On November 15 bitcoin cash (BCH), itself only a year-old offshoot of bitcoin (BTC)<\/a>, fragmented into two new chains: BCH ABC and BCH SV.<\/p>\n The acrimonious split in bitcoin cash helped trigger a week-long downdraft in cryptocurrency prices.<\/p>\n At 06.30 GMT on November 21, 7-day declines in cryptocurrencies\u2019 US dollar exchange rates ranged from -29% (EOS) to -31% (BTC), -36% (LTC), -37% (ETH), -40% (BCH SV) and -54% (BCH ABC). These price drops brought a savage, nearly year-old bear market to new lows.<\/p>\n At a headline level, the latest fork is a continuation of last year\u2019s battle over the ability of bitcoin to function as a payments network.<\/p>\n When splintering BCH from BTC last year, the supporters of bitcoin cash promoted an increase in the cryptocurrency\u2019s block size from one megabyte (MB), a limit set by Satoshi Nakamoto in 2010<\/a>, to eight MB.<\/p>\n Increasing the block size allows the storage of more transaction data, reducing transaction fees and making BCH more suitable as a means of payment.<\/p>\n However, a policy of block size inflation threatens the long-term decentralisation of the bitcoin network. As a result, the bitcoin chain with the highest market value (BTC) has stuck with Satoshi Nakamoto\u2019s one MB block limit.<\/p>\n Bitcoin cash\u2019s latest fork involves a further inflation of block sizes: to 32MB (in BCH ABC) and 128MB (in BCH SV), as well as other, more technical modifications to each network.<\/p>\n \u201cIt was nice knowing you\u201d<\/p><\/blockquote>\n But, perhaps most damaging for cryptocurrency market sentiment, the fork has also involved a very public airing of dirty laundry by two of the most outspoken and controversial figures in the bitcoin community.<\/p>\n The most prominent public supporter of the BCH ABC camp, Roger Ver<\/a>, is an early investor in bitcoin and bitcoin start-ups, the owner of the bitcoin.com website, a multimillionaire and a former convict (Ver was sentenced to jail in the US in 2002 for selling explosives on eBay without a licence).<\/p>\n In the fight over the future of bitcoin cash, Ver had the backing of Jihan Wu, the co-founder of prominent cryptocurrency miner and hardware manufacturer Bitmain.<\/p>\n The BCH SV (\u2018Satoshi\u2019s Vision\u2019) camp is led by Craig Wright, who achieved notoriety in 2016 after claiming to be the inventor of bitcoin, Satoshi Nakamoto<\/a>. After hoodwinking some of the audience<\/a>, Wright failed to provide the cryptographic proof he had promised.<\/p>\n According to journalist Andrew O\u2019Hagan, writing in the London Review of Books<\/em> in 2016, Wright is also a fugitive from the Australian tax authorities.<\/p>\n In the bitcoin cash fork, Wright was backed by Calvin Ayre<\/a>, an online gambling billionaire, convicted criminal and citizen of Antigua and Barbuda, where he advises the government on cryptocurrencies.<\/p>\n During the weeks preceding the BCH split, Ver and Wright traded insults, with Wright claiming he could sabotage Ver\u2019s network.<\/p>\n \u201cIt was nice knowing you,\u201d Wright told Ver in an email<\/a>. \u201cBitcoin will die before ABC shits on it.\u201d<\/p>\n Ticker war and mining tricks<\/strong><\/p>\n Some cryptocurrency market participants have already moved to anoint one half of the split as the rightful heir to the bitcoin cash name and network.<\/p>\n For example, cryptocurrency exchanges Kraken and Huobi both decided this week to award the BCH ticker to the ABC fork<\/a>. They renamed BCH SV as BSV on their trading platforms, downplaying the new chain\u2019s past association with bitcoin cash.<\/p>\n And Swiss cryptocurrency asset manager Amun, whose exchange-traded product (ETP) launch has coincided with the fork, has decided to track an index that includes only the ABC branch<\/a> of bitcoin cash.<\/p>\n \u201cWhat really mattered in the bitcoin cash fork was the exercise of soft power to convince exchanges to list either of BCH ABC or BCH SV as BCH,\u201d Nic Carter, partner at Castle Island Ventures, told New Money Review<\/em>.<\/p>\n \u201cIt looks like ABC won the \u2018rights\u2019 to the ticker. This is unsurprising as they had the most community and corporate backing within the BCH network,\u201d said Carter.<\/p>\n According to Carter, some of the cryptocurrency miners backing the traditional bitcoin (BTC) network have also influenced the outcome of the BCH network split, often in a less-than-transparent way.<\/p>\n \u201cMining pool operators are totally unaccountable\u201d<\/p><\/blockquote>\n \u201cWe saw lots of BTC hash power being redirected to BCH, at times without the permission of the allocators,\u201d said Carter.<\/p>\n Since the beginning of November the BTC hashrate has fallen from 60 exahashes per second to around 40 exahashes, the first significant decline in a year (an exahash is a billion billion hashes). The number of hashes reflects the processing power devoted by bitcoin miners to the network.<\/p>\n However, the bitcoin network hash rate is still four times higher than a year ago, despite the ongoing bear market in cryptocurrency prices.<\/p>\n Bitcoin hash rate<\/em><\/p>\n \u00a0 Source: Blockchain.info<\/em><\/p>\n Carter sees the apparent recent diversion of BTC mining activity to BCH as symptomatic of a broader governance problem.<\/p>\n \u201cMining pool operators are totally unaccountable, and happy to exploit the power that they have for political objectives. This is questionable at best. The cowboy industry of mining pool operation definitely deserves more scrutiny, and this should raise support for initiatives like BetterHash,\u201d he said.<\/p>\n BetterHash aims to decentralise bitcoin mining by removing the undue influence of some operators with \u2018pools\u2019 of computers under their control.<\/p>\n And, says Carter, the apparent winners of the bitcoin cash battle\u2014those promoting BCH ABC\u2014had to compromise significantly on the key selling point of bitcoin, decentralisation, to achieve their political objectives.<\/p>\n \u201cI think this was a pyrrhic victory for BCH ABC,\u201d Carter told New Money Review<\/em>.<\/p>\n \u201cThey fully recentralised the chain by instituting a check-pointing scheme, so that reorganisations weren’t possible. They clearly abandoned a lot of the premises that had underscored the initial BCH split from BTC.\u201d<\/p>\n A checkpoint, achieved by a manual alteration to a cryptocurrency’s code<\/a>, helps prevent a network against an attack: it stops a potential adversary from mining coins in secret and then disclosing a new \u2018longest-chain\u2019 history, effectively taking over the network.<\/p>\n Questions over cryptocurrency governance<\/strong><\/p>\n Last week\u2019s events have triggered a renewed bout of soul-searching over cryptocurrency governance.<\/p>\n For some, the much-vaunted decentralisation of bitcoin is a myth.<\/p>\n \u201cIf these dudes have too much weed the whole thing could fall over\u201d<\/p><\/blockquote>\n \u201cBitcoin is always labelled as decentralised and distributed,\u201d said Ruth Wandh\u00f6fer, head of industry and regulatory affairs at Coinfirm, speaking last week in London<\/a>. Wandh\u00f6fer was formerly global head of regulatory and market strategy at US bank Citi.<\/p>\n \u201cBitcoin is distributed in terms of the number of computers around the world running the protocol,\u201d said Wandh\u00f6fer.<\/p>\n \u201cBut there are only a few people centrally managing the code. It lacks governance. If these dudes have too much weed at the weekend something could go wrong with the code. The whole thing could fall over at any time.\u201d<\/p>\n \u201cBy contrast, centralised networks that do have governance\u2014like SWIFT, a central bank or a financial market infrastructure\u2014work very well,\u201d said Wandh\u00f6fer.<\/p>\n In September, a software flaw that would have allowed the expansion of bitcoin\u2019s 21 million coin supply limit was unearthed and then quietly fixed<\/a> before being disclosed to the wider network.<\/p>\n Others insist that cryptocurrencies represent a new form of socioeconomic collaboration, with its own evolving ruleset.<\/p>\n \u201cBitcoin is not a democracy, but it\u2019s not an autocracy either\u201d<\/p><\/blockquote>\n \u201cI\u2019m not sure that this kind of governance has ever existed,\u201d Obi Nwosu, chief executive of cryptocurrency exchange Coinfloor, told New Money Revi<\/em>ew.<\/p>\n \u201cBitcoin is not a democracy, but it\u2019s not an autocracy either,\u201d said Nwosu.<\/p>\n Nwosu said that, to succeed, individual cryptocurrencies will need to maintain the support of different interest groups.<\/p>\n \u201cThe effort to create a fork is trivial,\u201d said Nwosu, \u201cwhereas the effort to support one\u2014amongst developers, miners, merchants, users and exchanges\u2014is not. Those five categories will decide collectively on the viability of a particular network.\u201d<\/p>\n![\"\"](\"https:\/\/beta.newmoneyreview.com\/wp-content\/uploads\/2018\/11\/hash-rate-300x180.jpg\")
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