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A brief history of Bitcoin (BCH) and the opportunities it presents for your business

Discussion in 'General Business' started by snakeplissken, Oct 3, 2018.


Do you accept Bitcoin (BCH) in your website?

  1. Yes

    0 vote(s)
  2. No

    1 vote(s)
  1. #1
    In August 2017 the bitcoin blockchain at height 478558 forked into 2 different paths. One blockchain would now start accepting bigger blocks to bring back Bitcoin's original features of peer to peer cash with low tx fees. This was BCH. The other blockchain, would keep blocks small and introduce segwit which separated signatures from blocks to slightly increase the block size limit. This blockchain is known as BTC. BTC and BCH have the same identical blocks till height 478558, afterwards BCH blocks are bigger and BTC blocks are smaller. With segwit a coin is no longer a string of signatures as defined in the whitepaper, therefore BCH is Bitcoin.

    Bitcoin was defined in the Bitcoin Whitepaper as peer-to-peer digital cash. A lot of people have heard this countless times yet very few understand what peer to peer actually means.
    1. Paypal is not peer-to-peer because the receiver/sender both need a paypal account.
    2. A bank wire is not peer-to-peer because both receiver/sender need a bank account
    3. Peer to peer means any person can receive/send money as long as they have an internet connection without having to sign up/register anywhere or pay fees to anyone.
    To be able to conduct any sort of business online without bitcoin, you need a bank account. With bitcoin, you only need an internet connection and you get paid instantly by anyone anywhere in the world.
    Bitcoin Mining ELI5

    Technically Bitcoin consists of a blockchain, where a new block is added on average every 10 minutes. Miners add these blocks after having solved a puzzle known as SHA256. These puzzles can only be solved through brute force, so miners have to try different combinations until they solve the puzzle. Once the puzzle is solved the miner who solved it gets to add a new block to the existing bitcoin blockchain, receives all transaction fees from the added block, and also receives the block reward (12.5 BCH). Each block contains the most recent round of transactions and updates the balance all addresses.

    Let's say Joe (Sending Address) has $10 in his BCH balance right now and wants to send $5 to his friend Alice (Receving Address). By using a wallet app Joe sends a request to the network to remove $5 from his balance and add them to Alice's wallet. The miner who solves the next SHA256 gets to add the next block that updates Joe's and Alice's addresses. The transaction is said to have 1 confirmation once this block is mined. For every successive block added to the block chain the number of confirmations increases by one since all future blocks will carry one the evidence that this transaction happened.

    Hashpower and Difficulty Algorithm

    As previously explained the only way to solve SHA256 puzzles (proof of work) is by trying different combinations through brute force. The total number of attempts per second being tried by all miners collectively right now is known as the total hash of bitcoin (BCH). The system is designed so that 1 block is found every 10 minutes, so each day 144 blocks are found. A miner finds a % of these blocks that is equal to its fraction of hashpower compared to that of the entire network.

    When new miners start mining Bitcoin (BCH) because of the additional hashpower the system starts finding blocks more frequently than 1 per 10 minutes. To maintain the block find rate constant, the difficulty adjustment logarithm kicks in and increases the difficulty of the SHA256 puzzle so that even with the additional hashpower the find rate remains the same.

    Why Everyone Within Bitcoin (BCH) is Incentivised to Innovate

    The most beautiful part of Bitcoin is its design. Bitcoin has been designed in such a way that only those providing the most proof of work get to decide where the network goes. Long term, this means that successful miners in bitcoin, regardless of how rich they are today, can easily lose their lead if they do not re-invest in innovation and efficiency. Because of this miners have gotten more and more sophisticated with time and today to launch a serious mining operation costs billions of dollars. Miners have to invest in tech (machines specialised in solving SHA256 puzzles), in software and in connectivity. Connectivity is particularly important in Bitcoin because as a miner after solving a SHA256 puzzle you want to make sure to let everyone know as soon as possible or someone else might solve the puzzle soon after you and claim the block reward and transaction fees because of better connectivity.

    Scaling Bitcoin

    Bitcoin transactions are added in blocks, the size of each block however was limited to 1MB until very recently. This meant that the bitcoin blockchain kept adding 1 block every 10 minutes, and each block could not be bigger than 1MB. The reason the blocksize was capped at 1MB for a long time was a group of developers that took over the Bitcoin Opensource project and imposed their views on the rest. Mining was still at an embryonic stage, and by resorting to Authority this group of developers (Blockstream) insisted that increasing the block size limit would lead to centralisation and that it was not technically viable. As bitcoin grew however, capping the blocksize limit at 1MB meant a worsening user experience and higher fees for transactions. To counter the user protest this small group of developers resorted to censorship (r/bitcoin is the most censored community on Reddit where any mention of increasing the block size limit would get you instantly banned until very recently), DDOS attacks against implementations that allowed bigger blocks, and social purges against anyone that supported big blocks:

    - Gavin Andresen's (the person Satoshi Nakamoto handed the project to) access is revoked out of "hack" concerns and is never reinstated again. [source]
    - History of r/bitcoin and bitcointalk forum censorship
    - The anonymous pro-censorship co-owner of the bitcoin.org and bitcointalk proposes to rewrite the Bitcoin Whitepaper.

    In August 2017, a fork of the bitcoin blockchain happened. Miners and bitcoin devs issued a new set of consensus rules loyal to the original Bitcoin Whitepaper and without the 1MB limit. At block height 478558 now miners could either continue building small 1MB blocks (BTC chain) or could start including bigger blocks (BCH chain). The BTC and BCH chain are identical up to block 478558, afterwards the BCH starts including biggers blocks while the BTC chain introduces Segwit (where signature data are removed from blocks to increase space slightly). With Segwit a coin in BTC is no longer a string of signatures as defined in the Bitcoin Whitepaper.

    Bitcoin (BCH) can scale

    One of the most disastrous consequences of the Blockstream policy to keep the blocksize limit at 1MB, was a spike in Bitcoin transaction fees to over $50 per transaction in December 2017 when the BTC coin reached an all time high of 20K. This meant that if someone wanted to send even $1 they had to pay $50 in fees (transaction count was 500k). This was a direct consequence of small blocks, because now that transaction count skyrocketed while block size was fixed miners started charging continuously higher fees to get your transaction in the next block. This also sealed Bitcoin's reputation as unable to scale in the mainstream media.

    However, in September 2018 Bitcoin (BCH) proved what its proponents and initial bitcoin pioneers had always said, that bitcoin can scale with bigger blocks. A stress test was conducted, 2M transactions were processed that day, the biggest created block was 22MB, and fees plummeted even further at $0.0017/transaction.

    Why your business is missing out

    Bitcoin (BCH) allows global commerce as it does not require the support of any bank. In other words, your customer base increases exponentially as literally anyone can buy from you if you use bitcoin and at the same time you save on processing fees (no more paypal, cc, bank fees) and you completely eliminate fraud risk even for buyers from Nigeria, because once a Bitcoin transaction goes through it can never be rolled back. Therefore, as long as you are a honest seller or service provider you are completely immune from fraud attacks.

    Another opportunity that Bitcoin (BCH) brings about is to allow you to hire freelancers from regions where bank access is limited due to political reasons. An extreme example is Venezuela, a less extreme example is Turkey where Paypal was recently banned.

    Please feel free to ask me questions.
    snakeplissken, Oct 3, 2018 IP