Jimmy Song is a bitcoin developer and principal architect at blockchain technology startup Paxos.
In this opinion piece, Song discusses the upcoming launch of Bitcoin Cash, outlining how it will (and won't) impact the bitcoin blockchain in the coming days and weeks.
We're less than 24 hours away from the launch of Bitcoin Cash.
Whether you're worried, interested or excited, you can't deny that the event – which will likely see a new cryptocurrency created from the existing bitcoin blockchain – will have ramifications on the larger ecosystem.
In this article, I'm going to go over the different things you can expect in the next few days.
As you may have seen on social media, exchanges and merchants are currently scrambling to prepare for the fork.
At a minimum, these custodians of customer bitcoins will want to record customer balances right before the hard fork so they can untangle who's entitled to what later. (Or risk facing accounting challenges).
More adventurous exchanges are preparing to list Bitcoin Cash as a separate asset, though this presents its own problems.
For one, listing a cryptocurrency that hasn't launched could prove difficult. Also, once markets are live, trading is likely to be choppy. (Part of what caused crazy volatility during the Zcash launch was that so few exchanges supported it during the first few days.)
This probably won't be the case as many exchanges have already committed to supporting the trade of Bitcoin Cash, but it bears watching.
We can expect many exchanges to freeze withdrawals in preparation of the above.
August 1, 00:00 UTC
Because the bitcoin network is already enforcing BIP 91, this should be a non-event. That is, BIP 148 won't split the network and bitcoin will continue as a single chain.
August 1, 12:20 UTC
Bitcoin Cash will launch.
At this point, miners that are mining Bitcoin Cash will create a transaction block greater than 1 MB in size and fork the bitcoin network.
There are a few scenarios here that depend on the percentage of hash power that the new blockchain attracts:
- If less than 16% of bitcoin's current hash power transitions to Bitcoin Cash, the first block will likely take over an hour. This won't affect the bitcoin blockchain that much, though on average, blocks should take a little longer than 10 minutes.
- If 17-50% of hash power moves to mining Bitcoin Cash, the first block will likely take between 20 minutes to an hour. This will slow down the bitcoin blockchain somewhat. Blocks on bitcoin will take between 12-20 minutes.
- If more than 50% of hash power is mining Bitcoin Cash, the first block will likely take less than 20 minutes. This will slow down the bitcoin blockchain significantly. Blocks on bitcoin will take longer than 20 minutes on average.
During this time, users will likely begin sending Bitcoin Cash to exchanges that both list the cryptocurrency and that have vowed to continue operations through the fork.
We can expect that the exchanges that accept Bitcoin Cash deposits first will have a lot of activity, and that initial trading will likely cause some significant price volatility due to reduced liquidity.
As for transaction approvals, even with low hashing power, we can expect the Bitcoin Cash mempool to be relatively empty since the network's blocks will be relatively big.
At 12.5% hash power, the mempool on Bitcoin Cash will clear at about the same rate as bitcoin. That said, confirmations will be much slower for the coin with less hash power until difficulty adjusts.
If Bitcoin Cash has relatively low hashing power, we can expect some difficulty adjustments at this time. Most scenarios result in something close to 10-minute block times provided the hash power stays constant.
This is probably not a safe assumption as miners will likely be switching between Bitcoin and Bitcoin Cash depending on which one is more profitable.
Bitcoin Cash will be much easier to mine after the difficulty adjustments, and we may get some relatively fast blocks (2.5 minutes or less) until we hit block 479,808.
SegWit should lock in on bitcoin around this time.
Depending on how much mining power moves over to Bitcoin Cash, and how much new mining power shows up, lock-in on block 479,808 on bitcoin may take longer than expected.
Once lock in is achieved, the code will be activated later this month, effectively upgrading the main bitcoin blockchain to support larger-capacity transactions.
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