may also decrease the overall health of the cryptocurrency, and goes against the decentralized safety built into Bitcoin. “Now that miners have to choose which bitcoin to mine on their limited hardware, each bitcoin suffers as they are now competing for the same mining hardware resources. More mining and versatile mining is good for the health of bitcoin—splitting this up can have a negative impact on overall bitcoin health,” Murarka points out.
With the Bitcoin community already dealing with fear, uncertainty, and doubt from non-experts curious about cryptocurrencies, Murarka says the split could further fan the doubts of certain groups who would otherwise be seriously considering the leap into using Bitcoin in their businesses. “Now there are two similarly named currencies that seem to do about the same thing, yet are different. And these differences are subtle and difficult for non-experts to comprehend. The lack of harmony between the two camps gives a negative impression to onlookers who may now perceive the Bitcoin currency itself to be politically unstable from within,” he shares.
As of press time, it seems that as far as results go, investors are rallying behind the original bitcoin more than BCC. Bailon, who had initially braced for a dip in Bitcoin after the fork, was relieved when the opposite happened: the original cryptocurrency hit its highest milestone yet at over $3,300. “It looks like the market is reacting positively. On a more technical or practical view, Bitcoin fees are cheap again so it’s a great thing especially for our business and similar businesses,” says Bailon.