Toms Blog

Where I talk about Bitcoin Cash and more

Fundamentals of BTC and BCH

2017-11-09 bitcoin bitcoin cash

In a surprise move yesterday the BitPay CEO Stephen Pair blogged and urged the miners to cancel the hardfork scheduled to happen for the Bitcoin SegWit chain. A large group of miners agreed and we will likely not see 2MB blocks on the Bitcoin-Segwit chain.

This is almost 3 months after SegWit was activated in what was promised to be a trade between different groups of stakeholders.

The problem that was attempted to be solved was one of growth. One group was certain SegWit would be able to solve the problem of growth, the other was certain that bigger blocks would support the growing userbase. As it turns out, the SegWit authors got what they wanted, but then turned around and rejected that they needed to reciprocate and allow the block size increase.

After 3 months of actual usage of SegWit we know that it didn’t in actual fact solve any scaling issues. The waiting queues continue to be long and we can only guess how many people and investors left because the coin isn’t growing. The observable facts are that nobody wants to use SegWit and even if they did we have seen practically no gain for scalability.

What is most worrying is that the rejection of a block-size increase leaves the Bitcoin-SegWit chain in a situation where there is no hope of actual scaling. Ever. It is true that some people suggest that the Lighting Network would solve all our problems, but those same people said that about SegWit too. The creators of the LN say it will be another 18 months at least before LN can be tested on real users, a little too much faith is needed to accept their opinion. Especially since they have shown how wrong they were just recently with their opinions on SegWit.

Where SegWit failed to provide any scale now or in the future, the alternative option that was always on the table is to increase the block size. The Bitcoin Cash chain (BCH) not only implemented bigger blocks, but very successfully used it. There was a long list of 8MB blocks, a feat considered impossible by noteworthy people like the CTO of Blockstream. Yet it was done. Not once, but many times.

Where the Bitcoin-SegWit chain is stuck and will likely never scale, we see the Bitcoin Cash chain actually have shown it can scale. From public statements we also know that they actively want to scale up to many more people using it like it were Cash.

If I may refer to some of my own research; “A roadmap for scaling Bitcoin Cash”, it becomes clear that when we consider on-boarding the next billion people onto CryptoCurrencies as the primary driver of success, then Bitcoin Cash has a very promising future where we expect the next billion people to start using it in the next 5 to 10 years.

This roadmap is specifically rejected by Bitcoin-SegWit, there is no coherent alternate solution for scaling at all for that chain. It should be clear that while it is the highest priced coin, the one with the most hashpower behind it, a coin that rejected its only growth option has no long term viability. I expect the miners to pull more and more of their hashpower from the Bitcoin-SegWit chain as this reality sets in.

This is a post about the fundamentals of the two coins. How you use that for trading and allocating your holdings is completely up to you. This is not investment advice.