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What is the point of Bitcoin forks and when will be the next one?

Bitcoin is the unit of the first cryptocurrency based on Blockchain technology. Strong security, decentralisation and effective verification of transactions before being added to the block have created Bitcoin’s reputation and popularity. The Blockchain distributed ledger keeps records of all network participants and transactions. Each new user downloads the full Blockchain (or the last part for light wallets) in order to use the cryptocurrency wallet.

Bitcoin Forks

Difference between Bitcoin and typical payment systems

The main difference between Bitcoin, as well as its great advantage over traditional financial systems, is transparency for customers. The Bitcoin network also has the following characteristics:

  • Open source and free white paper are available for everyone who wants to learn about its technical aspects.

  • Decentralisation. The correctness of transactions is confirmed by peers in the network.

  • Users have the ability to transfer cryptocurrency directly without the intermediation of banks or third parties (payment systems such as PayPal).

  • Participants have the ability to make edits to the source code and get a fork of Bitcoin – a new branch on the Bitcoin Blockchain. The fork will be an independent cryptocurrency with its own development path.

Despite this, the Bitcoin network has a significant drawback relative to modern payment systems. It has a low level of scalability. Special projects like the Lightning Network are designed to solve this problem, but they have not yet been fully launched and cannot be used at present.

Differences between Bitcoin Cash and Bitcoin Gold and why did they appear?

On 01st August, 2017, the first split of the Bitcoin network occured. As a result of the fork, the Bitcoin Cash cryptocurrency appeared. The token has become relatively successful: its value by the end of 2020 was USD $243. The goal was to increase the amount of information that fits into the block. Bitcoin developers couldn’t agree, so a fork occurred. The BCH fork enthusiasts hoped to increase network scalability and speed up transactions in this way. However, when making edits to the code, the main advantage of Bitcoin – reliability – was lost. Many users and investors have come to love Bitcoin Cash for its speed and anonymity. This coin is convenient to use in medium-sized transactions.

Bitcoin Gold separated from the Bitcoin network on 24th October, 2017. With the second fork on top of block 491.406, mining of its own new altcoin began. The goal of the coin’s founder was to simplify mining. At the time, Bitcoins could only be mined at special mining farms, consisting of many expensive ASICs, or by participating in a mining pool. The project did not receive significant support due to lack of technical information.

Who is responsible for the Bitcoin forks and who benefits from them?

Both forks of the first cryptocurrency were conducted by programmers who disagreed with the policies of the main developers. Now, they are former members of the network. The purpose of the forks was stated to be network improvements, but there was a material interest behind each project. When launching each new branch, its founders hoped that the value of the token would exceed the value of the original coin.

The founder of Bitcoin Cash is ex-Facebook engineer, Amaury Sechet, and Bitcoin Gold’s is Jack Liao, the founder of the Lightning ASIC firm. In the first case, the original SHA256 algorithm was retained, in the second, the SegWit2x structure was used. With each fork, a new currency is automatically distributed to users of the parent currency, BTC. The popularity of Bitcoin also plays an important role in marketing. It is difficult to predict the further development of the forks. Most likely, they will not be able to step over the existing price ceiling.

Current situation and forecast

It is difficult to predict the future of Bitcoin, but given its rapid growth after two crises, the price of the coin should not fall below the latest limit of USD $3,800. The cost of forks will directly depend on their usefulness for the crypto community. If the developers of the network can offer fast and reliable transactions with low fees, the tokens could start to rise in value. At the moment, these coins are used as a trading instrument on exchanges and are a risky short-term asset.