Waching daily Aug 5 2017

Bitcoin Cash is a fresh new cryptocurrency that officially entered cyber markets on August

1st this year.

It came to existence as a resolution of a two-year long dispute over certain bitcoin's

features that arguably limited its growth.

Bitcoin Cash brings most important increase of the block size limit from 1 MB in original

bitcoin to 8 MB in bitcoin cash.

Block is a unit of transactions that are made public in the Bitcoin's network in order

for everyone to check and verify authenticity of ownership, transfer, and acceptance of

bitcoins sent in the network.

All transactions using bitcoin are public to make usage of the cryptocurrency more secure

for everyone.

Blocks supplement the necessity of a central bank to regulate the supply of currency in

the circulation.

Using blocks in cryptocurrency everyone is equally the bank of the blockchain.

To make sure no fraudulent activity takes place when people send bitcoins among each

other, there is a group of people who devote strong computing power to solve difficult

puzzles that help verify blocks of transactions.

This activity is called mining, and miners are being automatically rewarded for each

validated block to increase their incentive to participate voluntarily.

This was initially 50 bitcoins for each verified block and was halved after each 210,000 validated

blocks.

It takes 10 minutes on average to verify a block on Bitcoin.

The smallest half is 10-8 bitcoins per block, which is also the smallest unit of Bitcoin.

This means that in the year 2140, last bitcoin will be mined and there will be no more rewards

for miners.

Fortunately, Bitcoin provides an option to set aside a portion of each bitcoin transaction

as fees that go to the wallets of the miners.

The size of the block is thus crucially important to maintaining trust in Bitcoin, as the validation

process is based on the amount of computing power one can bring to the network, and not

the number of validations.

This system allowed virtually no fees and fast transaction speeds (fractions of conventional

banking).

However, with the rise of transactions, fees were introduced to allow to speed up the mining

process and eliminate slow down or even rejection of transactions.

Both currencies have arguably equal amount of coins in circulation, while the value of

bitcoin cash is a fraction smaller than 20% of bitcoin.

Bitcoin Cash copies bitcoin in cryptocurrency aspects, but operates on different rules that

are focused on faster growth rather than maintaining decentralization.

The overall value of bitcoin cash after the release fluctuated around $7 billion and ranked

as the third or fourth most valuable cryptocurrency in the world.

At the point of the split, both bitcoin and bitcoin cash blockchains were still part of

the same body, which granted one bitcoin cash for every bitcoin users' owned in their

wallets.

After the first block was mined in bitcoin cash, that's when a new cryptocurrency was

born officially, separate and independent of bitcoin.

While bitcoin is marked as BTC on exchange, bitcoin cash is referred to as BCC or BCH.

Despite the use of the word split, launch of the Bitcoin Cash is nowhere near comparable

with a stock split.

Bitcoin Cash is its own blockhain, with unique software and value.

The two cryptocurrencies only share bitcoin's transaction history together.

Everything following noon of August 1st 2017 are two independent stories.

All of this came to existence as original bitcoin cryptocurrency was more and more urgently

becoming to face problems of its design.

As Bitcoin's network grew in numbers, transactions piled up and the 1 MB limit didn't allow

the network to expand fast enough without having considerable effects on the use of

bitcoin.

The 1MB block size limits the number of transactions to 7 per second at most.

While Visa with conventional banking can process up to 56,000 transactions per second with

significantly less computing power.

Confirmation of transactions started to have longer delays and as a result fees began to

rise as bitcoin users tried to jump the waiting queue.

This situation has divided the community of bitcoin users, developers, and miners in half

for two years by now.

Proponents of bitcoin cash suggested fall of bitcoin due to its incapacity to satisfy

growing industry without a software change.

Several crash scenarios were being drawn, signaling that freezes of bitcoin network

and spike in rejected transactions would result in massive exodus of bitcoin users and downfall

of public trust in the cryptocurrency.

Bitcoin Cash was advertised as lifeboat for the sinking bitcoin ship.

The traditionalists, however, maintained that the limit is not a bug, but a security measure

to prevent the network from being hijacked by powerful players, like big companies or

governments in attempt to centralize and regulate it.

It was also intended to prevent validation of fraudulent activities like double spending.

The proposed 8 MB limit was rejected out of fears that it would price out small players,

giving few mining pools more leverage to influence development of bitcoin in their favor.

Such high entry levels to mining could create strong single entities controlling too much

of the Bitcoin's network making it more susceptible to attacks in the process.

The community couldn't find common ground as any proposal would have to gain support

of sizable majority of actors involved in the development of bitcoin.

And that has never happened up until the point of the Bitcoin Cash fork.

When the proposal was finalized, Bitcoin Cash was trading as a future in late July for from

$200 - $400.

This range was maintained after the release and peaked at $700 for a Bitcoin Cash.

As it turned out not enough people are buying bitcoins, and too many of them were eager

to get rid of it, which with simple economics, leads to drop of prices.

Bitcoin cash was rejected by some big exchange forums making it impossible for most owners

of Bitcoin Cash to sell it for other cryptocurrency or even fiat money.

Furthermore, mining blocks of Bitcoin Cash turned out to be painfully slow.

That was due to high difficulty of entry levels to mining and also high opportunity cost for

miners to devote their resources to mining a fresh new cryptocurrency instead of traditional

bitcoin.

The situation with bitcoin cash is extremely volatile at this point.

Prices are now crashing to double digits.

However, Bitcoin Cash might find some luck after all, as it received support from two

major cryptocurrency exchanges that previously rejected it, Coinbase and GDAX.

Speed of mining new blocks also increased to one block every hour as of making of this

video, after Bitcoin Cash reduced mining difficulty.

Things change every minute with advanced cryptography.

Meanwhile, Bitcoin is set to implement their counter-solution to the growing problem by

changing the format of bitcoin transaction using SegWit – Segregated Witness.

This basically means that a block will no longer be counted as 1 million bytes, but

one million units.

Where signature part, the "witness", will be stripped from each transaction, which take

up roughly 60% of transaction size.

Each witness byte will be counted as 0.25 units, which essentially allows increase of

the maximum block size.

Also Bitcoin will increase its block capacity to 2 MB in the next six months.

We are about to see how the effects of SegWit compare to the fate of Bitcoin Cash fork once

activation takes place this August.

The bottom line of these ceasefire is that it perfectly reflects attempts of emerging

groups to gain influence where the money flows.

Both SegWit and Bitcoin Cash fork were realized under close watch and lobby of the biggest

players on the bitcoin market.

No power is going to want to coexistence with a decentralized cryptocurrency with such a

huge value.

There is a lot of politics involved in this science of math.

Every crisis will serve as an opportunity to pursue what's best for their strategy

to gain more.

Bitcoin is a place for face-off among users, miners, developers, start-ups, companies and

even governments.

We haven't such a battleground yet.

Thank you very much for watching.

I hope my efforts helped you understand the current crypto-quagmire that's been going.

If you like my, show your support by clicking the like button, leaving a comment and sharing

the video.

Also subscribe for more analyses like this one in the future.