Bitcoin may be winning the battle for investment dollars, but when it comes to attracting mining power, competition is heating up.
After the bitcoin cash blockchain experienced a major adjustment this weekend, the less than one-month-old cryptocurrency has seen a dramatic reduction in mining difficulty, and perhaps more crucially, an increase in its profitability for those providing computing power as a means to secure its ledger.
At press time, bitcoin cash has now attracted nearly 30% of the mining power of the bitcoin network, a figure that is up from just 5% two days earlier.
As profiled by CoinDesk last week, the move sets the stage for a high-profile, real-time test of how two large blockchain markets might compete at scale. As both bitcoin cash (BCC or BCH) and bitcoin (BTC) use proof-of-work to secure their transaction histories, both networks are now effectively competing for hash power.
So, while bitcoin cash may have struggled to produce blocks after the split (miners initially earned less money), that has now changed.
As of last Friday, bitcoin miners are now earning more through the creation of new bitcoin cash, as developers and miners have worked to lower the bitcoin cash difficulty rating that regulates its rewards.
Price takes note
What happens from here is less clear given that there are few comparative events from which to draw historical information.
The most similar event, last summer’s ethereum hard fork, had several notable differences in that both networks very much wanted to continue building in separate directions. Bitcoin’s split, by contrast, has been more competitive.
Already, there is suggestion that there might be a larger fight over the bitcoin branding should one blockchain prove more popular. And it remains to be seen how exchanges would respond to such an event in their listings.
Further, the two markets appear to be divorcing from ideological motivations, with many bitcoin and bitcoin cash users and traders showing a propensity for taking profit wherever it’s being made available.
At press time, bitcoin cash is trading at just under $600, though its price had been as high as $1,000 this weekend, largely on anticipation of scheduled mining changes.
The result is a sign that bitcoin cash may be responsive to developments in hash power changes, or at least, the expectation of those changes. By contrast, bitcoin has seen more stability to these fluctuations, largely trading in the $4,000 to $4,500 range over the last several days.
Miners for hire
But while price action has been subdued, the event still might mark a turning point in the relationship between the two competing cryptocurrency networks, which emerged following a years-long disagreement on how best to upgrade bitcoin’s technology.
Bitcoin cash, created in August, boasts 8 MB transaction blocks, while bitcoin is soon set to activate Segregated Witness, a code optimization that will increase capacity as well as redefine how capacity is counted by the distributed network.
Still, miners so far appear to be setting up to profit from the competition between the two networks in their quest to appeal to users.
In recent days, BTC.Top, the fifth-largest mining pool, and AntPool, the network’s largest mining pool, have both given the independent miners that use their software the option to dedicating their computing power to both networks.
Some are now going a step further, with ViaBTC and AntPool indicating they are or will soon begin working on technology that will enable miners to direct their computing power to whichever chain is offering the most profits.
For now, markets will likely be watching to see whether other miners follow suit.
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