Last week the value of Bitcoin was down about $2 billion within three days representing about 25 percent plunge as the battle over the future of the technology was underpinned by the rise of a new threat, its namesake Bitcoin Unlimited.
The original cryptocurrency fell from highs of $1,255.32 to $1,142.60 on Friday 17 March, 2017. It further dropped to $1,089.30 on Tuesday, 21 March according to CoinDesk data.
The sharp fall in value was alluded to the warning about a bitcoin “hard fork” devastating the value of the digital currency. The warning was made by Vinny Lingham, Gyft founder and civic chief executive officer.
Bitcoin Unlimited was introduced in 2015 as a fork of Bitcoin Core. It was one of the first three new Bitcoin implementations set to increase the block-size limit and is maintained by lead developer Andrew “thezerg” Stone.
What separates Bitcoin Unlimited from the older bitcoin is the absence of a hard-coded block-size limit. Users are allowed to manually set the limit on their nodes; the Bitcoin Unlimited team expects consensus on a limit to emerge naturally at a so-called schelling point.
Over time, support for use of Bitcoin Unlimited has swelled forcing supporters of the older bitcoin to express concerns on the future of the entire digital currency.
Analysts are of the view that a contentious ‘hard fork’ which creates another bitcoin portends more grave dangers for the future of the digital currency in ways that regulatory efforts from countries like China and the United States will never imagine.
A fork, in software engineering occurs when developers take a copy of source code from one software package and start independent development on it, creating a distinct and separate piece of software.
Presently, a major beneficiary of the power tussle between the two bitcoins is the rival cryptocurrency ethereum or ether. Like bitcoin, ethereum uses the Blockchain technology and is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third party interference.
Last week, the value of ether went up more than 85 percent from highs of $29.87 percent. In the morning of Wednesday, 22 March, the price soared to $42.25.
According to Arjun kharpal, an analyst on CNBC, “The real concern is if Bitcoin Unlimited gains major support, it could have an impact on the underlying Blockchain technology that supports bitcoin. Bitcoin Unlimited has about an 11 percent market share of all the “nodes” in existence. Nodes are the backbone of bitcoin’s infrastructure and refer to those mining the transactions as well as those tracking the movement of bitcoin to make sure it is all working correctly.”
Nodes, Arjun explained, can run Blockchain Unlimited software which would signal their support for increasing the block size. If 50 percent of bitcoin miners adopted Bitcoin Unlimited, there would then be two major blockchains and a fork would be created made of Bitcoin Core, the current main software behind the infrastructure, and Bitcoin Unlimited.
Vinny Lingham recently wrote in a blog post “It is inarguable that bitcoin is the single strongest brand in the crypto space. I believe it probably received $2 to $5 billion free media exposure over the years. A Hard Fork would create two brands of Bitcoins?”
Bitcoin developer Andrew DeSantis describes the power struggle between bitcoin and Bitcoin Unlimited as a “dangerous” gamble that “could be the death of bitcoin.”
The battle is also creating what analysts are calling an oligopolistic attempt to control the Bitcoin network rather than allow it to be held in equilibrium of competing interests.
Laura Shin, Forbes bitcoin analyst said origin of the bitcoin crisis can be trace to a two-year debate over how to scale the network, which currently accommodates, on average, about a handful of transactions a second, based on a data cap of 1MB roughly every 10 minutes.
“On the surface, the argument is that some participants in the ecosystem want to raise that, called the block size, to what, under Bitcoin Unlimited, would be a flexible cap, while the developers who have been designing and maintaining the software for the last several years, a team called Bitcoin Core, want to keep the 1MP limit but make the system more efficient so it processes more transactions per block,” Shin writes.
Meanwhile, 21 different Bitcoin exchanges came out on Friday, 17 March to state that in a hard fork contingency plan that they will trade any Bitcoin Unlimited cryptocurrency as an altcoin alongside bitcoin. In essence, Bitcoin Unlimited will not be replacing bitcoin.
Some analysts also defended the future of bitcoin against the surging etheruem. According to Andreas Antonopoulos, bitcoin entrepreneur “The idea that bitcoin is stale and that ethereum will come to the rescue without stumbling on all the same milestones of growth that bitcoin has overcome is a fiction.”
