Popular Science | What are BTC, BCH, and BSV fighting over?

When BTC’s block capacity was approaching its upper limit a few years ago, the issue of capacity expansion had been discussed for a long time. The game between miners, developers, and users was relatively chaotic. When no agreement could be reached, fork became the only outcome.

Therefore, on August 1, 2017, BCH was forked from BTC, and the block size was increased from 1M to 8M, claiming that it was the true embodiment of Satoshi Nakamoto's "peer-to-peer electronic cash system". On November 15, 2018, BCH again had internal disagreements over the future development direction of BCH, resulting in BCH splitting into Bitmain's BCHABC (the former later took back the BCH title) and Nchain's BCHSV (later named BSV).

At this point, Bitcoin has finally formed a three-way competition. BTC electronic gold, BCH electronic cash and BSV global ledger. The following chapters will tell you what they are fighting for, as well as their respective advantages and disadvantages.

01 BTC, BCH, BSV
1. BTC

The goal of BTC is to allow an ordinary computer to run a full node and make BTC truly "decentralized". In other words, as long as there is a computer in the world running BTC, BTC cannot be killed.

This method certainly has the advantages of security and "decentralization", but at the same time, due to the "super small block" of 1M and the birth of ASIC mining machines, it has become a "delusion" for home computers to become nodes.

In December 2017, the highest BTC transfer fee reached tens of dollars. It is said that one netizen’s transfer took several weeks to arrive. So far, BTC’s journey as “electronic cash” has come to an end temporarily. BTC has become a “good-looking but difficult to use” currency and has embarked on the path of “electronic gold”.

In 2019, the Lightning Network began to become popular, and it was really popular at the beginning of the year. At that time, the Lightning Network "Torch Relay" was almost spread throughout major WeChat groups. However, it should be noted that the Lightning Network is currently only a prototype, and there are very few merchants who actually support the Lightning Network. The next 1 to 2 years, especially around the halving of the Bitcoin block reward next year, will be a critical development period for the Lightning Network. The specific reasons will be known below.

2. BCH

The underlying philosophy of BCH is to reproduce the meaning of the white paper title "Electronic Cash", because the current block capacity of BTC is really unable to bear the most important function of cash "payment".

Compared with the underlying logic of BTC locking in 1M blocks and BSV unlimited expansion, BCH appears to be more "flexible" at the bottom layer, or in other words, it has not yet found its true underlying logic. The block size is sufficient as long as it is not blocked, and it will be expanded if it is not enough; the lightning network looks good, but it will not be deployed for the time being, but it will be deployed in the future; smart contracts are good, and it is always right to try them. However, the dissolution of the Wormhole and Copernicus development teams can be said to have announced the temporary failure and end of the smart contract direction.

Judging from the recent development path of BCH, there is an intention to return to pure "electronic cash". This may be a good thing. Find a path and stick to it, then you are at least qualified to participate in this three-kingdoms competition. If you are wavering and can't find a backbone, you will eventually fall behind.

3. BSV (BSV is called “Satoshi Vision” for a reason, which will be briefly discussed here)

The underlying philosophy of BSV is "protocol lock + free game + unlimited expansion".

Because what BSV aims to create is a global ledger rather than electronic cash or gold, the development route of BSV is mainly aimed at the To B market. It wants to create a blockchain that can truly attract large companies and institutions, or in other words, a stable protocol and an unalterable global ledger.

Therefore, the block size must be expanded first. One G is the minimum, and there will be TB-level expansion plans in the future.

As for the ambition of this global ledger, it is called Metanet on BSV. The ultimate goal is to use the current Internet as a side chain to form a value network for data transmission and storage that cannot be tampered with. In simple terms, it is BTC+ETH+IPFS (Filecoin), basically the rhythm of all chains returning to one.

02The root of the disagreement

Beneath the bottom layer just now, there is actually a deeper and most basic philosophy, namely: where does the value of Bitcoin come from?

In this regard, the underlying philosophy of BTC and BCH is consistent. The value of BTC (BCH) itself is "currency". Becoming currency (payment function + stored value function) is both the initial form of BTC (BCH) and its ultimate form. Its value comes mainly from the huge consensus and "unkillable" ability accumulated over ten years as the first blockchain project.

BSV disagrees with this. BSV believes that whether it is shells or gold, or everything that has served as currency in history, it first has use value, and then after a long period of consensus, it becomes a currency attribute. In the past 10 years, the origin of Bitcoin's use value is the transfer of funds on the dark web. In other words, the "currency consensus" formed by the "underground illegal currency consensus" itself is at its core unable to prove itself, or be self-consistent.

The underlying logic of BSV is that Bitcoin itself is the wheel, and the global ledger (Metanet) is the car. Bitcoin is the universal currency on this global ledger, and its purpose is to provide fuel for the car, maintain the security of this immutable ledger, and provide economic incentives. Only after it has use value, the attribute of "universal currency" or "money" is extended. It's just that when building a car, you need to build the wheels first, and only after the wheels are built can you put the frame on it.

In addition, BSV does not agree that BTC or BCH is "unfriendly" to regulation, and believes that blockchain technology should help commercial organizations, embrace regulation, follow a compliance route, and expose crimes and evidence to the sun and on the blockchain.

Unlike many blockchain geeks who believe in "Code is Law", BSV believes that the world is complicated and "Code is Code, Law is Law".

03 What are the advantages of each?

In the next 5 to 9 years, the current three-kingdoms competition will most likely be broken, and the current situation of three companies developing in parallel is very likely to no longer exist. The reason is very simple: it all stems from the words in Satoshi Nakamoto’s earliest post:

In another decade or two, the block reward will become too small and transaction fees will become the main compensation for nodes. I am sure that in 20 years, the transaction volume (on-chain) will be very large or even non-existent.

The current block reward is 12.5, which will be halved to 6.25 in one year, 3.125 in five years, and 1.5625 in nine years. The block reward is almost one-tenth of the current one and can no longer be the main source of income for miners. Then, the competition will actually be on-chain transaction volume and price.

All three use the SHA256 algorithm. If quantum computers do not threaten Bitcoin within nine years, then the battle for computing power and the battle for miners will determine the final winner. If there is no threat from quantum computers, whichever company decides to change the algorithm first will actually declare failure.

So, starting from this point, it is easy to infer what the winning moves of the three companies will be in the next few years:

1. BTC

Advantages: Unparalleled huge consensus, the "real Bitcoin" in the eyes of most people, has begun to attract institutions and real big funds to enter the market, and is currently the absolute king.

Winning factor: For BTC to maintain its security and attract enough miners to maintain the network, it must achieve either of the following two points before several halvings. If both are achieved, the advantage will become huge: very high prices; sufficient on-chain transaction volume brought about by the large-scale popularization and merchant support of the Lightning Network.

2. BCH

Advantages: Backed by the big tree of Bitmain, it has a unique advantage in mining machines. When someone is not optimistic about the use value and congestion problem of Bitcoin, the first thing he thinks of is likely to be BCH.

The key to success: Strictly speaking, the key to success for BCH is not itself, but BTC, especially the Lightning Network. Originally, BTC was used as gold and was mainly used for storing value, while BCH was used as cash and was mainly used for payment. However, the Lightning Network has undoubtedly affected BCH's market share.

Therefore, the key to BCH’s success lies in its more advantageous experience and lower fees than the Lightning Network, and more importantly, its merchant support, which is at least close to that of BTC. After all, if no merchants accept BCH as a means of payment, it will be useless as a “cash” currency, and transfers between users alone cannot support sufficient on-chain transaction volume. After several halvings, the miner fees will be very low.

3. BSV

Advantages: Nchain has hundreds of blockchain patents, various applications are currently under development, and there is a possibility that CSW is Satoshi Nakamoto.

The deciding factor: If we put aside the issue of CSW's identity, the deciding factor for BSV actually lies in the competition with underlying public chains such as ETH, Cosmos, EOS, etc. in multiple dimensions such as development cost, user experience, security, customer base, etc., including the competition between UTXO and Account models, the competition between small world network PoW and PoS, DPoS, etc.

As for the three-kingdoms battle, who will win in the end among BTC, BCH, and BSV? We can only wait a few years to know the answer.