Guide to Bitcoin Forks: Bitcoin Gold, Bitcoin Cash, Bitcoin SV
Being the first cryptocurrency on the market, BTC is a role model for the rest of the altcoins, and no wonder Bitcoin has the most number of forks in the industry. Some of the splits are rooted in the global top chart in terms of market capitalization, while others are faded in the oblivion. We are going to inspect the well-known Bitcoin forks and tell you why new chains appear.
Hard Fork vs Soft Fork
There are several types of forks possible in the decentralized space. The most common ones are hard forks and soft forks.
A soft fork is an upgrade of the software required for the network. It can be applied once most of the participants of the network agree to do so. The changes are backward compatible which means those nodes that haven’t updated cryptocurrency protocol’s software are still capable of processing transactions and adding new blocks to the blockchain as long as they follow the updated set of rules.
A hard fork is a mandatory update that brings significant changes to the blockchain’s protocol. Those nodes which are not willing to update to the latest version have to leave the network as they cannot perform the same actions to maintain the blockchain at their full. Most of the time, those participants of the network who disagree with upcoming updates unite to create another blockchain.
Bitcoin met both types of forks in its development. In 2017, the soft fork Segwit was proposed to increase the amount of the transactions while decreasing transaction fees and the time of confirmation. This was an essential update that required many resources as well as approval of 95% BTC miners. However, some miners did not like the idea of Segwit as according to the new updates the transaction fees would be lower, and so would be miner’s income.
To resolve the issue, the Bitcoin Improvement Proposal (BIP) 148 soft fork was activated by users to motivate miners to approve Segwit. According to BIP 148, BTC’s full nodes should have rejected any blocks that were created without a Segwit update. Such a crucial proposal had to encourage miners to agree on Segwit. There were fears that most miners could refuse the BIP 148 proposal and the chain split would occur.
The giant mining company, Bitmain, introduced plan B: User Activated Hard Fork (UAHF). The hard fork would provide a suitable environment for those who didn’t want to follow BIP 148 and Segwit. A new Bitcoin ABC (Adjustable Blocksize Cap) was introduced at the ‘Future of Bitcoin’ conference in 2017. Just a little bit later, a Bitcoin Cash blockchain was born. But before the crypto industry met BCH, there were other Bitcoin hard forks.
Scalability has always been the core problem for most of the blockchains. In 2014, a former Google engineer and Bitcoin Core contributor, Mike Hearn, introduced ideas that could resolve the issue. To process more transactions and avoid any bottlenecks on the network, he proposed to increase the size of blocks from 1MB to 8MB.
In August 2015, Bitcoin XT was officially released and attracted lots of attention and support from the community side. The fork was supposed to be fully activated once there would be approval from 75% miners. More than 1,000 nodes agreed to support the fork, but the 75% threshold was never reached. However, in August 2017, Bitcoin XT got support from another BTC hard fork, Bitcoin Cash. Eventually, Bitcoin XT became a BCH client by default.
Bitcoin Classic was another Bitcoin Core fork that tried to resolve the BTC scalability issue. In 2016, developers behind the Bitcoin Classic platforms proposed less aggressive changes to the block size. The hard fork had support from blockchain giants like Coinbase, Gavin Andresen, Roger Ver, and many others.
Bitcoin Classic also wanted to increase the block size limit from 1MB to 2MB but failed at attracting the critical mass of active nodes.
To gain the necessary number of miners, Bitcoin Classic offered an initiative that allowed miners to set their own block size. The same logic was later applied to Bitcoin Unlimited, but it also faced obstacles. In 2017, Bitcoin Classic ceased all operations.
Bitcoin Unlimited (BU)
Following the ideas of precursors, Bitcoin Unlimited aimed to increase the block size, but this time there were no limits on it. Being the hard fork of Bitcoin Core, BU wanted the community to reach the consensus on the block size limit. The idea also had the support from crypto influencers and mining pools, yet it failed in execution.
The fact that an independent decentralized space could be invaded by the miners with greater computational power, pushed away many users. As there was not any determined size limit, miners with more powerful mining rigs could set a greater block size and process more transactions, while smaller miners wouldn’t have a chance to do the same thing.
Bitcoin Gold (BTG)
Unlike the aforementioned forks, Bitcoin Gold is a hard fork from the original Bitcoin network. Pursuing the idea of ‘more decentralization to the decentralized land’, Bitcoin Gold split from the original ledger on October 24, 2017, at block number 491407. Just like other BTC hard forks, BTG has the same maximum supply of coins as Bitcoin – 21,000,000 BTG.
When forking from the main chain, a new blockchain distributes coins to attract new users to the ecosystem. According to the BTG white paper, users that had held BTC on the cryptocurrency exchanges received the same amount of BTG.
BTC utilizes the proof-of-work (PoW) consensus algorithm and allows for ASIC mining. The team behind BTG claims that miners with more powerful rigs and higher hash rates make BTC blockchain more centralized as the power is focused in the hands of giant pools. In July 2018, BTG switched the PoW mining algorithm to the one developed by ZCash. With some adapting features proceeded to the algorithm, BTG’s new consensus protocol was named Equihash BTG.
Ironically, BTG suffered from the 51% attack twice in 2018 when hackers stole BTG worth $17M and at the beginning of 2020.
Bitcoin Cash (BCH)
As mentioned above, Bitcoin Cash was conceived to save miners’ privileges like transaction fees, and so on. The blockchain does not have the Segwit feature, while the size of blocks is 8MB. Due to the bigger block size, the BCH blockchain handles up to 116 transactions per second. BCH has finally completed the work of BTC XT and BTC Classic forks.
The Bitcoin Cash blockchain aims to be a peer-to-peer (P2P) electronic cash for the Internet and is considered to be one of the most successful Bitcoin forks so far. BCH forked from BTC on August 1, 2017, at block number 478558. Since then, the Bitcoin Cash blockchain has experienced its own hard forks and, unlike other BTC splits, could gain success.
The crypto industry’s conflicts sometimes remind the twisted plot of a reality show. Bitcoin SV stands for Bitcoin Satoshi Vision and this is a hard fork of the hard fork, excuse the tautology.
In November 2018, the Bitcoin Cash community divided into two opposing factions, and the so-called ‘hash war’ was started.
The first party led by ‘The Bitcoin Jesus’ Roger Ver and Bitmain co-founder, Jihan Wu, followed the idea that the block size limit should have been increased up to 32MB. The BCH was conceived on the Bitcoin ABC ground.
The second party was headed by ‘I am a real Satoshi Nakamoto’, Craig Wright. The community claimed to increase the size of blocks to 128MB. This war has seen many dirty tricks and tactics and in the end, it resulted in two different blockchains – Bitcoin ABC (Bitcoin Cash) and Bitcoin SV.
The look of the heatmap is quite touching as two forks of the same ‘parental’ ledger are standing right next to each other. The war is definitely not over and who knows what crucial changes it will bring in the future.
Will Bitcoin meet a hard fork in 2020? There are no planned hard forks at the time of writing. Blockchain developers and active participants of the network are continuously seeking ways to enhance and to upgrade Satoshi Nakamoto’s legacy. Once there is no consensus on the new changes, a hard fork appears.
In an attempt to bring vital updates to the Bitcoin platform, many forks are history now but some of them have deserved success and community’s respect. There will be more Bitcoin hard forks for sure as they are a significant part of the never-ending development process. And we are ready to welcome them all.
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