On 15 May 2018, Bitcoin Cash (BCH) is undergoing a hard fork, This guide explains how this coin came into existence, what this fork means, why it is being done, and what the effects it will have.
As you probably already know, Bitcoin Cash (BCH) started its life on 1 August 2017 as a hard fork of Bitcoin (BTC). The idea was to create a new cryptocurrency (BCH) based on the same basic ideas as BTC but with an adjustable maximum block size rather than a fixed (1MB) maximum block size. At that time, it was decided that a maximum block size of 8MB would result in a significant increase in the number of transactions that could be processed by the ledger. The larger block size would also mean that transaction fees would be lower. The first (and still most popular) implementation of the BCH protocol was called Bitcoin ABC; "ABC" stands for Adjustable Blocksize Cap. Before the hard fork happened, two other implementations of the BCH protocol had been completed: Bitcoin Unlimited and Bitcoin XT.
Everyone who held BTC coins at the time of the hard fork (1 August 2017) received an equal number of the new BCH coins. However, this hard fork that is taking place on 15 May 2018 is different in that for users it will look like a soft fork, which means that if you are a holder of BCH, contrary to what you may have heard/read elsewhere, you won't be receiving any new coins.
When BCH hard forks on May 15th, there will be two separate chains, but only the new chain will have any economic value. The old chain will become obsolete and will no longer be accepted by crypto exchanges. However, because the term "hard fork" often suggests that there was some disagreement in the community that could not be resolved, the BCH community is using the term "upgrade" for what will be taking on place on May 15th. And indeed, there will be an upgrade because new features are being added to the protocol.
The May 15th upgrade was first proposed when BCH developers met in London in November 2017 to discuss how to improve the scalability of BCH even further so that it would be better prepared, as a form of payment, for global adoption. There are three main changes:
- the maximum block size is being increased from 8MB to 32MB so that more transactions can fit in each block, which leads to more transactions per second (around 224) and even lower transaction fees (since there will be less competition to fit transactions into these larger blocks);
- several Bitcoin script operation code (op codes) are being added/reactivated so that we can have the possibility of creating very simple smart contracts; and
- the OP_RETURN data carrier size is being increased from 80 bytes to 220 bytes, which allows for tokenization or creation of "colored coins" (kind of like ERC-20 tokens on the Ethereum blockchain) that can be used for tracking real-world assets -- such as gold, real estate, bonds, stocks -- or even virtual assets such as CryptoKitties.
The main change that holders of BCH may notice after the upgrade is that Memo, the decentralized social network built on the BCH blockchain, will probably be updated soon so that it supports messages longer than 75 characters.