Bitcoin Forks
The Bitcoin split in August was the rage all over cryptocurrency-centred news websites. The fact that a crypto giant like Bitcoin was going through such a significant event caused prices to swing like they hadn’t done in a while, and uncertainty covered everyone’s faces. That is what we know as the birth of Bitcoin Cash that came with the creation of SegWit2x, which looked to improve the speed and efficiency of Bitcoin.
But, Do People Really Know What Happened?
What took place with Bitcoin and Bitcoin Cash is what we know today as a “hard fork”. Whenever a blockchain is modified, it’s called a fork. These can be soft forks (when the change is minor) or hard forks (when the switch is so big it creates a whole new, different blockchain).
Bitcoin has seen better days speed-wise. With its popularization, the number of transactions has grown exponentially, and this has caused significant slow-downs in the time it takes to complete one.
Multiple changes were proposed such as increasing the size of the blocks in the blockchain or implementing SegWit2x. In short, SegWit is a method of space-saving where the information of every transaction is divided and stored in additional blocks to reduce the space it takes in the blockchain.
However, these changes ultimately modify how the blockchain itself functions and thus generated a hard fork. The new blockchain (with all the changes) was named Bitcoin Cash, and the old one got renamed to Bitcoin Legacy. That was all the fuzz about the split and the creation of BCASH.
How Are Altcoins Created Through Blockchain Splits?
As we mentioned earlier, whenever a hard fork is implemented, the blockchain is segmented into two new branches: one that continues the original, unchanged blockchain and a new blockchain with the changes implemented.
Due to transaction history being the same on both blockchains up until that point, any coin owner will get the same amount of coins he had but on the new currency. That means that someone who owned 20 Bitcoins before the split, now holds 20 Bitcoin Cash.
Other Examples of Altcoins Being Born Out Of Splits:
- Bitcoin Gold.
Another new blockchain originated from a Bitcoin hard fork, Bitcoin Gold was created about a week ago, and it implemented both SegWit2x and the ability to mine using your GPU.
That was done as a countermeasure for Bitcoin mining centralization due to big firms being able to purchase more expensive and useful equipment. Bitcoin Gold lets users mine just using their GPU.
- Ethereum Classic.
Also, this year, another crypto giant, Ethereum, went through a hard fork that created a new currency.
Ethereum was also facing mining centralization and (like BTC) it decided to fight it by changing how mining was done, albeit in a more radical way.
Ethereum saw the implementation of Proof of Stake (PoS) mining, which means that users will generate new coins not through lending processing power, but through leaving Ether unspent for long periods of time.
That resulted in the creation of Ethereum Classic, with Ethereum keeping the changes and the new altcoin staying with the traditional PoW method of mining.
Click the image to sign-up for Taxbit and get 10% Off!
