A Review of Four Major Bitcoin Forks
By now you’re probably well aware of the concept of a fork in a cryptocurrency, but in case you could use a little refresher, in this article we will be reviewing what a fork is, why they happen, and which of the major four are potentially worth investing in.
A Primer on Bitcoin Forks
There are three major types of forks you should be aware of:
- Soft fork. A soft fork is a “backwards compatible” software update, meaning that you do not need to apply the update in order to continue participating in the coin network. The fork is always set to occur at a predetermined block in the future, after which time, the new software implements the new set of rules which is to be followed
- Hard fork – one chain remains. A hard fork is a non-backwards compatible software update, meaning that you will no longer be able to participate in the coin network if you do not upgrade to the latest version of the coin software. Those who continue using the old software are considered to be on the “old chain,” which is an unofficial version of the coin that is not going to be recognized by any exchanges, merchants, or vendors. The “old chain” is usually abandoned rather quickly as users slow to upgrade ahead of the hard fork finally come around to doing so.
- Hard fork – two chains remain. There are 3 different subtypes of this particular scenario.
a. When a hard fork occurs and the “old chain” does not die. The most famous example of this is when Ethereum (ETH) hard forked in 2016 and included a rollback of certain transactions related to a hacking exploit, whereas Ethereum Classic (ETC) kept the original, unforked chain intact, even though it lost the ETH trading abbreviation.
b. When a hard fork occurs but another group decides to go by its own set of new rules. In the case of Bitcoin SV (BSV), a new BCH software version was implemented at the same time of a Bitcoin Cash (BCH) hard fork, but a different set of rules as those being implemented by Bitcoin Cash (click here to read a more detailed explanation of how this happened).
c. When a hard fork occurs independent of the direction of the larger community. This is how BCH forked away from BTC, after a contingency of the bitcoin community opposed the idea that the BTC block limit should be kept at 1 MB. On August 1st, 2017, BCH was hard forked away from BTC, with the biggest difference being that the block size of BCH was expanded to 8 MB.
It is this last subtype that we will be focusing on through the remainder of this article. Coins formed from this type of hard fork for the sake of creating their own coin have been all the rage since Bitcoin Cash first came into existence, and you may be shocked to discover that there have been at least 104 forks of BTC that have followed since. It’s true that older coins such as Litecoin (LTC) and Namecoin (NMC) were also developed as forks from bitcoin, but they began their own chains anew and do not have any common transaction history with BTC. Here is a snapshot of just a few of these new generation fork coins to get an idea of how clever (or non-clever) their brand naming tactics are when attempting to market a “new bitcoin” to the masses:
Popular Bitcoin Forks
The market cap of all of these forks combined (including BCH) does not even come close to matching that of BTC, as the majority of them are simply cash grab attempts riding off the popularity of bitcoin. Some of the more successful forks include Bitcoin Gold (BTG), Bitcoin Diamond (BCD), Bitcore (BTX), Bitcoin Private (BTCP), Clams (CLAM), and Byteball (GBYTE). Some of them add innovative tweaks to bitcoin’s main parameters (such as increasing or decreasing total supply, changing the time between blocks, or using different consensus algorithms), but most of them are more or less a rebranding of bitcoin under a new name for the sake of making a little bit of money.
Below is a flow chart that demonstrates when and how each of the 4 major forks came into existence (“major” as defined as currently being listed in the top 100 coins by market cap, and includes BCH, BSV, BTG and BCD).
We will now go through the top 4 forks to find which ones actually have some merit behind them, and which should be avoided entirely.
1. Bitcoin Cash (BCH)
Fork date: August 1st, 2017
Reward ratio: 1 BCH to 1 BTC
Block length: 10 minutes
Block size: 8 MB
Arguably, the only real competitor of BTC is BCH, which makes a decent point by demonstrating in practice that the number of transactions per second of a blockchain network can indeed be increased by upping the block size. Bigger blocks – BCH’s selling point – allow for more transactions to fit inside every 10 minute block, meaning that bitcoin could now act closer to being a “peer-to-peer system of electronic cash,” free of large fees that made transacting small amounts instantaneously and cheaply near impossible.
The main problem with BCH is that it has faced a rather severe lack of user adoption which is due to a number of factors. It only manages to fill an average of 120 kb of each 8 MB block, meaning that expanding the block size 8-fold has been a frivolous endeavor up to this point. The most obvious of its adoption issues is the fact that the world has been slow to adopt bitcoin at all, and adding competing, non-compatible versions of bitcoin to the mix only serves to confuse the skeptical public about an already highly confusing technology. Having said that, if you insist on investing in one particular bitcoin fork, Bitcoin Cash is probably the safest one to consider. Despite its relative collapse in price as compared to BTC, it is still the 4th largest coin by market cap, and better poised to seek large-scale integration than any other bitcoin fork.
2. Bitcoin SV (BSV)
Fork date: November 15th, 2018
Reward ratio: 1 BSV to 1 BCH
Block length: 10 minutes
Block size: 2 GB
Though technically a “fork of a fork,” the Bitcoin SV blockchain indeed shares the same history of the BTC blockchain up until August 1st, 2017, and shares the BCH blockchain history from that date until November 15th, 2018. Initially, the Bitcoin SV camp had no intention of becoming its own coin; instead the plan was to usurp the BCH trading symbol and become the new Bitcoin Cash. A contingency of BCH miners and developers were unhappy with changes being scheduled in an upcoming hard fork, fearing they were driving BCH away from its mission of acting as “digital cash.” Their plan failed to materialize, however, after it became apparent that more hash power was going to be directed at “BCH ABC,” the fork upgrade led by the original Bitcoin Cash dev team. Instead of falling to the wayside and admitting defeat, BSV became its own coin, instantly becoming one of the biggest coins by market cap.
Though it stumbled a bit at its beginnings, devoid of market or industry support, BSV has started to make a name for itself. Its core tenets are not only bigger blocks (way bigger) and cheaper transactions, but now government compliance, and most recently, data storage. After it was quickly realized that the market wasn’t ready to absorb and “even bigger block bitcoin” as the “big block bitcoin” (BCH) wasn’t doing so well on this principle, BSV found another use for what to do with its big blocks, and that was store data. Now, anybody can upload files in 100 kb chunks that are linked together by special BSV software which will forever be part of the BSV blockchain. This sounds like a decent idea and by all indications, it already works in practice. However, it should be warned that a lot of BSV’s current market cap rests on the idea that its founder is Satoshi Nakamoto, and that BSV could be due to plummet as more evidence comes to light indicating that this is not the case. Therefore, we warn against buying BSV at this point in time as it runs the risk of suffering a severe drop in price on a moment’s notice — but if you want to use it to upload data to a blockchain, it’s definitely a feasible option.
3. Bitcoin Gold (BTG)
Fork date: October 24th, 2017
Reward ratio: 1 BTG to 1 BTC
Block length: 10 minutes
Block size: 1 MB
Bitcoin Gold was born out of the idea of “making bitcoin decentralized again,” as according to their launch slogan. This was to be accomplished by switching from BTC’s SHA256 hash algorithm to a newer proof of work algorithm known as Equihash, which was designed to be ASIC resistant, meaning that mining equipment could not be developed in order to mine it any faster. Unfortunately for BTG, this concept failed to hold true, as Equihash was proven not to be as ASIC resistant as previously suspected, and there was a relatively huge “premine” for developers found to be built into the coin, which made it entirely less democratic than it had originally espoused.
Then, a mere 7 months after BTG had launched, something happened that had only been theoretical up until it happened to Bitcoin Gold. In May 2018, Bitcoin Gold was the victim of the first ever “51% attack,” in which attackers gained control of the majority share of the hash rate to perform a series of double-spends on exchanges, resulting in a theft of BTC worth $18 million at the time. Coins thought to have been moved to exchanges were actually not being moved at all, even though the exchanges had credited them with the amounts, allowing them to withdrawal about 388,000 BTC across 6 different exchanges. A coin that had once espoused itself as being highly decentralized was found to be completely the opposite, and its credibility hasn’t recovered since. In short, Bitcoin Gold is a failed concept, and we frankly can’t understand how it maintains such a relatively huge market cap, or any price at all.
4. Bitcoin Diamond (BCD)
Fork date: November 24th, 2017
Reward ratio: 10 BCD to 1 BTC
Block length: 10 minutes
Block size: 8 MB
Branding itself as “the better bitcoin,” Bitcoin Diamond is a lot like BCH in that it speeds up the number of transactions per second that can be added to its blockchain. However, it possesses a couple of other qualities which render it different, in that it uses a new hash algorithm (named “Optimized X13”, which is somewhat ASIC-resistant) and its supply is amplified 10 fold. This means that for every 1 BTC somebody held at the time of the fork, they would be credited with 10 BCD on the new chain. Its developers cited bitcoin’s high transaction fees, long times for confirmations, and a high price per unit as reasons why bitcoin needed to be forked in the matter in which it was for BCD. Only a day after hitting the markets (November 25th), Bitcoin Diamond saw an unprecedented $50 million in daily trading volume, however demand has since slowed to a crawl.
There isn’t much more to be said about BCD, or why anybody should own it. Although it never suffered the same catastrophic failures as Bitcoin Gold, it currently possesses just a portion of its market cap, currently ranked #46 in coins by market cap size. It was simply one of the bitcoin forks that happened to be in the right place at the right time and possesses zero real-world utility or acceptance. The chances of it ever become useful to any degree are pretty slim, and we recommend avoiding it entirely.