Latest Bitcoin Cash fork could mean increased profitability for bitcoin
On November 15, Bitcoin Cash underwent a hard fork split between Bitcoin Cash Node (BCHN) and Bitcoin ABC (ABC). Here is everything we know about the event and what it could mean for your mining profitability.
What is a hard fork?
A hard fork is a change to a network’s protocol in which the blockchain’s original code is updated but only some of the nodes on the blockchain accept the update.
After a hard fork occurs, the previous version of the network and the new version based on the derivative form of the same code are completely split. They no longer communicate and both now have their own transaction histories. In essence, a new form of cryptocurrency has been created, complete with its own network and unique set of rules.
Previous hard forks
Bitcoin Cash (BCH) – the most widely known and used fork of the bitcoin network – was created on August 1, 2017, and is now the sixth-largest cryptocurrency in terms of market capitalization.
The fork took place because a group of miners wanted to make some changes to the bitcoin network that primarily related to block size and network speed. At the time of the split, everyone who held bitcoin received an equivalent amount of BCH.
Bitcoin Cash then underwent a fork of its own on November 15, 2018, that created Bitcoin SV (BSV) in order to adjust the protocol with larger block sizes and reduced transaction fees. Now, exactly two years later to the date, Bitcoin Cash is undergoing yet another fork split into BCHN and ABC.
Why the split?
The BCHN-ABC split is the culmination of a series of disagreements related to proposed changes to the BCH code. There is widespread agreement that the goal of BCH is and always has been to become a global peer-to-peer digital currency for low-cost, high-speed, borderless transactions.
But not everyone agrees as to how the architectural makeup of the blockchain can be made to best serve this ideal, with disagreements regarding if and when certain changes should be made. The BCHN camp is in favor of many of the same technological changes as the ABC camp – but on a much slower basis.
Impact on miner profitability
It has been shown that a hard fork of a network can impact the price of that network’s hashrate. This metric (price of hashrate) has been coined “hashprice” by HashrateIndex’s Ethan Vera. It measures how profitably a given network can be mined based on its hashrate. Using this metric, Ethan and his team found that:
- The original Bitcoin Cash fork had a positive impact on the bitcoin network’s hashprice
- The Bitcoin SV fork had a positive impact on both the BCH and the BTC networks’ hashprices
- In general, a hashprice increase can be expected following a fork as long as the fork keeps the same original algorithm (e.g. SHA-256)
The third point is really the most critical here. Forks that occur on the same algorithm tend to be good for miners in the short term (as long as they are mining that algorithm). In the case of BCH, this is because as the total emission rate (block reward + transactions fees) for SHA-256 increases, hashrate stays the same. While some miners move on to the new coin, the existing coins will become more profitable to mine.
Even if you are exclusively mining the bitcoin network, it is believed this fork for BCH will have a positive impact on performance and profits.
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