What Is Bitcoin Cash & Why Is Everyone Freaking Out About It Right Now?
On Tuesday, the most popular platform for making bitcoin transactions in the United States, Coinbase, began offering bitcoin cash, one of bitcoin's rival currencies. If you're wondering what exactly that means and why everyone is freaking out about it, there's a (somewhat) simple explanation.
Bitcoin cash is an offshoot of bitcoin. Bitcoin is a digital medium of exchange and is often referred to as a currency, but it isn't like the dollar, peso, or other physical currencies, the values of which don't fluctuate much on a day-to-day basis (their value is basically determined by the global currency markets' faith in a country's stability, which tends to shift gradually; central banks also help keep currencies steady). Bitcoin's value fluctuates dramatically every day, so it simply couldn't work as a replacement for physical currency. Instead, people use bitcoin to exchange payment in a decentralized way — i.e. without a third-party, like a bank, or PayPal.
Bitcoin is decentralized because it runs on "blockchain" technology. Blockchain is a constantly growing database of transactions. Most importantly, it's public: Anyone with internet access can look at any action that's ever occurred on the blockchain, which means that the power of transaction verification lies in the hands of all blockchain users, as opposed to any centralized authority. No one can "control" or "run" the blockchain. It only allows big changes (basically, changes that require everyone to update their software to keep using the blockchain) to be made to it via consensus.
As you can imagine, that consensus is hard to achieve, and in the case of bitcoin — which is owned by at least several million people — nearly impossible. If some of the users of a cryptocurrency together decide to implement a big change, their new system doesn't replace the old but instead becomes a whole new currency. This splitting-off process is called a "hard fork."
That's where bitcoin cash comes in. In August of this year, bitcoin users who were frustrated by bitcoin's slow processing speed decided to change the blockchain. Performing a "hard fork," they created bitcoin cash, which has been growing in popularity ever since.
Enter Coinbase, which is arguably the easiest place to buy and sell cryptocurrency. Coinbase is incredibly popular and even became the most downloaded iPhone app in the United States earlier this month. Until now, the platform only supported three digital currencies: Bitcoin, Litecoin, and Ethereum (the three leading cryptocurrencies). People who preferred bitcoin cash to bitcoin because of its faster transaction speeds and also preferred Coinbase to other marketplaces because it's user-friendly were out of luck.
But that finally changed on Tuesday when Coinbase began allowing users to trade in bitcoin cash. "Coinbase operates by the principle that our customers should benefit to the greatest extent possible from forks or other networks events," the company wrote on its blog. "This is essential in our mission to make Coinbase the most trusted, safe, and easy-to-use digital currency exchange."
The company did not always take this inclusive approach to forks. "Our policy is to support only one version of a digital currency," Coinbase wrote on its blog in July. "In order to determine which fork to support, we look at factors such as size of the network, market value and customer demand. We make this decision carefully, because safely supporting a new digital currency requires significant work for many teams."
The platform has evidently changed its policy, deciding that bitcoin cash — despite being essentially another "version" of bitcoin — is too important to ignore. Coinbase has also said that it will add even more cryptocurrencies to its platform in 2018.