The Bitcoin split is good for progress: 

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The Bitcoin split is good for progress

Context:

Bitcoin cash, the new alternative cryptocurrency, is crashing

Introduction:

  •  On Tuesday, bitcoin split in two following a years-long battle in the community over the rules that should guide the cryptocurrency’s network
  • The split resulted in the creation of new cryptocurrency, bitcoin cash, which has the same basic underpinnings, but plays by different rules.
  •  The idea behind the ‘hard fork’ to form bitcoin and bitcoin cash is to increase transaction speed and mainstream acceptance of the cryptocurrecny.

About Bitcoins:

  • Bitcoin is a digital currency that isn’t tied to any bank or government.
  • The coins are created by miners, who operate computer farms that verify other user’s transactions by solving complex mathematical puzzles.
  • These miners receive bitcoin in exchange.
  •   It is also possible to exchange bitcoin for US dollars and other currencies.
  • For bitcoin, with a maximum block size of 1 MB (megabyte), it’s just two or three transactions per second.

Uses of Bitcoins:

  •  Bitcoin is used for multiple purposes including funding companies, investing cash and transferring money without fees.
  • It is commonly associated with criminal activity such as drug dealing, cyber crime and money laundering,  
  •  In 2015, RBI published a financial stability report on disruptions in financial technology. In the report, it highlighted the importance of ‘private blockchains’ which have the potential to transform how bank back-end operations functions, as well increasing the payments.
  • The digital currency can be used to move money inexpensively across borders within a matter of minutes without even having a bank account.

Why is bitcoin splitting?

  • The bitcoin community has been divided on how to solve its scaling issue. Currently, only 1 megabyte of transactions can be processed at any one time, leading to delays.
  • Demand for Bitcoin has been so high in recent months that those creating the cryptocurrency can’t keep up, slowing transactions.
  • For bitcoin to continue to scale and have the potential to become a globally used currency, this slowdown in transactions has to be addressed.

Who is supporting Bitcoin Cash?

  • Bitcoin exchanges are divided on whether or not to support Bitcoin Cash. Several exchanges, such as BitMEX, Bitstamp and Coinbase, have said they will not support or allow trading of Bitcoin Cash on their exchanges, which means investors holding bitcoins on these sites will not receive any new tokens.
  • Some exchanges are also suspending bitcoin trading, withdrawal and deposits around the time of the fork.

Issues involved:

  • The bitcoin network is limited in how quickly it can shuffle around digital money
  • Payment delays have become more common and worrisome
  • A bitcoin payment takes an hour to clear.
  • Bitcoin’s slowness also leads to the proliferation of other cryptocurrencies, or altcoins, some of which claim higher processing speed as an advantage
  • Many exchanges are still hesitating whether to trade bitcoin cash.

Key points:

  • Eight crytocurrencies had a market capitalization of more than $1 billion.
  • Bitcoin is still by far the biggest, with a market cap of more than $44 billion, but that’s not much as far as currencies go, especially global ones.
  • Rivals such as ether, with a $ 20 billion market cap, have the potential to catch up.
  • People who kept their cryptocurrency on their hard drives got a choice between bitcoin and the new version, bitcoin cash.
  • Many investors, who held bitcoin through exchanges that didn’t support the “hard fork”, such as Coinbase, were deprived of the choice.

Conclusion:

Bitcoins have potential to fight counterfeiting in developing countries like India, but not if transaction fees are higher than the living wages. So there is need to transfer money quickly from one address to another with bare minimum fees.For bitcoin to become a simple global payment system for anyone to use, it needs to get over its growing pains. The solution to that is to make a whole new currency using similar software.

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