Coming 'fork' might cause chaos in bitcoin trading

Updated 2017-08-02 10:12:05 CGTN

The bitcoin blockchain is likely to face its first major fork on Tuesday.

A group of bitcoin miners, mostly based in China, are not happy with current proposed improvements to the currency's technology. Therefore, they plan to provide investors a matching amount of a new cryptocurrency, named Bitcoin Cash, to put pressure on the value of original bitcoins.

These miners, who get paid in the currency for contributing computing power to the bitcoin network, will initiate the fork to split the blockchain, a public ledger of all bitcoin transactions, into two potential paths on August 1.

If successful, the fork could create a new rival for the oldest and most valued digital currency, bitcoin. It is uncertain how much Bitcoin Cash would be worth.

Although it is not clear if the split will happen - if it does, anyone owning the original bitcoins before the split will have access to an equal amount of Bitcoin Cash for free, meaning they could then be able to trade for fiat currencies or other cryptocurrency, Reuters reported.

BBC reports that some popular bitcoin platforms are refusing to support Bitcoin Cash, which means investors who depend on some bitcoin currency exchanges and virtual wallets will not be able to take advantage of the offer unless they switch to other providers.

Potential influence

It is still unclear whether Bitcoin Cash could beat bitcoin and become the new favorite in the cryptocurrency world. But there is some potential chaos ahead.

According to the BBC, the uncertainty surrounding Bitcoin Cash's chances has led to one futures market in Bitcoin Cash to value one coin as being worth about 267 US dollars, a fraction of the 2,780 dollars each bitcoin was trading a short time ago.

Theoretically, if a mass adoption of Bitcoin Cash were expected, the two currencies should be much closer in price.

"There's massive uncertainty and the quoted futures price should be taken with a grain of salt," Dr. Garrick Hileman, research fellow at the Cambridge Centre for Alternative Finance told BBC.

"We won't know the real Bitcoin Cash price until a number of exchanges across the world start trading it, and it's still not clear when that will happen."

Hileman also mentioned that there could be some wild swings in the value of both types of bitcoin over the coming days. "My sense is that the split can be managed if exchanges and wallets take the necessary precautions," he explained.

"But I suspect some will not be well prepared as this happened quickly and a lot of organizations are coming on board at the last minute." Hileman told BBC. "It wouldn't surprise me if there is some chaos."

China, leading trader of Bitcoin

According to a Reuters' report in February, China is the world's leading venue for bitcoin trading, with analytics site Bitcoinity estimating that the three biggest bitcoin exchanging platforms in China; OkCoin, Huobi and BTCC, had accounted for more than 90 percent of the global bitcoin market on Jan 11, 2017.

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