We have all heard about bitcoin, the cryptocurrency is now worth more than the value of gold. Bitcoin has a long history, riddled with network scaling issues, and though several solutions had been presented, none were put into place until SegWit2x was recently accepted.
Why the scaling debate?
Bitcoin is notorious for long block confirmation times. When it takes six confirmations to publish a transaction to the ledger, that may not sound long at all, but it can take 30 minutes or more, depending on network traffic. This slowness is offset by paying higher transaction fees, but higher fees incentivize miners to publish partially full blocks for increased profit.
Bitcoin is nearing a scaling solution but has not reached one quite yet. As we approach the end of August, we will see if SegWit2x will meet the blocksize expansion criteria and be activated or not.
What is Bitcoin Cash (BCH)?
Bitcoin Cash is a second Bitcoin Network scaling option that will be launching alongside SegWit on August 1st. According to CoinDesk, the Bitcoin Cash project is led by Bitcoin ABC, in which the ABC stands for “Adjustable Blocksize Cap”. Blocksize limits govern how much information can be included in one link of the blockchain, and small blocks on the bitcoin network have led to the scaling debate today.
While BCC enables adjustable block size limits, it also sets the default limit to 8Mb, more than twice the size of current bitcoin blocks.
Bitcoin Cash is a hard-fork and will split the Bitcoin Network into two new networks, resulting in two unique coins.
What is SegWit2x?
SegWit2x is the scaling solution proposed by the Bitcoin Core team. SegWit2x will allow for slightly larger block size limits (2Mb), while also allowing the Bitcoin Network to adopt the Lightning Protocol.
Lightning is such an important step in this respect because it simplifies transactions and enables users to carry out multiple payments from within one payment channel, publishing only the total difference in bitcoin for all transactions within the channel to the main chain.
Segregated Witness 2x (SegWit2x) is a network user activated soft fork (UASF) that will not split the chain or create a new token. The 2x is simply a reference to a larger block size change to the bitcoin protocol.
How will the fork affect users?
The Bitcoin Cash fork will not affect the number of BTC in existence, rather it will create new BCC equal to the number of BTC in any given wallet. While this could show significant profits for a number of traders, it is also possible that BTC, BCH, or both could lose value after the fork. In the meantime, users should move their BTC to non-exchange accounts, as many exchanges have elected not to support BCH, and may not be able to provide users with BCC as such.
How can users protect their investments?
Users who own the private key to their wallets will receive BCH tokens equal to the number of BTC they own. Many exchanges, however, hold the private keys to their exchange wallets and thus control how funds are handled. Seeing that many exchanges have already decided against supporting BCH, users can secure their coins by moving them to a wallet they hold the keys for.
Some parties such as ViaBTC are neutral in the debate, but many others may refuse to accept BCC.