The so-called cash version of bitcoin—which features a larger block size, which supporters say makes for faster and cheaper transactions—is disrupting the market, and came close to overtaking ethereum as the second largest cryptocurrency by market cap over the weekend, nearly quadrupling its price in three days of trading after weeks of smooth sailing.
A block makes up the blockchain, and is equivalent to a file storing data. Bitcoin’s blocks hold 1 megabyte of data, while bitcoin cash holds 8 megabytes. For supporters of bitcoin cash, the larger block size is what they believe is the update bitcoin needed to become a better means of exchange to compete with payment services like Visa. By comparison, bitcoin process about 7 transactions per second, while Visa does about 2,000.
Bitcoin developers had decided to begin solving this problem this past summer and implemented an update called Segregated Witness, or SegWit, which aimed to move some of the work required to check transactions off of the main chain. However, while the SegWit upgrade was activated in August, most bitcoin transactions still aren’t using it.
SegWit2 was meant to be a second stage in the process that would increase the block size to 2 megabytes, though many bitcoin developers said SegWit should be fully implemented before implementing the second phase with SegWit2. The two factions had been deadlocked in disagreement, with SegWit2 supporters threatening to break off from the main bitcoin chain, until the SegWit2 supporters decided to cancel the split late last week.
This weekend, supporters of larger blocks for bitcoin flocked to bitcoin cash after being disappointed by the move. This caused the price for bitcoin cash to surge as high as $2,446 on November 12, up from around $600 before SegWit2 was cancelled. However, some of those gains were erased and the price now sits just about $1,100 today.