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Published online by Cambridge University Press: 22 December 2023
This chapter examines some of the major cryptocurrencies that have sprung into existence following Bitcoin. Bitcoin continues to dominate this landscape but it did not remain alone for long, as many sought to improve on Bitcoin, whilst others saw opportunities for making a quick profit by offering new altcoins (alternatives to Bitcoins). Investors poured money into the various offerings, selling real-world assets, dreaming of becoming millionaires overnight. We shall consider the top altcoins in terms of market capitalization and examine how their structures differ, the impact of hard and soft forks and their defences against hacking. We shall see that Nakamoto's dream of “honest” nodes working together to record transactions in an immutable and transparent blockchain did not last very long, even for Bitcoin.
BITCOIN, SPEED AND HARD FORKS
The slow and expensive process of transferring Bitcoins from one person to another led to technical changes that sought to address Bitcoin's transaction processing capacity. One such development adopted by mining pools and companies was a soft-forking change, “segregated witness” (SegWit) the process by which the blockchain limit on a blockchain is increased by removing the signature data from transactions in order to provide more capacity so that more transactions can be added to the chain. The plan to further upgrade the Network to SegWit2x (a hard fork) was presented at the 2017 Consensus conference in New York, and was expected to be introduced in November by the Digital Currency Group with the support of some 58 companies, including wallet providers, exchanges, other businesses providing goods or services providing goods or services in the cryptocurrency space (but only seven miners). But by mid-November, a number of companies began to withdraw from the agreement in order to focus their resources on Bitcoin cash, but none of the miners formally withdrew from the agreement. Some thought it was too soon to upgrade the Bitcoin Network up to SegWit2x three months after it had been upgraded to SegWit.
Despite the adoption of SegWit Bitcoin was still experiencing congestion problems for transactions, which led to high transaction fees and slow confirmation. SegWit2x proposed to increase the size of the block from 1 megabyte to 2 megabytes.
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