Bitcoin fork is a term describing a split in the Bitcoin network and canonical ledger. The ongoing Bitcoin civil wars have fragmented the ecosystem into several diverging protocol variations and respective chains.
When such a bifurcation takes place it results in the creation of new network currency. In Ethereum it was the infamous 2016 DAO hack which led to the partition of the blockchain into Ethereum (ETH) and Ethereum Classic (ETC). In Bitcoin fork the most notable one, the consequence of the persisting block size disputes, was the splitting into the rivalry Bitcoin Cash (BCH) and more recently followed by Bitcoin Satoshi’s Vision (BSV).
What’s a Bitcoin fork?
A fork may have multiple meanings. Usually, it refers to the copying of a project’s source code to start independent development on it in creating a separate and distinct piece of software. This may also imply a schism in the developer community itself where different developers have irreconcilable differences and/or are pursuing different goals.
In software clients powering the growth of a blockchain ledger, a change in the code may reflect a change in the rules of the protocol and as such a moving away from the constraints of how the client serializes the canonical ledger and onto a separate one. Such an instance is known as a hard fork. Hard forks are rigid and non-backward compatible, instantiating separate chains with separate rules at a specific predetermined block height after which it branches out into another chain (but sharing the history of the ledger up until that point).
Hard forks that take place with overwhelming community consensus are more accurately network upgrades, while those resulting from irresolvable disputes and irreconcilable differences are properly speaking hard forks.
Soft forks are protocol changes that are flexible and backward compatible, i.e. allow the new versions to play well with the original versions and don’t necessarily require any other nodes to upgrade to maintain consensus. All blocks accepted as valid by the newer version are also valid in the old version. It was by such soft fork mechanism that Segregated Witness (SegWit) was added to Bitcoin.
Bitcoin XT was one of the first significant software forks of Bitcoin Core to take place. The software was launched by Mike Hearn and Gavin Andresen in late 2014 so as to include a series of patches on top of Core as well as several new proposed features. Those included increasing the block size from 1 to 8 megabytes with the intention of increasing throughput from seven to 24 transactions per second. (Block size is a technical parameter affecting how many transactions can be processed per second.)
Initially seeing some success, with more than a thousand nodes running the software in the summer of 2015, the project rapidly lost user interest and was soon abandoned. Eventually, after the successful Bitcoin Cash hard fork, Bitcoin XT was revived as a full node implementation of BCH (and as such does not validate SegWit).
After the initial failure of XT, there were still many community members that wanted a block size increase. Bitcoin Classic was thus launched early in 2016, but as a less aggressive solution than XT, increasing blocks with just one megabyte – from 1 to 2MB. Also seeing interest at first (two thousand nodes running it for several months that same year), the project ceased operation in November 2017.
Following the releases of XT and Classic, Bitcoin Unlimited is a full node implementation that allows miners to signal and decide on their preferred block size with a limit up to 16 megabytes.
Bitcoin Unlimited is compatible with Bitcoin Cash.
The concept of Segregated Witness (SegWit) was first proposed in 2015. SegWit is a change in the architecture of transactions that separate signatures in an attached data structure not computed a part of the transaction hash or ID. This is another way to increase block capacity and reduce fees and scale on-chain without initiating a hard fork.
Technically a soft fork, SegWit is an opt-in choice, i.e. one can use it, but doesn’t have to. Signatures in SegWit are placed in a separate tree (the witness Merkle tree) in the block and are called witnesses and SegWit addresses are different from traditional Bitcoin addresses.
The October 2016 release of Bitcoin Core deployed the SegWit soft fork, aiming to put downward pressure on transaction fees and improve the maximum transaction capacity fitted in a block. SegWit also prevents various forms of non-intentional transaction malleability.
The formal Bitcoin Improvement Proposal specifying the consensus layer SegWit implementation is BIP 141.
Bitcoin Cash (BCH or “Bcash”) was the first major split of the Bitcoin blockchain which took place in August 2017. It had been the consequence of the same persistent blocksize debates and response to SegWit in order to avoid the protocol updates it had brought about.
BCash remains the most successful hard fork of the original crypto-ledger and currency and it ranks fifth by market cap (a slightly misleading metric in crypto). It has the support of prominent community figures, industry leaders and well-known domain experts such as Roger Ver (its main proponent), Emin Gün Sirer and others.
BCash also reflects the difference between the two Bitcoin narratives – Bitcoin as store-of-value and Bitcoin as medium-of-exchange. A block size increase is necessary in order to avoid the workflow bottlenecks that inevitably form with increased adoption of Bitcoin as a practical everyday buy-coffee-with medium-of-exchange.
The “digital gold” and store-of-value narrative, on the other hand, sticks to the notions of engineered scarcity and exponentially increasing energy expenditure in the mining process of bitcoins (which plays into forming its market price).
Unlike the Ethereum and Ethereum Classic communities which do cooperate and collaborate and occasions, contributing to each other’s projects, the Bitcoin Core and Cash schism is marked by bitter rivalry between the two camps, fighting over which of the two is the “true” Bitcoin embodying the intentions of its mysterious creator and crypto-prophet Satoshi Nakamoto.
On the whole, the Core camp tends to be extremely conservative and averse to any protocol changes (tending to outsource functionality to other chains as time goes by) as per its intended purpose of instituting itself as a kind of consistently reliable Schelling fence, while Bitcoin Cash has taken a more open and innovative approach (for example, implementing a high-level contract scripting language that translates into the lower level script).
Bitcoin Gold and Bitcoin Diamond
Bitcoin Gold (BTG) was a hard fork that followed several months after Bitcoin Cash. The creators of this hard fork wanted to restore the basic GPU (graphics processing unit) mining functionality and introduce some ASIC resistance as they felt mining had become too specialized an industry in itself which rendered mining out of reach for regular users and inevitably led to centralization in the hands of a few companies and mining cartels (e.g., Bitmain).
A unique feature of the Bitcoin Gold fork had been a “post-mine” – a process where the development team mined a hundred thousand coins after the fork had taken place. Most of these were placed in a special fund to be used to grow and finance the ecosystem, with some put aside as payment for developers.
This raises another long-standing problem with Bitcoin where the only party which directly benefits and pockets the profits is the miners while developers tend to often work without any compensation.
In May 2018 Bitcoin Gold became one of the victims of a 51% double-spend attack in a series of such attacks that had taken place at the time on several networks (including ZenCash and Verge). These go to demonstrate the problematic status of proof-of-work currencies in supporting the popular claim that there can be only one PoW currency. There have been a number of instances of such similar hash wars between ideological rivals in crypto space.
Bitcoin Diamond (BCD) is another fork that was almost concurrent with BTG, taking place at block height 495,866. It supposedly provides improved privacy, encrypting transaction amounts and balances (similar to Monero, but nowhere near as complete or competent) as well as faster confirmation and finality times thanks to the increased block size (to 8 megabytes). Additionally, it also changes the monetary policy by increasing total supply ten-fold to 210 million.
Bitcoin Satoshi’s Vision (BSV)
In November 2018 Bitcoin Cash itself experienced a fork as Bitcoin SV (standing for “Satoshi’s Vision”) split following community disputes and Twitter flame wars between certain community members. BSV wanted to set unlimited block sizes (Craig Wright even mentioning the possibility of fitting entire Linux distributions in blocks, for whatever purpose or reason), initially increasing the maximum block size from 32 to 128 megabytes. One immediate consequence of such radical change is that miners would be pocketing a whole lot more transaction fees per block.
The dispute split the BCH community into two rival camps, the Bitcoin ABC one led by Roger Ver, Jihan Wu (Bitmain co-founder) and having the support of the majority of the community and Bitcoin SV spearheaded by controversial figure Craig Wright (sometimes referred to as “Faketoshi” due to his unsupported and highly unlikely claims that he is actually Satoshi Nakamoto) and eccentric billionaire Calvin Ayre who had subsidized much of the Bitcoin Cash’s mining operations in the past.
Following much controversy and vitriol Bitcoin SV ended up delisted from Binance and other major exchanges for not living up to community standards and civil code of conduct (with Wright and Ayre constantly threatening critics with lawsuits while inappropriately demonstrating the influence of wealth and appealing to higher legal authorities, trying to stifle discourse).
In August 2019 Bitcoin SV experienced a serious network fragmentation splitting into three different chains after mining a massive 210 MB block. This was part of the planned upgrades meant to raise blocksize from 128 megabytes to whopping 2 gigabytes. Many popular BSV services got stuck at the 210 MB block, unable to keep up with the rest of the network and causing many nodes to run out of memory and crash.
Needless to say, the Bitcoin protocol so parametrized leads to extreme centralization due to the high costs associated with maintenance of the network and as the above instance of network disruption and blockchain reorganization shows, such unrealistic block sizes may be more of an attack vector than a feature.
Unsurprisingly, there’s little to no economic activity taking place on the BSV chain and the project has only a handful of vocal supporters (who also subscribe to the belief that Craig Wright actually is – despite his poor track record and history of ridiculous exaggerations, pathological lying, obnoxious and arrogant behavior and sense of entitlement – original Bitcoin creator Satoshi Nakamoto) and seems to largely rely and run on the financial support of Ayre.
Updates/Developments – 21 Nov 2019
- A rogue chain was reported to have been developed during a planned bitcoin cash hard fork, as an unknown mining pool failed to update to the new chain’s software.
- The on-going chain battle, which should be resolved by bitcoin cash’s internal rules, gives an insider look into how proof-of-work (PoW) consensus mechanisms operate.
- The hard fork occurred on Friday at 16:49:28 UTC at block number 609,135. Two additional blocks broke into two different chains that have been mined for a total of 4 new blocks, according to BitMEX Research’s Fork Monitor.
Hard forks and blockchain splits are inevitable occurrences under a regime of a global network-wide consensus. Diverging views and conflicting interests are bound to escalate into bifurcations fragmenting the network and partitioning network effects. Bitcoin is by design incapable of accommodating more than one consensus and a single authoritative view of the networks and ordering of events.
This is obviously problematic and is the reason why Bitcoin Core is governed the way it is as well as the reason for the community deadlock which has paralyzed development and made any further innovation nearly impossible.
In any case, from all the forks which have taken place the only other serious contender offering anything of value and having the support of a large number of community members and authorities in the field (of distributed systems design and cryptography, etc.) is Bitcoin Cash. All other attempts to modify the core protocol have proven insufficient and/or poorly executed.
Importantly, when a fork occurs, users with balances in the original chain end up having those balances replicated on the new forked chain. So, during that 2017/2018 period of Bitcoin forks taking place one after another, users enjoyed a number of airdropped “free” coins. This in itself ended up the reason for some of the forks which consequently took place – a marketing ploy meant to exploit the circumstances for some easy profits.
There will no doubt be other forks in the future, but what seems to be endemic to Bitcoin specifically when it comes to such forks is the bitter rivalry and aggressively competitive tone employed between the different camps.
It even led to the emergence of such bizarre phenomena like the so-called “Bitcoin maximalism”, a badge of excessive zealotry and fanaticism in defending Bitcoin Core as the one true and only possible interpretation of the Bitcoin gospel as contained in the original white paper.