FORK OFF

All through 2017, the Bitcoin community was pulling in opposing directions. The scaling wars, as they came to be known, were messy, protracted, and drove a permanent wedge through the once tight-knit community. The greatest symbol of this divide arrived in August 2017, when the Bitcoin chain was hard forked and the Big Blockers went their own way by supporting the new Bitcoin Cash network.

The Big Blockers broadly wanted to scale Bitcoin by increasing the maximum block size, allowing the network to process more transactions and making it suitable for payments. The Small Blockers preferred to keep blocks smaller, relying instead on innovations such as SegWit to squeeze more transactions into each block.

One reason why some Small Blockers favoured this approach is because they didn’t see the value in trying to make Bitcoin a payment network: they believed the best use case for bitcoin was to HODL it as a store of value. They also thought that the Big Blockers’ approach would increase centralisation by raising the costs of running a full node, pricing out ordinary users. In turn, Big Blockers were suspicious of the Blockstream-supported SegWit, which they saw as a covert attempt to get more people to use the “centralised” Lightning Network.

There was no easy way to reconcile these opposing goals, and so it’s not surprising that a chain split ultimately occurred. For the first half of 2017, though, it was by no means certain that this outcome would manifest, as horse-trading among Bitcoin’s power-brokers – major mining pools, exchanges, and investors – attempted to reach a compromise.

In May, it was believed that such a deal had been struck in the form of the New York Agreement. The event saw executives from 58 prominent cryptocurrency companies and representatives from major mining pools controlling over 80% of the Bitcoin network's hashrate meet behind closed doors in New York City. The outcome of the meeting was a solution intended to appease both factions. Firstly, miners and companies would signal for and activate SegWit, as demanded by the Small Blockers. Then, within six months of SegWit's activation, the signatories would execute a hard fork to increase the base block size to 2 MB, appeasing the Big Blockers.

Despite seemingly satisfying both camps, the New York Agreement ultimately failed, with Bitcoin’s grassroots community viewing the deal as an illegitimate attempt at a “corporate takeover.” And so, as August loomed, when SegWit had been scheduled to activate, the prospects of a chain split were upgraded from possible to probable.

A New Bitcoin Is Born

From the ashes of the NYA came another abbreviation that was to spawn the creation of Bitcoin Cash: UASF. The User-Activated Soft Fork was a leftfield proposal for the Bitcoin network to reject all blocks that didn’t signal support for SegWit transactions on August 1, 2017. This Bitcoin Improvement Proposal, submitted by a single developer, rapidly found favour with a majority of miners and node operators, who signalled support for the UASF just days before the deadline.

This community-spawned initiative had succeeded where the New York summit had failed. As a result, the Small Blockers had effectively won the war: Bitcoin was getting SegWit. If the Big Blockers didn’t like the game, they could take their ball and go elsewhere. Which is exactly what they did.

On August 1, the Bitcoin network underwent a hard fork following block 478,558. The Bitcoin network rejected any block larger than 1MB, whereas the new Bitcoin Cash network – which effectively held a shared history with Bitcoin up until that point – did not. The two networks would now pull in opposing directions, leaving the Small Blockers to implement SegWit on Bitcoin and the Big Blockers to proceed with increasing the block size on Bitcoin Cash.

The first block on the new Bitcoin Cash network – sized at 1.9 MB – was mined by the ViaBTC mining pool, a key supporter of the big block initiative. The schism was complete and a new cryptocurrency, sharing a history with Bitcoin but a different vision for the future, was born. For Bitcoin Cash, however, this was to prove the apotheosis. From this auspicious start, things rapidly went downhill, causing the forked chain to be forked and forked again.

“I believe the fork strengthened Bitcoin and led to a massive increase in the price of BTC because people gained confidence that the “bad actors” were defeated, opines Tone Vays. “It proved that a dedicated small group looking out for Bitcoin's protocol and decentralization would win against the majority of businesses focused on profit.”