Bitcoin Cash: towards a new split in November?

On August 6, Bitcoin ABC unilaterally announced that it was implementing an 8% mining revenue redirection for its development. This decision is the subject of a deep rejection in the community and a separation into two distinct chains could take place on November 15th.

Bitcoin Cash is a restless kid and it has already seen two splits in its history. The first was the founding separation Bitcoin (BTC) , which took place on 1 st August 2017 and following the debate on the scalability of Bitcoin.

The second was the branch with Bitcoin SV (BSV) on November 15, 2018, which was made for issues of scalability, stability and legality, and which was especially the opportunity for Craig Wright to try to take protocol control.

Following months of tension in the Bitcoin Cash community, another split could take place on November 15 , during the planned upgrade.

What is the context?

The Bitcoin Cash protocol is upgraded every 6 months by a hard fork . This allows it to integrate many improvements such as increasing scalability, extending the possibilities of smart contracts or even implementing Schnorr signatures. However, this constant change makes it less stable than its Bitcoin or Bitcoin SV counterparts, and the content of upgrades can be subject to conflict.

Until then led by Bitcoin ABC, this evolution of the protocol could perhaps change hands.

Indeed, Amaury Séchet , the chief developer (and „benevolent dictator“) of Bitcoin ABC, announced on August 6 that the next upgrade would put in place a „new reward rule“ requiring all miners of send 8% of the newly created BCH to an address controlled by Bitcoin ABC .

This unilateral decision is contentious to say the least, since it follows months of debate around this idea and its rejection by the majority of ecosystem players.

L’Infrastructure Funding Plan

The idea of redirecting part of the monetary issuance of bitcoin cash to finance development is not new and was originally presented as the Infrastructure Funding Plan (IFP). The first version of this IFP was offered by Jiang Zhuoer , CEO of BTC.TOP mining cooperative, on January 22, 2020.

Originally (IFPv1), the aim was to divert 12.5% of the BCH created in each block to redistribute them to development teams through a company based in Hong Kong. Following discussions on this, the proposal was amended by its creator to include a decision mechanism based on the vote of minors (IFPv2). It was then implemented in Bitcoin ABC on February 15, 2020 (IFPv3) and the choice of miners only concerned 4 destinations: a general fund, the address of Bitcoin ABC, that of bchd and that of Electron Cash.

However, the IFP was not activated, having received almost no votes from minors . And for good reason: this proposal was highly contentious and gave rise to a risk of a split.

The opposition was very strong and gave birth , on February 20, 2020, to Bitcoin Cash Node (BCHN), a fork of Bitcoin ABC which did not implement the IFP and whose chief maintainer is freetrader , an anonymous personality who participated in the creation of Bitcoin Cash.

We also saw the appearance of Flipstarter , a decentralized crowdfunding platform dedicated to the development of Bitcoin Cash. This platform, supposed to solve the “free rider problem” in the financing of common goods, has enabled many projects to raise funds since its launch on April 17.

The difficulty adjustment algorithm

Nonetheless, that didn’t calm things down and another conflict emerged around changing the Difficulty Adjustment Algorithm (DAA).

Indeed, the algorithm which modifies the mining difficulty in Bitcoin Cash is imperfect and gives rise to large irregularities in the frequency of the blocks : several blocks can be mined in a few minutes and there can be periods of the order of 2 or 3 hours without blocks. This is especially due to the fact that Bitcoin Cash is a minority chain and miners optimize their activity by alternating between the three big chains mined by SHA-256 (BTC, BCH, BSV).

In order to correct this problem, a lot of work has been done by some developers. In November 2019, Mark Lundeberg thus proposed a new type of algorithm (named ASERT for absolutely scheduled exponentially rising targets ). From February 2020, Jonathan Toomim began to study the question by comparing the different models, and finally made his own proposal on July 8 (based on Lundeberg’s work): the aserti3-2d algorithm .

This proposal was quickly integrated into BCHN and was in the process of being incorporated into Bitcoin ABC. Nevertheless, the ABC team judged that the integration had not been fast enough and announced on July 23 that they had developed their own difficulty adjustment algorithm, Grasberg . This algorithm, also based on ASERT, corrected not only the variance of the time between each block, but also the past drift (since 2009) of the production of blocks. This meant that the average block time would have been 11 minutes and 15 seconds for over 6 years!