Cryptocurrency is 2017’s hottest buzzword. The blockchain currency has been making waves all year and now we have a tidal wave on our hands.
A big split in the biggest name in virtual currency has a lot to say about how blockchain technology may change how business works in the future.
You can go your own way
The venerable bitcoin split this Tuesday with the launch of Bitcoin Cash, after a disagreement within the bitcoin community about the technological architecture of the virtual currency. The disagreement escalated to the level of a “hard fork,” a permanent split between the two systems.
Translated to English from Digital Currency Dork, a hard fork is a fundamental change in the protocols used to encode and verify transactions on a blockchain. The change is as basic and permanent as it gets: after it’s made, the people using pre-fork versions of the system will no longer be able to have their transactions verified.
On the surface, this may seem like pure inconvenience: one of the few advantages of printing all your money out on paper and stuffing it in your sock drawer is it rarely requires firmware upgrades.
In this case, however, there’s a serious concern at work.
As bitcoin has grown in popularity, its core infrastructure has begun to struggle to efficiently verify transactions, leading to delays and general inconvenience. The main bitcoin currency’s response is SegWit2x, a two-stage solution involving full implementation of SegWit, a new code optimization for the system, and a timeline for increasing the size of blocks on the chain. Cash, the other tine on the fork, is already increasing the size of their blocks but sticking with the current code.
CoinDesk provides a breakdown of the gritty details here, but which proves to be the working solution, and what effect the fork will have on market values, remains to be seen.
What’s clear, however, is that the event itself matters.
In traditional currencies, management decisions of this kind would be made by experts, typically behind closed doors. Ironically for the iconic instance of constructive digital paranoia, the world’s most famous cryptocurrency is demonstrating a unique feature of peer-to-peer value exchange: transparency.
Brilliant or bizarre
With conventional currency, you don’t know what’s happening to that fat stack in your sock drawer until it’s happened. The bitcoin/Cash hard fork was something the people who possessed the money in question decided among themselves.
That’s new. Whether it’s brilliant or bizarre is a question beyond the scope of this article, but for anyone who intends to do business on the Internet, ever, it’s clearly a question worth asking.