Introduced in 2008 and released in 2009, Bitcoin is the world’s first and most popular digital currency. Even with its growth, with some banks looking to bring it into their product lines, there may be some turbulence with it in the future.
There is a chance that Bitcoin’s development could fork, creating two different currencies with similar names.
What is Bitcoin?
Bitcoin is a decentralised virtual currency that isn’t tied to any country or specific market. This allows it to not only work on the supply and demand principal, increasing or decreasing its value, but it is free from politics and general market crashes.
The system doesn’t hold any real physical value, such as money notes or coins, though it is controlled through digital means. Transactions take place on a peer-to-peer basis without the need for any immediately. Transactions are verified through security nodes and are listed on a public ledger called Blockchain.
While it is theoretically easy to accumulate Bitcoin by [digitally] mining it, the process requires the correct tools. Users can mine bitcoin by using PCs to verify and record bitcoin transactions, though over time this becomes more difficult, requiring more computing power.
According to the Economist in 2015, the amount of electricity needed to mine Bitcoin globally would be 166.7 megawatts (or 1.46 terawatt-hours per year). Some miners use hydroelectric power to reduce electrical costs.
On 2 March 2017, one Bitcoin cost more than an ounce of gold, coming in at US$1273 as opposed to US$1244 for the precious metal.
In South Africa, the cryptocurrency is supported by the likes of Luno (formally BitX), which is a digital wallet, along with payment gateway PayFast which has introduced it as a payment method to its clients, among others.
Why would it fork?
The debate around a fork started due to the limitations of Bitcoin. At present, the cryptocurrency can only handle a set amount of transactions, and due to its growth, has become a slow and more expensive process.
Changes to the way Bitcoin works can be voted and decided upon by miners. Massive changes, which would impact the currency in a significant way, could result in a new version of the software that may not be compatible with the older version.
These changes could lead to a fork in the development and the emergence of two different types of Bitcoin.
The most popular fork is Bitcoin Unlimited, which plans to allow more transactions but increasing the block size. The current version of Bitcoin would then be called Bitcoin Core.
What does this mean for the currency?
There is a possibility of ending up with two different versions of Bitcoin. According to a blog post on Luno’s website, “If you have ten Bitcoin (10 BTC) before the hard fork, you will have a balance of 10 Bitcoin Core and 10 Bitcoin Unlimited after the fork.”
Each currency could command market value independent of each other, as well experience market volatility closer to the split.
The fork may also lead to digital wallets supporting one of these forks or both, though it would be up to each company to decide.
The future of Bitcoin
Whether it forks or not, there is an interesting road ahead for Bitcoin and its place in the world of global currencies.
Bitcoin is not the only cryptocurrency. Since its debut in 2009, a number of others, such as Ripple and Litecoin, have emerged, with some becoming inactive since then. There is competition in the market, but not enough to throw off the dominating power.