Bitcoin Fork History

If I told you today that Bitcoin had a chance to be controlled by the Chinese two years ago, would you believe it?

Bitcoin, the world's most famous and mysterious investment (speculation) product, has been full of doubts and myths since its birth. In the past decade, it has risen by as much as 22 million times, writing countless wealth stories.

In 2017, the highest price of Bitcoin reached $20,000 per coin. Just when the price was rising wildly, a player who owned a large amount of Bitcoin called his close friend.

The 31-year-old said to his best friend on the other end of the phone in an almost pleading tone: "What if you just help me once?"

The person who answered the phone was called Chang Jian, the founder of China's largest blockchain forum and media "Babbitt". He plays a vital role in the Chinese blockchain world, and Babbitt also has a huge influence in the Chinese encryption world.

The man who called for help was Wu Jihan. He had fought side by side with Chang Jian and co-founded 8btc. Now he is one of the founders of Bitmain, the world's largest cryptocurrency mining machine manufacturer. In Hurun's list of wealth of the post-80s, the 32-year-old Wu Jihan was ranked among the top 50 self-made people born in the 80s with assets of 16.5 billion yuan. He is the one who wants to kill Bitcoin.

In the world of cryptocurrency, computing power is life. At that time, Wu Jihan's Bitmain controlled more than 60% of the computing power of the Bitcoin network and was considered the only one who had the opportunity to destroy and control Bitcoin.

It may not be easy for Wu Jihan to make the decision to make this call. He is not a person who is willing to bow his head. But now he must get more people to support him in hard forking Bitcoin. On the phone, he waited for Chang Jian's reply, hoping that this good friend who had fought together with him could support him.

Forks are common upgrades in the field of open source software. Usually in blockchain, soft forks can be compatible with both the old and new versions, while hard forks cannot be compatible with both the old and new versions. Hard forking Bitcoin means that Bitcoin will be divided into two incompatible versions, the old and the new.

"I can agree to anything else, but not this one." Chang Qia rejected his request outright. Wu Jihan probably didn't expect Chang Qia to reject his request like this. After all, he had helped Chang Qia when Babbitt was in the most difficult time. He probably hoped that Chang Qia could help him out of their old friendship.

In the end, Chang Jian and his Babbitt remained neutral in this bifurcated century war.

1. Hong Kong consensus, the beginning of crisis

Time goes back to one year before the fork, February 20, 2016, location: Hong Kong Cyberport

The atmosphere at the meeting was somewhat tense. After 18 hours of heated debate in a small conference room, representatives of Bitcoin miners from China and representatives of the Bitcoin development community in the United States. Everyone was tired but excited. They didn't know what impact the conclusions reached in this room today would have on the crypto world in the future, but they knew that this was the first time Bitcoin faced a real "fork" since its birth.

At 3:30 a.m. on February 21, the debate in the conference room ended, replaced by a moment of silence. The nervous representatives finally breathed a sigh of relief because they reached a consensus on expanding the capacity of Bitcoin, which is also known as the Hong Kong Consensus .

"No more divisions!" the attendees began to cheer.

“If you were worried that Bitcoin would split into two coins, which would lead to a collapse in the price of the coin, you can rest assured now that the dispute has been degraded from a military struggle that could lead to the division of the country to a parliamentary struggle, and the danger is greatly reduced.”

With the Hong Kong consensus being reached, many people in the Bitcoin industry finally breathed a sigh of relief and rushed to tell others about this hard-earned consensus.

Wu Jihan, who usually appears with a baby face, round glasses, jeans and sneakers, had a gloomy face these days, but he finally showed a happy smile in the group photo after signing the Hong Kong Consensus Agreement document.

The reason why the Hong Kong Consensus makes the entire Bitcoin industry so excited is that the Bitcoin community has been caught in a three-year-long quarrel and division over the "capacity expansion dispute". This time, they can finally put aside the dispute and jointly develop.

Since the participants of this consensus include Bitcoin core developers, five major mining pools led by Bitmain (accounting for 80% of the computing power of the Bitcoin network), representatives of the four major exchanges (BTCC, Bitfinex, OKCoin and Huobi) and other individuals or industry representatives, the Hong Kong Consensus is also regarded as the most important official document in the history of Bitcoin since the white paper.

Going back three years, in 2013, the Bitcoin network began to face a thorny problem. As the number of Bitcoin users grew, the block capacity designed by Satoshi Nakamoto was insufficient. Bitcoin transfers became slower and slower, while the fees required for transfers became higher and higher. This caused the entire Bitcoin community to fall into an unprecedented worry. If this continued, Bitcoin would become as mediocre as bank card transfers. People began to argue about how to solve this problem.

Bitcoin community members have proposed hundreds of proposals to solve this problem. The debates on these competing proposals are extremely fierce. Often, as soon as one person puts forward his idea, he will be ruthlessly refuted by another opponent. It is like a war on the Internet. Sometimes it seems to have deviated from the original intention of solving the problem. The debate has intensified, and even death threats and hacker attacks have occurred.

In the chaos, two solutions gradually emerged and gradually evolved into two camps. One was the miners led by Bitmain, who proposed a large block solution to expand the capacity directly on the Bitcoin network, while the other, led by Bitcoin Core developers, did not support the Bitmain idea. They advocated keeping the Bitcoin network at 1MB and launching the second-layer network of Segregated Witness and Lightning Network solutions outside the Bitcoin network.

However, Bitmain and Bitcoin Core have been vetoing each other’s proposals , and there has been no real progress in the following years.

Worse still, the long dispute has plunged Bitcoin into a continuous governance and trust crisis, with more volatile prices. During this period, there has been more and more criticism and public opinion declaring the death of Bitcoin. Some early industry insiders were even completely disappointed by Bitcoin’s poor governance and announced their exit from the industry.

Just one month before the Hong Kong Consensus conference, Bitcoin developer Mike Hearn announced that he would quit the Bitcoin industry, declaring it a “failure.” As a result, the price of Bitcoin fell from $440 to $360.

Thanks to the mediation of many parties, the Hong Kong consensus was reached.

2. Adam, the foreshadowing

The Hong Kong Consensus Conference got off to a delicate start.

“The issues debated at the meeting started as technical disputes, then escalated into ideological disputes, and finally into cultural differences. Who has the final say, the Americans or the Chinese? Because the Americans are writing the code, and the Chinese are mining.”

Xu Zijing, a miner representative who participated in the Hong Kong Consensus Conference and is known as the "Martian", later recalled that due to the lack of trust among the participating parties and their different interests in the issues they focused on, they were unable to communicate at all.

“There were a lot of debates during the roundtable. We all have different ideas. Those who have other ideas may not believe in reality. They put their heads in the sand and only believe what they want.” Samson Mow, COO of BTCC Exchange and Mining Pool, is one of the initiators of the Hong Kong Consensus Conference. He has been negotiating with all parties to put aside their disputes during the meeting.

After the Hong Kong consensus was reached, Miao Yongquan still worriedly called on other developers to accept the consensus and promote the recommendations listed in the consensus. Miao Yongquan was worried that the Hong Kong consensus was not binding. For example, only five Bitcoin core developers attended the meeting. They did not represent all developers, so they needed to convince every Bitcoin core developer.

There is another detail in the Hong Kong Consensus Conference. The signature format of the agreement at that time was "name-position-company", and the signature of Blockstream CEO Adam Back only represented himself. This also laid the groundwork for the subsequent development of the trend .

As one of the earliest blockchain development companies, Blockstream not only has personnel overlaps with Bitcoin Core, but also funds their development work. Blockstream is also the company that developed the Lightning Network, and another founder is also the proposer of Segregated Witness. The signature of CEO Adam Back made everyone think that the developers agreed to the Hong Kong consensus.

Someone once used the Western system of separation of powers and game theory to illustrate how Bitcoin’s design ensures that power is sufficiently decentralized. Core developers have the power to control the code and can modify the rules; miners have the power to record Bitcoin, and the rules must be approved by more than 51% of the computing power; users and industry companies are responsible for supervising full nodes and maintaining the value of Bitcoin.

This kind of checks and balances and game was well reflected in the Hong Kong Consensus Conference.

Developers do not trust miners’ representatives and believe that mining pools and large companies that operate mining pools have stolen the miners’ voice. Industrialized mining has become a centralized business activity. In particular, the existence of “mining tyrants” such as Bitmain is destroying the decentralized nature of digital currency.

Developers blame the excessive power of miners, which has led to the centralization of Bitcoin to a certain extent, and miners must not be allowed to overstep their authority and interfere in route development work that does not belong to them.

Miners also don’t trust developers. Bitcoin Core proposed to launch the second-layer network of Segregated Witness and Lightning Network outside the Bitcoin network. In the future, the transaction fees will be collected by those who build these multi-layered networks. This is an attempt by developers to overstep their authority and take away the miners’ transaction fee income that does not belong to them.

Miners accuse Blockstream, the company that developed the Lightning Network and one of its founders who proposed Segregated Witness, of directly intervening and controlling the development of Bitcoin Core.

Exchanges and industry company representatives hope to calm market turmoil and restore confidence in Bitcoin as soon as possible, so they act as coordinators.

Blockstream CEO Adam Back is coordinating to prevent Bitcoin from splitting

In the end, both sides took a step back and promised that Bitcoin would not be split into two coins, that isolated certification would be carried out, and that the Bitcoin block size would be expanded to 2M, which would be implemented by the Bitcoin Core team. This was the Hong Kong consensus reached by the bigwigs in the Bitcoin industry after 18 hours of fierce debate.

On the day after the Hong Kong consensus was reached, the price of Bitcoin also recovered to US$440.

3. Peacemakers are blocked from entering

What the initiator of the Hong Kong Consensus, Miu Yongquan, worried about actually happened.

After the Hong Kong consensus meeting, Bitcoin Core claimed that the developers who promised various changes at the meeting were all programmers who did not have the authority to modify the Core source code. None of the five people who had the right to modify the Core source code were present, let alone signed.

Adam Back also said that he signed at the meeting only on his own behalf and could not represent Bitcoin Core in agreeing to the Hong Kong consensus. He changed his attitude 180 degrees and strongly opposed the Hong Kong consensus that he had signed not long ago.

The Hong Kong Consensus was rejected by Bitcoin Core.

This reversal directly stimulated the miners who supported the Hong Kong consensus and accounted for 80% of the total network computing power. The Bitcoin community, which had just reached a consensus, fell into a continuous quarrel and division. The miners represented by Bitmain described Bitcoin Core developers as conservative Bitcoin fundamentalists, while Bitcoin Core developers did not respect miners and believed that they were businessmen full of money.

One day in March 2017, Wu Jihan wrote on Twitter, "I don't think the economic majority is important. I ignored the so-called majority when I started investing in Bitcoin in 2011." He decided to start a new business and stop playing with Bitcoin Core.

On May 23, 2017, Barry Silbert, founder of Digital Currency Group, one of the industry's top cryptocurrency investment companies, convened 58 company representatives from 22 countries for a meeting in New York.

In order to hold this meeting, Barry Silbert had one-on-one contact with major companies and developer representatives in the industry to act as a mediator. After much effort, Barry initially softened the positions of all parties. At that time, Adam Back also agreed that Barry would go to New York in May to participate in face-to-face negotiations.

An unexpected event occurred, and Adam Back, who represented the Bitcoin Core faction, missed his deadline again.

Before he set off, he was severely stopped by another important partner in Blockstream. On the eve of the meeting in New York, he temporarily announced that he would refuse to attend the meeting and instead sent Miao Yongquan, who was of a lower rank, to attend the meeting.

In April 2017, Michael joined Blockstream as CSO. When he arrived on behalf of Bitcoin Core and Blockstream, he was refused entry by Barry Silbert at the entrance of the venue. Since Michael had quarreled with many people on Twitter, Barry Silbert was worried that Michael's arrival would make everyone unhappy.

Barry Silbert is a businessman with great negotiation talent. Under his organization, and with the opposition blocked from the door, the New York meeting basically continued the Hong Kong consensus meeting. The miners reached a second consensus, deploying Segregated Witness in August 2017 and expanding the block size to 2M in November 2017, which is called the "New York Consensus."

The companies that signed this consensus represent a key group of the Bitcoin ecosystem, including: 56 companies located in 21 countries; 83.28% of the Bitcoin computing power of the entire network; $5.1 billion in on-chain transaction volume per month; and Bitcoin wallets with a wide range of users.

"The New York Consensus is entangled with many interests. Mining pool owners want a hard fork, and developers will not sit idly by." Miao Yongquan's position has changed. At the Hong Kong Consensus Conference a year ago, he was the conference initiator, representative of mining pools and exchanges, and mediator of the interests of all parties. Now he is a representative of developers who were turned away at the door and a staunch opponent of the expansion plan.

“There is no logic in expanding to 2M. The hard fork solution has no retreat attribute. If you don’t agree to the upgrade, you are not on the same network.”

Miao Yongquan believes that expanding to 2M is a plan that cannot be reversed. The New York Consensus has brought the entire industry to a fork in the road, with only one of the two routes to choose from.

Some signatories of the New York Consensus did not realize that this so-called consensus was not recognized by the Bitcoin Core team , which means that the consensus did not really reach a consensus. The result of their upgrade may become an "altcoin" with unorthodox bloodline . Miao Yongquan has repeatedly stated that the result of the New York Consensus was the creation of Bitmain's competitive currency.

As the defensive party that controls the development of Bitcoin code, Bitcoin Core can take the initiative and continue to maintain its original route as long as it does not make mistakes. As the offensive party advocating hard fork, Bitmain needs to use interests to convince others to support the new route.

Although no one defaulted on the New York Consensus this time, just like the last Hong Kong Consensus, the New York Consensus failed due to opposition from the Bitcoin Core camp. Therefore, the New York Consensus is also jokingly called the "miner's consensus."

After Bitcoin Core opposed the New York Consensus, the miners’ camp began to loosen up, the balance of power began to change quietly, and the offensive and defensive trends began to change. Some mining pools began to withdraw from the New York Consensus. For example, F2Pool, Slush, BTCC and other mining pools announced that they would no longer support the New York Consensus.

However, most exchanges and industry companies declared neutrality and made it clear that there is only one Bitcoin, and that is the one that survives the hard fork and maintains more than 90% of the computing power.

After being turned away in New York, the Bitcoin Core faction proposed its own soft fork plan before the deployment of Segregated Witness. Although it was not implemented in the end for various reasons, this action did stimulate the miners.

Therefore, Microbit, a mining farm invested by Bitmain, launched a hard fork solution to deal with the challenge of Bitcoin Core's soft fork solution. Finally, on August 1, 2017, the Microbit team mined the first block. Since then, the forked coin BCH that competes with BTC was born. The capacity of BCH has reached 8M, which can accommodate more than eight times the transactions of BTC, and is not compatible with Segregated Witness.

4. BCH usurps BTC

On January 13, 2018, the market value of Bitcoin fell to 32.45% of the entire cryptocurrency market, a record low. At that time, many people thought that it was only a matter of time before Bitcoin was replaced.

For Wu Jihan, computing power is the biggest advantage and weapon. He hopes that the forked coin BCH he leads can replace BTC.

However, BTC has the legitimacy and naming rights of Bitcoin, as well as 9 years of user accumulation and industry ecology. After the birth of BCH, it has been facing a severe challenge, that is, no one recognizes it.

Wu Jihan, McAfee and Roger Ver took a photo together.

Coupled with the opposition from the Bitcoin Core camp and the wait-and-see stance of most industry companies, after the BTC fork, most BCH was sold off by users as candy, and the price of BCH was only over $200 when it first came out.

After the fork, Wu Jihan, on the one hand, attracted miners to mine BCH by raising the price of BCH, and on the other hand, he continued to sell BTC, causing BTC price instability . Eventually: "many miners will choose to continue mining BCH, which will lead to a reduction in Bitcoin computing power, more congested network, more people losing confidence and selling Bitcoin, and finally more miners will transfer to BCH, forming a vicious circle and leading to the collapse of Bitcoin."

So Wu Jihan chose to pull the price in his first attack. The price of BCH continued to rise. Less than 20 days after the fork, on August 20, the price soared to $898, more than three times . Miners saw that BCH was profitable, and with the reduction of BTC's computing power, transactions became more congested; more and more people began to switch to BCH, which further led to an increase in the price of BCH. In this way, the cycle continued, and the price of BCH continued to rise.

Then Wu Jihan launched a second attack to seize Bitcoin’s computing power. In extreme cases, BCH diverted nearly half of BTC’s computing power, causing significant congestion in transactions on the Bitcoin chain. However, in November, BCH’s computing power reached twice that of BTC, but its price was still only one-third of Bitcoin’s. In the end, BCH’s computing power quickly collapsed and never exceeded Bitcoin again.

For a long time, the price of BCH has been artificially anchored at 7-10% of BTC.

Wu Jihan's "allies" also support BCH. Among them, R0ger Ver, the founder of Bitcoin.com | Buy BTC & BCH | News, prices, mining & wallet, is known as Bitcoin Jesus because of his firm support for decentralization, opposition to government regulation, and preaching everywhere. At the peak, he held hundreds of thousands of bitcoins. In this Bitcoin fork, he sold all his bitcoins and held BCH instead. R0ger Ver has publicly stated many times that only BCH is the real Bitcoin, and there are even accusations that he deliberately misled new users on his website (bitcoin.com) to buy BCH.

Dr. Craig Wright (CSW) is an Australian businessman who calls himself Satoshi Nakamoto and is nicknamed "Australian Satoshi" by netizens. He supported the Bitcoin fork in the name of Satoshi Nakamoto and was one of the backbone forces of BCH at the time.

In May 2018, the CoinGeek Hong Kong Conference was held. Major mining pools, exchanges, and developers came to Hong Kong to celebrate the first anniversary of BCH and to share the "exciting" development of BCH in the past year. Bitcoin.com founder R0ger Ver, Leibit Mining Pool founder Jiang Zhuoer, and BCH core developer Jiang Jiazhi took a group photo at the event, representing public opinion, mining pools, and development, respectively, to celebrate the first anniversary of Bitcoin Cash.

Dr. Craig Wright was also present. No one present expected that he would start a fork war that almost destroyed BCH three months later . Yes, you read that right. The man who claimed to be Satoshi Nakamoto later forked BCH and established BCHSV (Satoshi Vision).

In the bear market of 2018, Bitmain invested heavily in BCH and exchanged all the company's Bitcoin and cash for BCH, suffering heavy losses . Since then, BCH has maintained a 1:20 ratio with Bitcoin in terms of price and computing power. Because of the heavy holdings of BCH, Bitmain was questioned for relying on the sale of BCH for income when it went public in Hong Kong in 2018.

Looking back two years after the Bitcoin fork, the BTC fork has long been settled, and BCH has also taken another parallel route. However, this fork has had a profound impact on the entire Bitcoin ecosystem.

Bitmain was severely damaged in the following bear market of 2018 because of its bet on BCH. In the early years, Bitmain's mining pool Bitcoin Block Explorer - BTC.com open-sourced the Bitcoin mining pool code, which led to more and more mining pools adopting the Bitcoin Block Explorer - BTC.com open-source code in the following two years. The resulting decentralization trend of the mining pool industry was very obvious, and Bitmain gradually lost its absolute advantage in Bitcoin computing power.

Bitcoin Core has achieved absolute dominance in Bitcoin development. Whether challenging Bitcoin Core within the Bitcoin ecosystem or surpassing and replacing Bitcoin with other cryptocurrencies, it will be an epic task.

References:

[1]. Babbitt: “Ten Years of Blockchain”

[2]. Miner Zhaobei: Bitcoin’s Crown of Power — CORE

[3]. Slightly referenced from “The Believer, the Power Lord, and “Jihad” Wu Jihan”

[4]. Documentary: The New Blockchain

[5]. Chang Qia, Minutes of the Discussion on Bitcoin Blockchain Expansion Consensus

[6]. Jiang Zhuoer, “Consensus Interpretation: Bitcoin Roundtable Reaches Consensus on Expansion”

[7]. Liu Hongjun and Song Wei, “Civil War and Division in the Bitcoin Kingdom” | Caijing Special Report

[8]. Babbitt, “Hong Kong Roundtable AMA - Dialogue with Adam Back Content Record”

[9]. Forbes, Laura Shin "Bitcoin Agreement Promises To Break Impasse; Currency Jumps In Value"