Fallout: Everyone’s a loser after Bitcoin Cash split

Following months of rising tensions between factions with opposing views on how to upgrade the Bitcoin Cash protocol, the BCH community initiated a hard fork on November 15. What has followed has been an ideological hash war between two majors camps — Bitcoin ABC and Bitcoin SV — which has caused a surprising amount of collateral damage.

The crux of the matter can be traced back to a long planned update published by BCH lead developer Amaury Sechet which included a pre-consensus feature to speed settlement rates. While Sechet maintained that the feature would only serve to strengthen the BCH codebase, it nonetheless angered many members of the BCH community who thought it unfairly favored large mining groups (it was supported heavily by mining giant Bitmain).

In response, self-proclaimed Satoshi Nakamoto, Craig Wright, began championing an opposing update, which he called ‘Satoshi Vision’ (SV). Similar to Bitmain’s support of the ABC camp, the SV faction was supported by major miners CoinGeek — led by online gambling billionaire Calvin Ayre.

CoinGeek threw its weight behind the SV camp mainly because of its opposition to the burn feature which BCH had initiated in conjunction with Bitmain and which allowed Bitmain to destroy units of BCH as part of a new token creation framework.

Each camp was steadfast in its position that the other was attempting to take over Bitcoin Cash, motivated by profits as opposed to the course of action that would ultimately be best for the health and value of BCH.

Hostilities commence

Come November 15th, the opposing factions were in a race to determine who would come out on top. In the event of a hard fork, a community ‘votes’ with its hash power. The chain with the most support from the mining community eventually has the longest chain and becomes "the" coin.

In their efforts to assert dominance, both camps diverted significant hashing power to their respective chains. The BCH ABC camp was supported by the Roger Ver-owned Bitcoin.com as well as Bitmain, several other mining pools and multiple businesses. Before the hard fork, the SV group was reported to have more support from the mining community. According to Coindance, a community-driven blockchain analytics website, SV was set to receive 64 percent of the hashing power of the BCH chain from miners like CoinGeek, SVPool, and BMG Pool.

However, in the hours following the split, the ABC camp appeared to take the lead and mined its first block at approximately 1:00 pm EST on November 15. The SV camp mined its first block 22 minutes later, marking the official time of the hard fork as the BCH chain was now split into different chains.

At the time of writing, 2538 blocks have been mined since the split. The ABC camp continues to cement its lead and is currently ahead of the SV camp by 15 blocks (equivalent to 30.2 percent more proof-of-work). It is important to note that both camps have been operating at a loss since the beginning of the hard fork. Bitcoin exchange BitMEX published data about the split, revealing that both sides were dealing with major losses.

In the initial stages and factoring only electricity costs, BitMEX estimated that both sides were dealing with about half a million in losses. The biggest loser appears to be the SV camp which, by November 21, had racked up an estimated loss of 2.2 million. The estimates only factor in electricity costs and it is likely that the actual figures are much higher.

How the cryptocurrency world reacted

In the days before the split, most exchanges stopped trading BCH as there was uncertainty about the outcome of the fork. Also, it was necessary to wait until the split happened to see which camp would retain the BCH name.

After the ABC camp was able to garner enough support to have the longer chain, several influential exchanges including Coinbase, Bittrex, and Bitstamp began to refer to the ABC camp as BCH, signaling a win in the eyes of the crypto sector with the Bitmain, Roger Ver backed chain now considered the "real" BCH.

Additionally, some exchanges began listing the SV coin. San Francisco-based Kraken, for example, started listing BCH SV under the ticker BSV, albeit with a warning that BSV was a high-risk token. Other platforms listing both BCH ABC and BCH SV are Poloniex, HitBTC, and Binance.

At the height of the hash war, the entire crypto sector felt the burn as leading mining groups focused their hashing power on the camp they were supporting, a situation which contributed to a drastic fall in the price of bitcoin (BTC) and dragged down the entire crypto market cap.

As it stands today, the majority view is that the ABC camp has come out on top and thus retained the BCH ticker. The SV camp, however, believes the battle is far from over with Craig Wright tweeting that the competition would continue until one side died. Ayre, meanwhile, has characterized the split as a win for both sides as the SV camp is able to continue upholding the Nakamoto defined protocol, and that the SV camp is now the ‘real’ bitcoin and no longer wants the BCH name anyway.

While both antagonists have declared victory, for investors the split has been a disaster. On the 1st of November the price of Bitcoin Cash was $423.00. Just over two weeks after the split the price of BCH ABC is $158, while BCH SV is $93 – meaning a combined value of $251. This equates to a 40 percent drop from BCH’s November 1st price and is 52 percent down from its November 14th high.

Conclusion

Two weeks on from one of crypto’s most consequential hardforks, the price of bitcoin is at lows not seen since August 2017, the total crypto market cap is down almost $100 billion, and the two resulting chains are locked in a money losing fight that one side describes as being to the death. Or, put another way — War, huh, yeah – what is it good for? Absolutely nothing…