Despite their names, Bitcoin Cash, Bitcoin Gold, Bitcoin Diamond, Bitcoin Private, and others are not the same thing as Bitcoin. They’re based on Bitcoin, and are piggybacking on its name, but they’re different things. Here’s how to know which Bitcoin variant is which.
Bitcoin is a decentralized cryptocurrency based on open source code. Anyone can take the code, modify it, and release their own version. That’s exactly how these other coins were created.
In computer software, a “fork” occurs when developers take existing code, modify it, and then use it as the basis for their own project. That’s exactly what other projects with names like Bitcoin Cash (BCH) and Bitcoin Gold (BTG) are. The developers took the main Bitcoin (BTC) code, known as “Bitcoin Core,” and modified it.
They also chose to fork the Bitcoin blockchain, copying its transaction history and using it as the basis for their own blockchain. In other words, if you owned 10 Bitcoin at the time Bitcoin Cash was released, you’d end up with 10 Bitcoin and 10 Bitcoin Cash. However, that’s a one-way, one-time event. You can’t convert any Bitcoin Cash you own back to Bitcoin—not without selling your Bitcoin Cash at the market rate and then buying Bitcoin at its market rate. And, if you buy Bitcoin after the fork, you don’t get any free Bitcoin Cash.
Coins like Bitcoin Cash and Bitcoin Gold are known as “hard forks” because they create a permanent split in the block chain, as opposed to “soft forks” that only create a temporary split.
People often disagree on the design decisions made in the Bitcoin project, and these hard forks allow developers who disagree to modify Bitcoin in their preferred ways. They can bypass the usual process of gaining consensus in Bitcoin Core and implement their own ideas. These Bitcoin forks are altcoins—that is, non-Bitcoin cryptocurrencies—based on the Bitcoin code.
Critics argue that these coins are piggybacking on Bitcoin’s name and that many are launched just to make a nice profit for the developers and early adopters. Supporters argue that they can improve on Bitcoin’s weaknesses.
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Like Bitcoin itself, these forks have value (or no value) based entirely on perception—they are worth however much people value them. Some Bitcoin purists believe that these forks have no value and are a distraction from Bitcoin, just as they believe altcoins are largely pointless. Other people believe that Bitcoin has too many problems and that these Bitcoin forks could be the future, just as some people believe that one or more altcoins will supplant Bitcoin as the premier cryptocurrency in the future.
In the end, Bitcoin and all its forks are priced by the market—in other words, what people are willing to pay for them. You can see how valuable people think these coins are at the moment by looking at a website like Coinranking.com.
Bitcoin Cash was designed for low fees and quick transaction times. The name pitches it as a sort of “electronic cash” thanks to these features. Bitcoin Cash embraces a larger block size, which means the network can support more transactions. It’s currently the most valuable Bitcoin hard fork.
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This sounded particularly compelling in December 2017, when Bitcoin’s high transaction fees topped out at over $40. It’s still a meaningful difference in April 2018, however. Bitcoin transaction fees are down to $1.15 or so, while Bitcoin cash fees are below $0.04.
Bitcoin proponents argue that Bitcoin Cash’s changes are unnecessary, that SegWit (Segregated Witness) has already helped bring transaction fees down, and that the Lightning network will bring cheap, near instant payments to Bitcoin in the future.
Critics have pointed out that Bitcoin Cash seems designed be confusing. Both bitcoin.com and the Twitter account @Bitcoin are both used to push Bitcoin Cash. But Bitcoin Cash (BCH) isn’t the same thing as the original Bitcoin (BTC.) The Bitcoin Cash website argues that Bitcoin Cash is the “real Bitcoin,” but the larger Bitcoin community doesn’t agree.
This was the first big hard fork and took place on August 1, 2017, inspiring other hard forks of Bitcoin.
Bitcoin Gold tackles another problem some see with Bitcoin: the increasing centralization of Bitcoin mining that requires specialized hardware and makes it impossible for the average person to mine. Specialized hardware known as application-specific integrated circuits (ASICs) is required to mine profitably. And those mining companies can wield power over the network thanks to their massive size.
The Bitcoin Gold hard fork tackles this problem by swapping out the SHA-256 mining algorithm in Bitcoin for another algorithm called Equihash. This is still a proof-of-work algorithm that requires an immense amount of electricity and computing power, but it’s made to be much more difficult for ASIC-based optimization. Bitcoin Gold is designed so that average people—or at least average people with powerful graphics processors (GPUs)—can mine Bitcoin on their PCs once again, making the network more decentralized.
As of April 16, 2018, Bitcoin Gold was the 26th most valuable coin and the third most valuable Bitcoin hard fork after Bitcoin Cash and Bitcoin Diamond, according to Coinranking.com.
The Bitcoin Gold fork took place on November 12, 2017.
Bitcoin Diamond mixes together a number of features to create a “better Bitcoin,” including Segwit and the Lightning network (from Bitcoin), larger block sizes (from Bitcoin Cash), and a GPU-optimized mining algorithm (similar to Bitcoin Gold). It also promises some privacy by encrypting the values of each transaction. People can’t see how much currency is being sent in any given transaction by examining the public blockchain.
This is the 16th most valuable coin and second most valuable Bitcoin hard fork and as of April 16, 2018, beating Bitcoin Gold.
The Bitcoin Diamond fork took place on November 24, 2017.
This is a hard fork of Bitcoin, but it’s also a merge with the Zclassic cryptocurrency. It’s a “fork-merge.” In other words, anyone who owned either Bitcoin (BTC) or ZClassic (ZCL) received Bitcoin Private at a 1:1 ratio. So, if you had 10 Bitcoin and 10 Zclassic, you ended up with 20 Bitcoin Private as well.
Where Bitcoin allows people to view transactions on the public blockchain, Bitcoin Private is focused on privacy. As the project’s website puts it, “payments are published on a public blockchain, but the sender, recipient and other transactional metadata remain unidentifiable.”
This is the 37th most valuable coin and fourth most valuable Bitcoin hard fork as of April 16, 2018.
The Bitcoin Private fork took place on February 28, 2018.
Unsurprisingly, these hard forks were all released in mid-to-late 2017 or early 2018, around the time of Bitcoin’s historical highs in December 2017. Lots of people want to get in on the hype. There are many, many other hard forks out there with names like Bitcoin Rhodium, Super Bitcoin, and Bitcoin Silver, too. You’ll probably see lots of hard forks released throughout 2018.
If it’s all becoming a blur at this point, that’s the idea. People will keep creating Bitcoin hard forks as long as Bitcoin is popular, attempting to add their own ideas to Bitcoin or just strike it rich by hoping their coin takes off. Slapping the “Bitcoin” name on something seems like a surefire people to get people to pay attention to your idea, while an altcoin without “Bitcoin” in the name may not grab as much attention. Just as anyone can create their own altcoin, anyone can create their own Bitcoin fork.
While we don’t recommend you put money into Bitcoin, we think you should be especially careful before putting money into Bitcoin hard forks or altcoins.
Image Credit: Adrian Today/Shutterstock.com.