Bitcoin Cash (BCH)
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09 11月 2020

Understanding the Bitcoin Cash Hardfork and How Exchanges are Preparing for the Split

It is all but inevitable that Bitcoin Cash will hard fork on Nov. 15, 2020.

The first rumblings of a potential fork arose in late July of this year after a fracture formed between the two lead development teams for Bitcoin Cash over the implementation of a difficulty adjustment algorithm. The Bitcoin ABC (ABC) and Bitcoin Cash Node (BCHN) teams found themself in a standoff after leading ABC developer Amuary Sechet proposed implementing a difficulty adjustment algorithm labeled Grasberg. Grasberg was designed to solve three problems on the bitcoin cash network: - Block production consistency - Stabilize profit margins for miners - Predictable emissions of coins. This proposal itself was not what caused the rift between the two development teams. Rather it was the fact that the ABC team made clear their intentions to unilaterally implement this algorithm without consent or agreement of the Bitcoin Cash Node team. A short time later, the groups held a meeting to attempt to resolve this conflict.

While initially there was hope that cooler heads would prevail, the meeting quickly turned sour with multiple participants walking out. The ABC Team would go on to scrap the Grasberg Difficulty Adjustment Algorithm in favor of the Aserti3-2d (Asert) algorithm, but the die had already been cast and a split from the Bitcoin ABC development team from the Bitcoin Cash network was as good as done.

Realizing a fork was likely the Bitcoin ABC team decided to double down on their attempt to independently control the Bitcoin Cash network, and shared their plans to implement a restructuring of the coinbase rewards to fund future development by ABC. This proposed change labeled IFP (Infrastructure Funding Proposal) would funnel 8% of the reward from newly mined blocks to an ABC owned address to fund development on the network. Bitcoin ABC previously attempted to implement this IFP in the May 15, 2020, network upgrade but failed to meet consensus requirements needed for it to be included in the upgrade.

A restructuring of the coinbase reward is no small change, it is a complete shift of the incentives and security designed to protect the network. Unsurprisingly, the change was not met with the support of network miners. BCHN (the non-IFP implementation) is currently receiving 84.7% of support, signaled from miners, and will be the dominant chain after the fork barring any significant changes to the hash rate of the network.

To understand the context around the restructuring of the coinbase reward you have to understand the context of the development of Bitcoin and Bitcoin-forks. Bitcoin does not change often and developers and supporters are hesitant to see any change no matter its size within the network. Even changes that could be considered upgrades often fail to get implemented. In the eyes of Bitcoiners, any new software or change to the network opens up a new attack vector for malicious actors to exploit or the opportunity for unforeseen network failures to be introduced. These reasons are why people can have confidence that the current design of the network and its current parameters, including the 21 million coin supply cap and fixed issuance schedule will not change.

For a development group to independently restructure the Bitcoin Cash network to divert the block reward to a single address owned by a central entity is all but unthinkable. It is quite likely the ABC team and lead developer Amuary Sechet understands this and it is quite reasonable to assume that the implementation of this reward structuring would be a decision that leads to a hard fork of the network. After all, this fork was not caused by any singular change or proposed improvement but by the decisions of the ABC team to forgo achieving consensus on proposed improvements and unilaterally implement changes to the network.

Bitcoin Cash is a network quite familiar with hard forks after all it is the most prominent Bitcoin fork and is currently the fifth-largest network by market cap. Every six months the network undergoes an upgrade. Taking place every May 15 and November 15, these upgrades open the possibility for dissenting opinions and plans for upgrades. We saw this play out in late 2018 when Bitcoin Satoshi Vision (BSV) hard forked from Bitcoin Cash on Nov 15, 2018, with its supporters wanting to implement larger block sizes and reduced transaction fees.

A majority of exchanges and services providers have stated their intent to support BCHN as the dominant Bitcoin Cash network with some supporting ABC dependent on the consensus and user demand following the fork. The complete list of service providers and their positions on the fork can be found at the bottom of this post.

List of service providers and their positions on the Nov. 15, 2020 BCH Hardfork

Binance: Will suspend BCH deposits and withdrawals on Nov. 15, 2020. Will credit users holding BCH with both forks at a 1:1 ration based on a snapshot of BCH balance on Nov. 15, 2020.

Bitgo: Is currently running BCHN nodes and expects it to be the dominant chain post fork, all BCH services will be paused at 00:00 am UTC on Nov. 15, 2020.

Trezor: Will continue to support Bitcoin ABC implementation following fork but will consider changing to BCHN depending on customer interests. Will not be distributing coins from the split and users who wish to take part in the fork should transfer their BCH balances to a different wallet provider.

Bitmex: Will be following the fork closely and will decide which chain to support for Bitmex products following the fork.

Kraken: Will support BCHN regardless of the outcome of the fork, may support ABC if the hash power on the ABC network is at least 10% of the hashpower of the BCHN network. If Kraken supports ABC they will provide its clients with an equal amount of ABC forked coins based on a snapshot of BCH balances at the time of the fork.

Ledger: Ledger will suspend Bitcoin Cash services at 7:00 UTC on Nov. 12, 2020. The ledger will then monitor post-fork activity and decide if and when which network they will support. Ledger does not a timetable on when Bitcoin Cash services will be restored.

FTX: BCH futures on FTX will settle to a single BCH index of the majority chain and any minority chain will not be included in the BCH index. For Spot markets and balance FTX will pause BCH deposits and withdrawals at 11:00 am UTC Nov. 15, 2020. FTX will credit users with the BCH from the chain with the most work done, if the minority chain is able to maintain 10% of the hashrate, FTX will enable users to withdraw coins from the minority chain based on a snapshot of BCH balances taken on 12:00 pm UTC.

Houbi: Houbi will suspend all BCH trading pairs, deposits, withdrawals, and loan services before the fork before taking a snapshot of BCH assets as the basis for distribution of coins following the fork. Following the fork Houbi will open trading services for both ABC and BCHN.

Bitfinex: Bitfinex will suspend deposits and withdrawals of BCH at 10:00 am UTC on Nov. 15, 2020. Bitfinex will take a snapshot of BCH balances at 12:00 UTC and BCH balances will be credited in equal amounts ABC and BCHN.

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