What is the bitcoin fork? What will happen when bitcoin forks TODAY?
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What is the bitcoin fork? What will happen when bitcoin forks TODAY?
BITCOIN traders are braced for uncertainty and price swings after the cryptocurrency began forking this afternoon. But what is the fork and what will happen next?
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What is the bitcoin fork?
Bitcoin began forking at 1.20pm BST, creating Bitcoin cash (BCC) - a new version of bitcoin with its own rules and blockchain.
All bitcoin transactions are recorded by a ledger, known as the blockchain, which is run by so-called ’miners’.
Today’s fork is essentially a divergence in the bitcoin blockchain.
This fork will result in two sets of tokens: bitcoin (BTC) on the original chain and bitcoin cash (BCC) on the new blockchain.
Although millions of bitcoin users will keep their existing bitcoins, they also will also receive bitcoin cash. The fork began today and bitcoin is in the process of being created.
Dr Garrick Hileman, a research fellow at the Cambridge Centre for Alternative Finance, compared bitcoin to a tree and bitcoin cash to an offshoot.
He said: “That bitcoin tree is going to continue to grow like nothing happened today. It’s like a shoot has dropped off and is growing into a new tree.”
A group of existing bitcoin users and companies are launching bitcoin cash in a bid to increase transaction capacity.
What will happen after the bitcoin fork?
If bitcoin cash is embraced by users, it could become a serious contender in the cryptocurrency space.
But if bitcoin cash's supporters switch back to the original blockchain, it could simply wither away. Bitcoin cash will only have value if traders use it.
Bitcoin cash was worth £276.5 on the futures market at 11.36am on August 1 - just one tenth of the bitcoin price $2,772 at the same time.
At 1.36pm, the value of Bitcoin was $2,761.79.
Dr Hileman said this price should be “taken with a grain of salt” and it is not known what will happen to value of bitcoin cash this afternoon.
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Bitcoin price latest: The latest bitcoin graph for Tuesday August 1 as of 11.55am
Dr Hileman said the price will depend on which exchanges allow trading on bitcoin cash and whether users decide to sell, buy or hold it.
He added: “Because millions of people are going to hold bitcoin cash, it is probably going to be around for some time.”
He said that there may not be any material effect on the original bitcoin and the two cryptocurrencies might co-exist going forward.
However, he said that bitcoin cash could "dilute bitcoin’s dominance of the cryptocurrency space".