The Bitcoin Cash -rings t -he end of bitcoins?

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On August 1, a “new” cryptocurrency was born:  Bitcoin Cash  (BCH). Knowing that there are currently several hundred, some of which are born and die like ephemeral, the news could seem anecdotal if it were not the famous  bitcoins .

Celebrated by some as an instrument of liberation from the “yoke” of the financial system; hated by others  as a tool for money laundering and trafficking , bitcoins leave no one indifferent. Let us quickly recall what it is.

Bitcoins, a recent success

Bitcoins (and  crypto-currencies  in general) are units of account, managed in a decentralized manner through a  peer-to-peer network . That is to say a network where each of the stakeholders is both user and producer, client as well as server.

Unlike conventional currencies, where a central bank plays the role of regulator and controller, it is an  algorithm  which, through the decentralized work of the members of the network, ensures control and regulation.

Bitcoins were offered in 2009 by the mysterious  Satoshi Nakamoto . Their capitalization now exceeds  45 billion  dollars and thousands of businesses around the world accept them. Zealots have even managed to show that we can live by using only bitcoins as a means of payment.

It is no longer possible to see it as an epiphenomenon which would find its origin in the excesses of  ultra-liberal “  geeks ”. Cryptocurrencies, and bitcoin in particular, are an integral part of the global digital ecosystem. Faced with such success, why set up Bitcoin Cash?

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Bitcoin Cash

Bitcoin Cash has been proposed in an attempt to address the recurring problem of the system's ability to absorb growth. The Bitcoin network can only handle ten operations per second. Compared to the several thousand operations per second that Visa-type networks can handle, there is a fundamental and structural limit here.

This weakness stems in particular from the fact that a block (that is, a set of transactions which forms the fundamental unit of the system) is limited to a size of 1 megabyte (MB). Knowing that the network is designed to validate a block every 10 minutes, it is understandable that if the size of the block is reduced, it can only contain a small number of these transactions, which are only validated every 600 seconds or so. .

The Bitcoin community   has long been thinking about potential solutions to this scalability problem. Two approaches are favored. The first is to lighten the blocks by handling certain information differently. This is the case of the  Segregated Witness  (SegWit) mechanism proposed by Pieter Wuille, which, while remaining compatible with the current system, manages part of the data outside of blocks.

The second and most obvious is simply to increase the size of the blocks. If we accept blocks of 2 MB instead of 1 MB, the network will be (roughly) able to process twice as many operations per unit of time. But, if the debate has been raging for several years within the Bitcoin community, the arrival of Bitcoin Cash marks its failure.

Governance of the Bitcoin network

The Bitcoin network is based on  open source software  and its governance operates at three levels:

  • The developers, with in particular the team in charge of  Bitcoin Core , the reference client, directly descended from the one developed by Nakamoto;

  • Miners, who are responsible for validating transactions and blocks at the cost of a great deal of computational effort and, as a result, heavy power consumption. Currently, given the necessary investments, mining is overwhelmingly dominated by professional structures (farms);

  • The users.

For a change to take place in the system, it must be implemented by developers and adopted by miners and users. If a significant minority of participants do not adhere to the proposed changes, they will remain a dead letter. It is both a guarantee of security and a pledge of democracy. But this ideal is theoretical and the arrival of Bitcoin Cash clearly demonstrates its failure.

A screenshot of LibreOffice software, a famous  fork  of open sourceVanger / Wikimedia / The Document Foundation / LibreOffice TeamCC BY-SA

Unable to settle the debate on scalability, the Bitcoin network is coming off a  classic phenomenon  of open source  : the creation of a  fork  (fork). We call  fork  the development of an alternative version of software. The LibreOffice example   is famous. After the acquisition by the company Oracle of the free office suite OpenOffice, the open source community   created a  fork  (LibreOffice), in order to guarantee an independent development of the possible commercial pressures of the new owner.

Bitcoin Cash is thus nothing more than a new branch of the Bitcoin network, which, even if it integrates the whole of the history of classic bitcoins, is not backward compatible. It addresses the issue of scalability by increasing the block size to 8MB. From there, we are heading towards the existence of two different currencies: classic bitcoin (which will use SegWit) and Bitcoin Cash with its enlarged blocks.

Crypto-currencies, between leadership and decentralized decisions

If, in general, the emergence of a  fork  within an open source project   can be a simple sign of vitality, it is quite different for crypto-currencies. To create a   non-backward compatible fork is quite simply to create, potentially, an alternative currency.

How then to build the confidence necessary for the adoption of a new unit of account? Should we trust Bitcoin Cash or, on the contrary, continue to rely on classic bitcoins? And what about other currencies, which are also susceptible to schismatic temptations? Managing  forks  and preventing the emergence of   independent forks is a vital imperative for cryptocurrencies.

The governance of open source projects   has been the subject of numerous studies and to use  Robert Viseur's expression : “In practice, no governance logic seems to be able to eliminate the risk of a fork for the organization. "

The solution may lie on the side of massive decentralization. Networks like  Steem  or  Tezos  want to integrate the governance system within their protocols. By construction, users will have “native” voting rights, allowing them to vote on proposed changes.

By integrating governance into the protocol, we hope to significantly limit the temptation of  forks . Unless it is on the side of centralization. The interest in open source projects  of the "benevolent dictator" is often emphasized  . The Linux project, with  Linus Torvald , is the ultimate illustration. The creation of Bitcoin Cash, which is a failure for the Bitcoin community, unable to manage itself, will revive these debates and this is not the least of its merits.

At a time when the press and the media multiply the Unes on the  blockchain  and when governments and financial institutions are wondering about the use and contributions of crypto-currencies, this "failure" of Bitcoin must challenge us. It shows that the governance models of cryptocurrencies remain to be designed and validated. Until this is done, mistrust will persist.

If Nakamoto did a work of genius when he designed his algorithm, he visibly underestimated governance issues. We are witnessing a youthful Bitcoin crisis and solutions will be found. Future debates will necessarily focus on the balance between peer-to-peer democracy and effective governance. The future of cryptocurrencies rests on their ability to respond to this new challenge.

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