Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.
Bitcoin Cash has undergone a hard fork creating a new software protocol for its blockchain that aims to reduce mining difficulties and attract miners to its platform.
The latest news coming from the fintech world is that the first offshoot of Bitcoin – Bitcoin Cash – has successfully hard forked thereby shifting to a new software protocol that aims at reducing the mining difficulties. The new protocol aims to upgrade the network’s Difficulty Adjustment Algorithm (DAA) and also incentivizes miners with a better reward distribution process for keeping the Bitcoin Cash blockchain secured.
According to the Investopedia, hard fork (or sometimes hardfork) is a radical change to the protocol that makes previously invalid blocks/transactions valid (or vice-versa), and as such requires all nodes or users to upgrade to the latest version of the protocol software.
The original DAA applied to the Bitcoin Cash network did boost the cryptocurrency but on the other hand, there were wild hash rate (The amount of computational power committed to mining each digital coin) fluctuations or we can say the changes in difficulty levels which caused the miners to frequently shift between the Bitcoin and Bitcoin Cash blockchains. Miners usually shift towards that version which offers more incentives to reap better rewards.
This was one of the major reasons we witnessed huge fluctuations in the prices of Bitcoin and Bitcoin Cash. While Bitcoin prices plummeted by more than 30%, on the other hand, Bitcoin Cash touched its all-time high of $1953. This occurred due to miners shifting hands from Bitcoin to Bitcoin Cash. Now, Bitcoin has managed to somewhat regain its lost grounds and is currently trading at $6622.38 as per coinmarketcap.com. While on the other side, Bitcoin Cash seems to be consolidating at around $1200.
The new software protocol for the BCH blockchain aims to reduce the volatility and sudden changes in the difficulty levels by adjusting the difficulty to a hash rate such that it targets a mean block interval to approximately 600 seconds. This means that the new DAA will keep block times at around 10-minute block interval.
Once this has been verified, it remains to be seen as to how frequently will then miners shift between Bitcoin and Bitcoin Cash and there are fewer chances for them to exploit the vulnerability in the existing networks. BCH supporters are optimistic about this change and they say that the new DAA will create a level playing field for the competition to exist without miners playing around.
Note that the new software protocol after the hard fork still keeps the rules of creation of Bitcoin Cash intact! This means that the block size in the BCH blockchain will remain 8MB against the 1MB block size of Bitcoin. However, the introduction of the new DAA in BCH shifts the game completely from the hands of miners to the hands of investors.
As miners will get almost the same incentive for either staying on BTC of BCH blockchains, it will be interesting to see as to how investors decide on the next roadmap of the two cryptocurrencies. The Bitcoin community supporters always take pride in Bitcoins completely decentralized, permissionless and censor-resistant network. While on the other hand, the supporters of Bitcoin Cash boast about faster transaction speeds and cheaper payments. Both these camps are seeking the beneficial features of other without compromising on their existing rules. Only time will tell as to where will investors lean in the future!