BITCOIN traders are braced for uncertainty and price swings after the cryptocurrency forked yesterday. But what is the fork and what will happen next?
What is the bitcoin fork?
Bitcoin forked yesterday, creating bitcoin cash - 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’. Yesterday’s fork is essentially a divergence in the bitcoin blockchain. This fork means there are now two sets of tokens: bitcoin on the original chain and bitcoin cash on the new blockchain.
Millions of bitcoin users kept their existing bitcoins, but they received bitcoin cash as well when the fork took place.Dr Garrick Hileman, a research fellow at the Cambridge Centre for Alternative Finance, compared bitcoin to a tree and bitcoin cash to an offshoot. On Tuesday, 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 launched 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.
Dr Hileman said the price of bitcoin coin will depend on which exchanges allow trading on it 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 price and the two cryptocurrencies could co-exist going forward. However, he said that bitcoin cash could "dilute bitcoin’s dominance of the cryptocurrency space".
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