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It has been eight years since the first Bitcoin transaction in 2009, and now one of the oldest and most commonly used digital currency is experiencing a fundamental change. As of August 1st, 201, the currency has split into two separate entities: Bitcoin and Bitcoin Cash.
While the new currency Bitcoin Cash will not directly affect the value of the original, it is possible that other effects will soon become evident. The potential legal and logistical troubles that could arise for users of both currencies due to this split are certainly cause for concern, if not outright alarm. So, what has actually happened to Bitcoin and how could it affect you?
What Happened?
Bitcoin Cash was established to improve upon and potentially replace the original Bitcoin. It aims to accomplish this by providing a superior service, chiefly by focusing on the poor transfer rates that Bitcoin users commonly experience.
Before the split, Bitcoin users could only transfer one megabyte of data at a time. This limited the number of Bitcoin transactions to a total of seven every second, a severe practical limitation on the currency that likely influenced its popularity. Bitcoin Cash does away with these constraints. Up to eight megabytes of Bitcoin Cash data can be transferred at any time, giving it a distinct advantage over the original currency.
Bitcoin Cash is, however, severely limited in other ways.
The most pressing limitation of Bitcoin Cash when compared to the original is the lack of support that it has received from the community. Digital currencies exist without the backing of any physical material or banking organization, and as such heavily rely on users actually “mining” and using them.
Bitcoin Cash simply does not have an active enough user base to be as prolific as Bitcoin right now. Of course, the currency has only recently been created, but it has already impacted upon its perceived value standing at only $345 as of August 8th. While this is relatively impressive, ranking it as the 4th most valuable digital currency on Coin Market Cap, it falls far short of Bitcoin’s $3,383 value.
Bitcoin Cash also faces some practical limitations. The potentially poor security of digital currencies inherently limits their usage and acceptance of those currencies in businesses. Still only 40% of retailers accept chip cards due to the potential security issues associated with them, demonstrating vendors’ tendency to be cautious when it comes to new payment methods.
However, the issues surrounding Bitcoin Cash are not limited to its own potential shortcomings. The legal ramifications of the currencies creation are numerous and far reaching, particularly due to the inherently global nature of any digital currency.
How Could It Affect You?
The fact that Bitcoin Cash exists as a fork from the original currency is the potential cause of many legal issues, as well as a major factor in the reactions of digital currency marketplaces and investors.
Bitcoin Cash is stored alongside the original Bitcoin currency, meaning that your Bitcoin savings are equivalent to your Bitcoin Cash savings. However, certain currency exchanges are potentially acting illegally by refusing access to individuals’ Bitcoin Cash amounts.
While Coinbase initially refused to trade in Bitcoin Cash due to uncertainty surrounding the market, the marketplace has since accepted the change and will implement Bitcoin Cash transactions by January 2018. This case highlights the potential legal trouble that could occur due to the split, especially in regards to how marketplaces react to new currency creations in the future.
However, this is not the limit to the legal difficulties that the split could cause. The potential for direct competition between the two currencies could lead to sabotage from investors and developers. As the currencies are easily exchangeable, but only usable once, bad actors could easily manipulate the markets.
To make matters worse, potential litigation against these saboteurs and manipulators could be effectively impossible due to the inherently global nature of digital currencies like Bitcoin Cash. This again could result in serious issues with Bitcoin Cash for which workable solutions are not yet known.
It is clear that any potential investors in Bitcoin Cash need to thoroughly examine the potential legal consequences of the Bitcoin split. The currency is still growing. It’s likely, however, that issues will arise in the future as the needs of the currency change, similar to the issues that occurred with Bitcoin and resulted in the creation of Bitcoin Cash in the first place.
