eCash for beginners 3: The Rise and Fall of Bitcoin Cash

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In part 1, I covered the nodes that make up the Bitcoin network. In part 2, we discussed the people who make up the Bitcoin community. Now in part 3, it’s time to look at what happens when the people in a community can no longer see eye-to-eye.

When Bitcoin first started, everyone was happy. Satoshi was still around serving as the de facto benevolent dictator of the project. And for all intents and purposes, the community was full of like minded individuals who shared the common goal of wanting Bitcoin to take over the world.

Then came the Silk Road. It was proof that Bitcoin could be used as digital money. The price started to rise and the number of users and transactions grew rapidly.

But it was also starting to become obvious the network would eventually hit capacity. With 1 MB blocks, the network could only handle a mere 7 transactions per second. Any more than that and the blocks would become full, leading to higher fees and longer confirmation times.

Fortunately, there was a solution. You could raise the limit to something like 8 MB and buy some time. Transacting on the network would remain cheap and reliable with no real detriment to the network.

But others disagreed. They said raising the block size was merely kicking the can down the road. They said it would lead to centralization because it would cause the size of the blockchain to grow too quickly making it burdensome for people to run a node. At that point transactions weren’t even filling 1 MB blocks so the big blockers felt this wasn’t anything to be concerned with for the time being.

For years the two sides argued back and forth. There were accusations of censorship and sock puppets. There were closed door meetings with some of the largest stakeholders. Promises were made and eventually broken.

Basically, the block size wars resulted with the two sides at complete odds with one another and no hope of reaching consensus.

Had Bitcoin been a country, or a corporation, there would have been no way to make both groups happy because people can’t be expected to live or work in the same place with different sets of rules for different people.

But this is what makes Bitcoin unique. By being able to fork the code and split off into your own network, it’s like being able to make a copy of a country and running it your way.

And this is exactly what happened on August 1, 2017, when Amaury Sechet of Bitcoin ABC, with the help of Haipo Yang of ViaBTC, and Jihan Wu of Bitmain, created the first successful hardfork of Bitcoin. The new chain was named Bitcoin Cash (BCH) and featured 8 MB blocks with the hope of one day being able to handle blocks 100,000 times that size.

They sought to continue the Bitcoin project in the way they wanted, not resign themselves to being forced to follow a path they didn’t choose. They did everything right, like making sure to include replay protection, because after all it was Bitcoin Core’s code they were forking.

Anyone who held BTC at the time of the fork now held an equal amount of BCH to do whatever they wanted with.

Basically all holders were given a choice. They could hedge their bets and hold both coins, or if they thought one project was better, they could trade one coin for the other.

While the Bitcoin Cash fork was viable and the network was live, I remember the start of the project was full of unknowns. I was only just beginning my own crypto journey at the time, but I don’t recall there being much information at all for me to find. I eventually made my way to Twitter, and Discord, and later, Telegram, to learn from people more knowledgeable than myself.

I would say that one thing BCH had going for it was that it came with a community from day one. (Though maybe that was also what doomed it as well.) Basically, everyone who had opposed Bitcoin Core and believed that raising the block size was the reasonable solution had latched onto the project because it was their only option. This included many people who for years had been trying to create a big block version of Bitcoin only to suffer failure after failure whether due to buggy code or a lack of coordination. 

Then Amaury and Bitcoin ABC came along and it finally happened. Funding and hashpower were provided by Jihan and Haipo, while the holders were mostly old school big block Bitcoiners, or noobs like me who had been promised a flippening.

It would take an entire book to cover everything that transpired over the next several years, but for this article the question I want to answer is why didn’t BCH succeed? They had a AAA ninja lead software developer in Amaury. They had the backing of some of the biggest miners and names in all of crypto. And presumably, everyone was on the same page about on-chain scaling for Bitcoin Cash. 

So what went wrong?

In a word, culture.

What I remember from the early days of BCH is that all I cared about was becoming rich. I would ask people on discord for price targets and how long it would take. I fantasized about the flippening, and the BTC chain death spiral, or that someone like Jihan would swoop in and save the day.

Mind you, there’s nothing wrong with wanting to be rich, but I believe there is always a right way and a wrong way to go about doing something.

​When Bitcoin Jesus himself, Roger Ver, came out in support of Bitcoin Cash a few months after the launch, suddenly I thought he was going to save us. He went on CNBC and did interviews on Fast Money. His brand was the ally we needed, or so I thought. 

Suddenly, the mantra became that Bitcoin Cash was the real Bitcoin. Rather than focus on building and outcompeting the other chain, it was all about spreading fear, uncertainty, and doubt. We acted like some crazy ex girlfriend who couldn’t let go of her old flame. We complained about it not being fair Bitcoin Core kept the ticker and the logo. We bashed the lightning network and bragged how many transactions our network could handle even though no one was using it.

We were more focused on comparing ourselves to BTC rather than focusing on how to out compete that network.

I’m embarrassed to say, I fell for the whole flippening narrative hook, line, and sinker. I considered myself late to Bitcoin, and I saw Bitcoin Cash as a second chance, a way to catch up even if it was to be at the expense of others. A ticket for a free ride that would 100x all my problems away.

But that’s not what happened. Instead, the ride I ended up on was a four year long journey that ended up being an expensive but valuable lesson.

I believe Bitcoin Cash failing had nothing to do with the technology or the roadmap, but in its execution. The community was so focused on number go up they believed all they needed to do was convince everyone Bitcoin Cash was the real Bitcoin and then wait for the money to pour in. What they wanted was more marketing instead of development.

Rather than focusing on actually scaling Bitcoin Cash so the network would be better than any form of money the world had ever seen, the community focused on what color the logo needed to be. Green or orange?

We saw developers as an expense, not as an asset. We questioned their every move and everyone wanted to be the center of attention and have a say. People wanted credit for every little thing they ever did while ignoring past mistakes.

While I admit I was no better than anyone else, I blame it on the culture. Instead of being about working together to solve difficult problems, everyone was out for themselves. The whales wanted to be treated like royalty and held petty grudges rather than using their capital to increase everyone’s wealth, including their own.

The culture was also about instant gratification. We wanted it fast, and we wanted it for doing nothing.

That’s why we failed.

Between 2017 and 2020, we saw the BCH price go from a high of 0.4 BTC all the way down to 0.01. One percent. I know that seems hard to believe, but it’s true. 

Back in 2019, Amaury gave a presentation in Australia in which he asked why, if BCH has better fundamentals, is a better product, and more useful than most other cryptos out there, why was it only worth 3% of BTC. He continued: “So clearly there is something that we are not doing right, and clearly it’s not fundamentals, it’s not product, it’s not usefulness. It’s something else, and I think this can be found somewhat in our culture.”

To me, if number go down was a symptom, the culture was the disease. A culture of everyone wanting to get rich while expecting others to work for free.

Bitcoin ABC has some of the most experienced blockchain developers in the world, and the BCH community expected them to work for donations. They wanted Amaury and his team to keep their mouths shut and stop complaining about lack of funding.

We wanted something for nothing, and that’s pretty much what we got. Rather than supporting the people doing the work and cheering them on, we accused them of holding the chain hostage. And despite all that, Bitcoin ABC kept the network alive for all those years because they believed in the mission. They wanted to change the world, not have petty arguments, but everyone has their limits.

In part 4, we will look at the birth of BCHA.