OKX Blockchain 60 Lectures | Episode 48: The Story of Bitcoin Forks

BCH-1. 67%

In our last lesson, we discussed how in 2017, with Ethereum's gradual rise, a wave of blockchain revolution was approaching. In addition to this, another major event occurred that year that would influence Bitcoin's future trajectory: Bitcoin's first fork.

The story begins with Bitcoin's block capacity. When Satoshi Nakamoto first designed Bitcoin in 2008, to ensure stable synchronization of the Bitcoin network, the block capacity was set at 1M. However, some pointed out that a 1M block every ten minutes could only accommodate 2,000 trading transactions. If Bitcoin succeeded and many people worldwide used Bitcoin, this would clearly be insufficient. Satoshi proposed increasing this capacity limit one year before the expected 1M would be full, to avoid Bitcoin network congestion.

In 2010, after Satoshi Nakamoto's departure, Bitcoin's code updates and maintenance were handed over to Gavin. In 2012, following a decentralized direction, Gavin transferred code permissions to the Bitcoin core development team—Bitcoin Core's four main developers—while focusing himself on writing code.

In 2015, Bitcoin trading growth predicted that 1M blocks would be full by January 2016, putting capacity expansion on the agenda. But it wasn't proposed by Bitcoin Core; rather, it was put forward by the already retired veteran Gavin, while Core's core members opposed expansion. Beyond concerns about hard fork upgrade security and the belief that small blocks are easier for ordinary people to run, the key reason was that several Core members raised $72 million to form their own company Blockstream to engage in sidechain development. If the main chain expanded, sidechains would have no market demand for several years. Therefore, they advocated Bitcoin not expanding, instead achieving expansion through the Lightning Network and sidechains.

Gavin's expansion proposal faced strong resistance from Core's main developers. For this reason, he came to China to seek support from Chinese miners. As block capacity became increasingly exhausted, most Chinese miners recognized the importance of expansion but also had to rely on the Core development team's technical strength, preferring expansion under Core's leadership.

By 2016, due to Bitcoin's second bull market, Bitcoin prices rose from approximately 2,800 yuan at the beginning of the year to over 6,800 yuan, reaching a three-year high, with total market capitalization exceeding $15 billion. User numbers and trading volumes increased significantly. Starting in July, the Bitcoin system began experiencing persistent congestion, with confirmation times generally exceeding 10 minutes, and trading fees rising to several times their original levels.

Chinese miners widely recognized the urgency of expansion. On February 20, 2016, Chinese miners invited overseas developers to a meeting at Hong Kong's Cyberport to discuss expansion issues. The developers agreed to expand Bitcoin to 8M, and in exchange, Chinese miners agreed to run only Core, no longer supporting Gavin's version—the so-called "Hong Kong Consensus."

The sidelined Gavin, in the 2016 fake Satoshi Nakamoto incident, saw his reputation ruined after naively believing CSW was Satoshi Nakamoto. The expansion faction lost an important force. The Hong Kong Consensus was not honored by Core's main developers, and expansion code made virtually no progress. Chinese miners were greatly disappointed. Wu Jihan and others began seeking new teams to develop Bitcoin's expansion version independently of Core, including later BU and ABC teams, who began developing their own Bitcoin versions.

At this point, block congestion had made commercial enterprises in the Bitcoin ecosystem universally recognize the urgency of expansion. At a New York meeting attended by more than 50 important global companies, the "New York Consensus" to expand to 2M was reached. However, Core's main members firmly opposed the New York Consensus and announced they would never support 2M blocks. In this situation, if the New York Consensus were implemented, it would inevitably lead to a Bitcoin fork.

Concerned about the possible failure of the New York Consensus, Wu Jihan proposed creating an expansion fork version as a backup plan in case the New York Consensus failed. In June 2017, the ABC development team completed the Bitcoin version expanded to 8M—Bitcoin Cash (BCH)—which officially launched on August 1, 2017. However, most expansion supporters, including Wu Jihan, still regarded the New York Consensus as their primary hope.

However, under the strong opposition and threats from Core, the community's core development force, ultimately the greater consensus of "never fork" defeated the "main chain expansion" consensus, and the New York Consensus was announced to have failed in early November. The minority insisting on "main chain expansion" turned to Bitcoin Cash, which became their only hope for continuing Satoshi Nakamoto's ideal. That day, Bitcoin's price fell 10%, while Bitcoin Cash's price rose nearly 100%, with BCH's peak subsequently approaching nearly 50% of Bitcoin's price.

After expansion failed, the Bitcoin community still attempted to solve capacity issues through the Lightning Network, but progress was slow. In early 2019, Bitcoin began a significant rally without congestion and fee issues being resolved, with gains far exceeding other cryptocurrencies. The Bitcoin community began to widely believe that Bitcoin should not be peer-to-peer electronic cash focused on payments, but rather digital gold emphasizing store-of-value functionality.

At this point, Bitcoin and Bitcoin Cash each moved toward digital gold and electronic cash paths respectively—one as the originator of cryptocurrency, the other as a decentralized cryptocurrency that forked twice due to internal disagreements, both widely recognized by the public. The fork events caused by the expansion dispute became textbook cases, influencing generation after generation of new blockchain entrepreneurs and projects, becoming an unmentionable event in Bitcoin's history.

Special thanks to Liu Changyong for his assistance and guidance with this episode's content.

Sina Weibo: @昌用老师

"OKX Blockchain 60 Lectures" is a blockchain science animation video jointly produced by OKX & Sina Technology, targeting zero-basis blockchain users. Through series articles, science animations, and other forms, from concepts, technology, applications, and other perspectives, through 5 major sections and 60 knowledge points, it vividly explains blockchain concepts. This episode's course content was completed under the guidance of Liu Changyong, Ph.D. in Economics from Peking University.

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