Bitcoin Cash: Price of new currency rises after bitcoin's 'hard fork'

itcoin has split into two in an event known as a “hard fork” that has divided the virtual currency’s online community.

Two competing strands of bitcoin emerged after some of its leading backers disagreed on the best way to take it forward.

The price of the cryptocurrency has fallen slightly to around $2,700 (£2,000) after the fork. Bitcoin Cash, meanwhile, got off to a slow start as traders waited for the first transactions to be put onto the network. Its price fell shortly after it was created but has since rebounded to around $400.
What has happened?

Last week, key miners and developers of bitcoin agreed to adopt a new way of operating the cryptocurrency: since the technology is open source, changes are made to its underlying code if agreed by a consensus of users.

The new technology, called Segwit2x, has gradually been adopted by key players in recent days and appeared to avert a “civil war” over how to move forward.

However, a rival system has gained traction in recent days called Bitcoin Cash. The new system was launched on Tuesday.

Why is the technology changing?

Bitcoin, now almost a decade old, is struggling to cope with a recent surge in popularity that has seen its price jump from about £750 at the start of the year to over £2,000 now.
This has led to a boom in the number of bitcoin transactions that the existing technology is struggling to cope with.

Bitcoin transactions are completed when a “block” is added to the blockchain database that underpins the currency, but at present blocks are limited to 1MB every 10 minutes - or seven transactions per second. This compares to 2,000 per second for Visa and means that at peak times bitcoin transactions can take hours to be fulfilled, inhibiting the currency.

The two rival proposals - Segwit2x and Bitcoin Cash - are both seeking to solve this problem in different ways.

What is the difference?

Segwit2x proposes moving some of bitcoin’s transaction data outside of the block and on to a parallel track to allow more transactions to take place. After that happens, blocks would double in size some time in November.

Bitcoin Cash does not propose moving transaction data outside of each block, but wants to increase the size of each to 8MB. Its backers are sceptical that the Segwit2x plan will follow through with doubling the block size later on.

Segwit2x has been adopted by enough of the bitcoin community to proceed, but in recent days more have signalled their support for Bitcoin Cash, saying the rival proposals do not go far enough.

What has happened to my bitcoins?

Most people store their bitcoins in online wallets or exchanges, rather than downloading them onto a physical hard drive. The majority of these sites have said they will proceed with the mainstream Segwit2x proposal.
Online wallet Coinbase said on its website that it “is hard to predict how long the alternative version of bitcoin will survive and if Bitcoin Cash will have future market value”. Blockchain, another online wallet, said it has no plans to support Bitcoin Cash but that if it ends up becoming the more popular version it will.

Those who held their coins by downloading them onto hard drives end up with both bitcoins and bitcoin cash.

How much will each be worth?

The bitcoin price has remained relatively stable in the run-up to the hard fork, suggesting that the mainstream Segwit2x proposal is likely to remain the main strand of bitcoin.

The offshoot, Bitcoin Cash, is at present worth just a fraction of the bitcoin price. According to bitinfocharts on Wednesday morning, one unit was worth around $400.

However, this remains a very speculative value based on early trading. Bitcoin Cash will only have value if traders continue to use it and some have warned it could be worth nothing.

How do I get my hands on some Bitcoin Cash?

If you store your bitcoins online you are too late, since most have said they will adopt the main proposal.
Users who have downloaded their bitcoins onto a physical drive, rather than have a website act as their custodian, meaning you should receive both versions. Experts have warned that users should refrain from trying to access it at the moment, since the software used to do so may be unstable and put your main bitcoins at risk.

After the split, Bitcoin Cash will effectively run as an alternative cryptocurrency, like Ethereum, Ripple or Litecoin.