The digital currency Bitcoin will likely split into two separate currencies following a battle among cryptocurrency brokers.
Fortune reports that a new version of Bitcoin—Bitcoin Cash—hit the market on August 1, 2017. By its second day of trading, it had already tripled in price and its market cap is now third biggest of all digital currencies, according to Fortune.
Digital currencies like Bitcoin are known as cryptocurrencies. These currencies use encryption techniques to generate and regulate the currency units and verify fund transfers independent of a central bank. Cryptocurrencies permit anonymous transactions, and their use falls outside the control of central banks and governments.
Bitcoin, launched in 2009, was the first of these currencies. By 2015, Investopedia reports, 14.6 million bitcoins were in circulation with a total market value of $3.4 billion. The network underpinning Bitcoin has slowed as the number of people using the currency has increased.
Bitcoin Cash was created by what is called a “fork,” in which a breakaway faction of the people who run the Bitcoin software started a new version. The creation of the fork in Bitcoin’s block chain—the software ledger that records all transactions—followed a lengthy fight in the Bitcoin community.
According to its website, Coinbase has served nearly 9 million customers in 32 countries. The firm has enabled the exchange of over $20 billion worth of digital currency. But David Farmer, director of Biz Ops at Coinbase, wrote, “In the event of two separate blockchains after August 1, 2017 we will only support one version.” Coinbase has “no plans to support the bitcoin cash fork.” Farmer explains that Coinbase decided not to back Bitcoin Cash “it is hard to predict how long the alternative version of bitcoin will survive.”
No Way to Claim Bitcoin Cash
The creators of the new chain awarded Bitcoin Cash on a one-for-one ratio to every owner of Bitcoin. So a person who owns five Bitcoins is entitled to five units of Bitcoin Cash. But the introduction of Bitcoin Cash has been complicated by the decision of Coinbase, the world’s biggest Bitcoin exchange, decided not to support Bitcoin Cash, Business Insider reports. The millions of people who maintain a wallet on Coinbase did not receive the new Bitcoin Cash and there is currently no way for them to do so.
An activist group warns that it will initiate a class action suit after August 15 if Coinbase does not release the Bitcoin Cash. And a Florida attorney told Fortune she intends to file a complaint alleging negligence, breach of fiduciary duty, and unjust enrichment.
Parker Waichman has represented clients in a wide range of class actions, from defective drugs and devices, to consumer products and services, including financial services. The attorneys at the firm are available to investigate possible class actions and offer a free consultation.
Fight Over Speed Versus Security
The core group that developed Bitcoin wants to keep the blocks in the chain limited in size to protect against hacks. But Bitcoin Cash want to increase the size of blocks to make the network faster, Fortune reports. There are several possible ways to speed up the platform. Segwit2x would increase the size of Bitcoin blocks to two megabytes; it was slated to become the standard after August 1. But then, Bitcoin Cash arrived. The new software has all the history of the old platform but Bitcoin Cash blocks will be eight megabytes.
Bitcoin Risks and Advantages
Experts say the block chain has important uses in technologies like online voting and crowd funding. Major financial institutions see a potential for cryptocurrencies to lower transaction costs by making payment processing more efficient. Cryptocurrencies are more easily moved than hard metals, and not subject to government rules.
But other experts caution that cryptocurrencies are not immune to hacking. Investopedia notes that in Bitcoin’s brief history, the organization has experienced more than 40 thefts, some of which exceeded $1 million in value. Because cryptocurrencies do not have a central repository, a digital cryptocurrency balance can be wiped out by a computer crash if a backup copy of the holdings does not exist. Since prices are based on supply and demand, the rate at which a cryptocurrency can be exchanged for another currency can fluctuate widely.
Economic Losses Because of Bitcoin Cash
If you have suffered economic losses because of the inability to access Bitcoin Cash, the attorneys at Parker Waichman may be able to help. For a free, no-obligation evaluation of your legal rights, fill out the online contact form or call 1-800-YOURLAWYER (1-800-968-7529).