November’s Bitcoin Cash Fork, Explained

You may have noticed Bitcoin Cash’s wild price surge over the weekend. The fourth largest cryptocurrency jumped 37% to a high point of $586 on Sunday.

The surge was triggered by Bitcoin Cash’s looming hard fork. But what exactly is this hard fork? And why has it triggered a rapid price run?

BCH price surge
Bitcoin Cash price surges on news of impending hard fork. Credit: CoinMarketCap

What is the Looming Bitcoin Cash Hard Fork?

As part of the Bitcoin Cash system, the community schedules a bi-annual upgrade to keep the network up to date.

The next upgrade is due on November 15th, around 4.40pm GMT. However, there is disagreement over the upgrade itself. The split in the community is likely to create a “hard-fork,” where the blockchain splits with two different rules or “protocols.”

Further reading: What is a hard fork in cryptocurrency?

Bitcoin Cash ABC vs nChain

The dispute centers around two developer communities: Bitcoin Cash ABC and nChain.

Both aim to release a different version of the upgrade on November 15th.

The difference in opinion means this is a “contentious hard-fork.” When the upgrades are made, there will be two versions of the Bitcoin Cash blockchain, and it remains to be seen which will be the “dominant” chain.

The Argument: Bitcoin Cash ABC

One of the most prominent features of the Bitcoin Cash ABC proposal is to move beyond monetary transfers. An improvement to the scripting language may lead to the introduction of smart contracts on the Bitcoin Cash blockchain.

Further reading: What is a Smart Contract? (In Simple, Easy-to-Understand Terms)

The upgrade will also introduce “canonical transaction ordering,” which alters the way transactions are listed in a block. Bitcoin Cash ABC claims this will act as the foundation for enormous scaling potential in the future.

The current proposal maintains the current block size of 32MB, although ABC is open to increasing it in the future.

The Counter Argument: nChain

The major feature of the nChain upgrade is the quadrupling of blocksize. nChain proposes a new blocksize of 128MB, which is their solution to scaling issues.

nChain will release a “full node implementation” reflecting these changes on November 15th. nChain calls this upgrade Bitcoin SV, or “Satoshi’s Vision,” as they claim it is a true reflection of Bitcoin founder Satoshi Nakamoto’s ideals.

The Two Upgrades Are Incompatible

The two differing proposals cannot function together. So, when the two parties activate their upgrade, two different chains will be created, hence the hard fork.

Which Will Become the Dominant Chain?

It’s hard to say, as both communities have strong support from miners.

Bitcoin ABC’s proposal is backed by Bitmain – China’s dominant mining company. Not only that, but two-thirds of Bitcoin Cash mining nodes use Bitcoin Cash ABC’s software. If those nodes follow ABC’s upgrade, this chain is likely to become dominant.

However, nChain does have support from CoinGeek, the largest Bitcoin Cash mining pool, with roughly 20% of BCH hashing power. 

Coinbase, Binance, and Ledger Support?

Two of the world’s leading crypto exchanges, Coinbase and Binance, have both expressed support for the hard fork. Although, it remains to be seen which fork they will ultimately follow.

As Coinbase explains:

“Unlike previous BCH hard forks, there is a competing proposal that is not compatible with this published roadmap. Coinbase will monitor the hard fork process and work to minimize customer disruption until the network meets Coinbase security standards.”

 

Binance didn’t comment on the contentious nature of the fork, but did express support:

“Binance would like to confirm support for the upcoming Bitcoin Cash hard fork.”

 

Hardware storage company Ledger will also support the forked coin, but clarified it would only support the dominant chain:

“Ledger will pause Bitcoin Cash service to avoid unwanted transactions until it is clear which of these chains will be the dominant one.”

 

In all cases, transactions will be paused at least an hour before the fork is due to take place (roughly 4.40pm GMT).

Why Did the BCH Price Surge?

Generally speaking, a hard fork often triggers a price run in anticipation of free tokens. When a hard fork occurs, holders of the coin are often granted the new forked token on a 1:1 basis.

This was the case when Bitcoin forked to create Bitcoin Cash. Everyone holding bitcoin also received the same number of bitcoin cash tokens.

Traders are perhaps flocking to BCH in anticipation of a new, valuable forked coin.

Conclusion

Unless nChain and ABC come to a compromise or agreed solution, Bitcoin Cash will fork on November 15th, resulting in two separate blockchains. The dominant chain will likely be supported by major exchanges and third parties, but it remains to be seen which chain that will be.

Block Explorer will keep you updated on the developments as we move closer to the November 15th upgrade.

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Ben Brown

Editor, Block Explorer News

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