The price of the currency skyrocketed, the 51% attack, the "reputation" and "crime" of Bitcoin Cash (BCH) on the road to production reduction

The latest data from Coin360 shows that since the New Year's Day of 2020, the total market value of cryptocurrencies has increased from a low of US$176.8 billion to a recent high of US$307.7 billion, an increase of 74%. Popular reduced-production currencies such as BCH, ETC, and BSV have increased by more than 150%. The more than one month of excitement in the cryptocurrency market has swept away the haze brought by the "downturn" in the second half of 2019.

With skyrocketing coin prices, miners’ donation plans, and questions about 51% attacks, BCH is undoubtedly the focus of this capital feast.

Under the spotlight, BCH has been subjected to a barrage of criticism and praise. There are praises such as "BCH has sounded the clarion call for this round of production cuts" and "BCH is excellent in decentralization", as well as criticisms such as "BCH is essentially still a cryptocurrency" and "BCH is undergoing a 51% attack".

Unexpected praise, and criticism for seeking perfection. This comes from "Mencius·Li Lou Chapter 1·Section 21", Mencius said: "There are unexpected praises, and there are criticisms for seeking perfection." It means that there are both unexpected praises and criticisms for seeking perfection.

So, what is the core value of Bitcoin Cash, which is known as the "mainland currency" and "the prince" that "relies on the fork of BTC" and has a market value of 7.4 billion US dollars? Is the stable development of BCH the pursuit of capital or the power of consensus?

1

BCH "unusual movement" before the reduction

According to the BCH code settings, when the block height reaches 630,000, the mining reward will change from the current 12.5 BCH/block to 6.25 BCH/block, and the BCH annual inflation rate will also change from the current 3.97% to 1.80%.

The latest data from 1bch.com shows that BCH production is expected to be reduced on April 8, with a countdown of 50 days.

As the time for production cuts approaches and the inflation rate decreases due to the production cuts, the most direct result is an increase in the price of the currency.

The price of BCH rose from the low of around 190 in early January 2020 to 490 USD in mid-February 2020, an increase of more than 150% in less than a month, which also led to the rise in the prices of mainstream currencies such as BSV, BTC, LTC, and ETH. BCH is known as the first coin to "sound the horn of the reduction in production."

As the price of the currency rises, the mining computing power of the BCH network has also increased significantly.

BCH network computing power change trend since 2019

BCH network computing power change trend since 2019

Bitinfocharts real-time data shows that the BCH network computing power has also risen from the lowest 2.33Eh/s more than a month ago to the recent 5.00Eh/s. When the BCH price increased by 150%, the network computing power increased by 114%. During the same period, the BTC network computing power did not increase significantly, and has been fluctuating around 110Eh/s for nearly a month.

For BCH, a currency whose computing power accounts for only 5% of BTC, every increase in computing power means an improvement in its security and stability.

While the overall computing power of the SHA256 network has not increased much, the price of BCH has increased significantly, which can be said to have "saved" some miners.

“My S9 mining machine will basically be retired before the end of the year.”

Miner Yu Le is a Bitcoin miner. Some of his S9 mining machines have been in use for more than two years. Even with "AsicBoost" turned on, their lifespan would not last long. At this time, the prices of the three SHA256 currencies BTC, BCH, and BSV began to soar, which saved his mine.

According to data from the AsicBoost official website, using AsicBoost technology can reduce power consumption by 10%-20%. [1]

"While the computing power of the entire SHA256 network has not increased significantly, the price of the currency has risen a lot, which is a good thing." Yu Le told OKEx Intelligence Bureau, "The reason for this is the sudden domestic epidemic, which has caused many miners to be unable to deliver on schedule and the mining machines cannot be put on the shelves to work."

According to OKEx Intelligence, the combined hashrate of the BTC, BCH, and BSV networks has indeed remained at 120Eh/s since around the Lunar New Year, giving the dying older generation of mining machines a chance to breathe.

“This can also be considered an indirect positive impact of BCH production reduction on the market.” Yu Le said.

Of course, Bitcoin Cash (BCH), as a competitor to Bitcoin, has also been questioned by many, with BCH network security being the first to bear the brunt.

2

BCH production reduction will not lead to 51% attack

After the BCH production reduction, the rewards are reduced. Will the BCH network still be safe?

In fact, as early as early October 2019, at the "2019 Global Digital Mining Summit" held in Frankfurt, Wu Jihan was interviewed by Stefan Rust, CEO of bitcoin.com. When asked about his views on the impact of production cuts on the mining industry in 2020, Wu Jihan objectively explained his views on "the impact of production cuts on network security."

"BCH will reduce production much earlier than Bitcoin, which means that at some point in the future, the computing power of the BCH network will suddenly decrease, but I don't think this (BCH network) is safe," said Wu Jihan.

Wu Jihan also believes that a 51% attack is not something that people should panic about.

Wu Jihan said: “Because there are people who specialize in monitoring the network (technical workers responsible for risk control), hackers not only have to deal with known computing power on the network, but also with unknown computing power (it is difficult to control the entire network), so I don’t think this is an issue that deserves special attention. There has always been the problem of 51% attacks on PoW, but in recent years, people are less and less worried about this problem. Even if a 51% attack occurs, it is not the end of cryptocurrency, because people will always find a way to solve the problem.” [2]

“Don’t worry about 51% attacks” is Wu Jihan’s attitude, and Liu Changyong holds the same view.

“It has little impact on security. Some people sensationally say that BCH production cuts will lead to a 51% attack, which is hostile,” Liu Changyong told OKEx Intelligence Bureau.

Liu Changyong (hereinafter referred to as Mr. Changyong) is the founder of Zhimi University, director of the Blockchain Economic Research Center of Chongqing Technology and Business University, a Ph.D. in Economics from Peking University, and an important supporter of the BCH ecosystem. When talking about whether security issues will be affected after the reduction of BCH production, Mr. Changyong said this.

Teacher Chang Yong is popularizing blockchain knowledge to students

“As long as the computing power of POW coins reaches a certain scale, they are relatively safe. BCH has added reorganization protection (10 block confirmations), which makes it more capable of resisting 51% attacks and more secure.”

As for why BCH will be safe after the production reduction, Mr. Chang Yong gave his own explanation.

“The current BCH price is around 3,300 yuan. After the production cut, the security of the hashrate will be equivalent to that when the price was 1,650 yuan. In November 2018, when the price of BCH was around 600, it faced the real 51% hashrate attack threat from the CSW team without any problems, let alone now. In addition, in November 2018, BCH added a reorganization protection mechanism to deal with the attack threat from CSW. The exchange only needs to set 10 confirmations to avoid 51% attacks. Therefore, it is safer than BTC and BSV.”

"In general, the impact of production reduction is not significant, and there is no need to worry about the impact on safety," said teacher Chang Yong.

After the BCH production reduction, what impact will it have on the miners of the BCH network?

“The impact of BCH production cuts on miners’ income is also limited. Since BCH accounts for a small proportion of the entire SHA256 algorithm currency, the impact of BCH production cuts on miners’ income is also small, which is roughly equivalent to the impact of a 2% drop in BTC prices.”

"What really affects the market is the reduction in BTC production, which may lead to short-term mining accidents." Teacher Chang Yong told OKEx Intelligence Bureau.

As the three giants of coin reduction in 2020, what are the differences between BTC, BCH and BSV?

3

The dispute over the route - an irreconcilable contradiction

When it comes to the differences between the three giants in terms of production cuts in 2020, the “route dispute” among BTC, BCH, and BSV is the biggest difference.

"The direction of BCH is decentralized cryptocurrency. I think (the 32M large block route) is the most likely mainstream currency to achieve Satoshi Nakamoto's original intention." said Mr. Chang Yong.

Regarding BSV's return to BTC 0.1 version, Mr. Chang Yong believes that its competitiveness mainly comes from three aspects.

“One is the financial support from CA, the casino owner. These external funds are very scarce and effective in a bear market;”

Second, it is an organized and professional operation. CA and Jimmy are experienced in finance, politics and public opinion operations, and have carried out systematic operations on BSV;”

The third is to use CSW to establish a banner of returning to the classics. In the immature cryptocurrency community, it has captured a group of people who admire Satoshi Nakamoto, are dissatisfied with the status quo, and are eager to succeed. "

But gaining these advantages comes at a huge cost.

“These advantages of BSV seem powerful, but the price is a high degree of centralization. This is an advantage in company management, but it is a huge disadvantage for cryptocurrencies that are committed to decentralization. Moreover, if BSV is to be a centralized cryptocurrency, it cannot compete with the cryptographic version of legal currency at all.”

When asked about BSV's fierce rise before the New Year, when its market value once surpassed BCH, Mr. Chang Yong said: "BCH can stick to the direction of decentralized cryptocurrency. We don't need to care about what BSV does or how much it costs."

So, what is the difference between BCH and BTC?

“BCH mainly insists on being a free world currency, while BTC turns to being a digital gold for storing value,” said Mr. Chang Yong.

From a development perspective, BTC and BCH have also chosen two different routes.

Part of the BCH development team

“BCH development has been more decentralized than BTC from the beginning. The reason is that BCH was originally created to oppose Core’s dominance over the direction of Bitcoin. Several teams tried to break away from Core’s control and develop a scaling version for BTC. Although they all failed, when the scaling failed and BCH was born, most of these teams entered the development of BCH. Therefore, there have always been multiple teams involved in the development of BCH, roughly between 5 and 8 teams at different times.”

Even the Bitcoin ABC team, which first developed the 8M BCH version, has far less influence than Core in BTC. In terms of community influence, it is checked and balanced by other development teams, large companies, and important figures like Roger and Wu Jihan. Therefore, the degree of decentralization of BCH is far higher than that of BTC. "

In the view of Professor Chang Yong, BCH, the star of this year's production reduction, is moving in the direction of Satoshi Nakamoto's understanding of cryptocurrency.

Any new thing will face mixed reviews before it becomes certain, and BCH is no exception, especially when BCH production is about to be reduced and the community is discussing it fiercely.

4

On the road of reducing production, both "crisis" and "reputation" make BCH stronger

"BCH is essentially a cold currency, a mainland currency", this perception has almost become a small consensus in the currency circle. So, should BCH accept it?

"The misunderstanding that BCH is Jihancoin, Miningbacoin, or even Chinacoin originated from the dispute over capacity expansion. Those who oppose capacity expansion, mainly supporters of Core, attack BCH by creating this misunderstanding, and this attack continues to this day. In the 2018 computing power war, CSW supporters also used this to attack BCH, regardless of the fact that it is highly centralized." The teacher told OKEx Intelligence Bureau.

If the attack on the name was just a “mild” matter, then the “unknown computing power” incident that occurred more than a month ago might be a “serious injury”.

In December 2019, a large amount of unknown computing power appeared on the BCH network, which almost exceeded 51%. As a result, some people on the Internet believed that BCH was facing a "51% attack."

Currently, the unknown hashrate accounts for 23.5%, and by the end of December 2019, the figure exceeded 51%.

Teacher Chang Yong gave his own observations on the incident.

“The BCH community has been paying attention to this incident for some time. At least a large part of the unknown computing power has been proven to come from CoinIn. They have indeed opened the function of switching computing power between BTC and BCH, which is commonly known as the "machine gun pool". The main reason for the existence of the machine gun pool is that the difficulty adjustment of BTC and BCH cannot keep up with the changes in relative prices, so there is a certain profit margin in switching mining. Profit is the law of the market economy, so the "machine gun pool" itself does not need to be condemned.”

In order to solve the problem of machine gun pools, BCH modified the difficulty algorithm as early as November 2017, changing the difficulty adjustment cycle from 2 weeks to 10 minutes (that is, adjustment every block, called DAA), so that the difficulty adjustment can keep up with the fluctuation of computing power more quickly, thus ensuring its own survival. BSV also survived by relying on DAA, although they believe this is wrong.

But in Teacher Chang Yong’s opinion, this is still not enough. The 10-minute difficulty adjustment cycle still gives the machine gun pool an opportunity to take advantage.

"BCH's 10-minute difficulty adjustment time is still relatively long, which gives the machine gun pool profit space to switch computing power. Although it does not have a fatal impact, it will cause fluctuations in block time. In this regard, I believe that shortening the block time to 1 minute can shorten the profit window of the machine gun pool and reduce the harm of the machine gun pool. However, this modification involves the underlying consensus and is difficult to achieve." said Teacher Chang Yong.

In any case, the so-called 51% attack threat has led the BCH network to evolve the DDA mechanism, and these threats have led BCH to evolve a more powerful defense system.

The “criticism” and “praise” of BCH has not ended and will never end. As investors and observers in the crypto space, what you and I need to do is to ensure that we do not get out.

postscript:

In the first half of 2019, Bitcoin’s growth rate exceeded that of other competing currencies. Many people based their views on this and believed that it was correct not to expand the capacity that year, and that Bitcoin should not be used for payment, but for value storage and digital gold. This understanding has seriously impacted the original intention of Bitcoin’s creation and endangered the consensus on decentralized cryptocurrencies.

As a result, Professor Chang Yong’s 20,000-word article “The Beginning and End of the Bitcoin Expansion Controversy” was born, spanning more than four years, and truly restored the details of the BTC fork and even the later BCH fork. [3]

Reference Links:

[1] What exactly is AsicBoost? It has caused a stir in the mining industry.

[2] Wu Jihan discusses mining and industry growth with Bitcoin.com CEO;

[3] Liu Changyong: The whole story of the Bitcoin expansion dispute;