On August 1, 2017, a direct hard fork of Bitcoin resulted in a parallel blockchain that would go onto its own way: Bitcoin Cash.
The birth of Bitcoin Cash marked the beginning of an era of vehement disagreement between Bitcoin users. Those who remained on the original chain found the hard fork a controversy, whereas Bitcoin Cash supporters argued they are fulfilling the original vision of Satoshi Nakamoto with Bitcoin Cash (BCH).
Let’s take a tour in the annals of Bitcoin history and see the events that culminated in the creation of the currency, and the controversies that followed, including its addition to Coinbase.
What Is Bitcoin Cash?
Bitcoin Cash (BHC) is a 2017 hard fork of Bitcoin, born over a series of important differences in opinion between Bitcoin users about how the cryptocurrency should function. The most important point of difference was the activation of the SegWit (Segregated Witness) protocol, which allows second-layer solutions to be implemented as a solution to Bitcoin’s scalability issues.
China-based hardware manufacturer Bitmain, a company that owns mining pools such as BTC.com and Antpool, protested the implementation of SegWit, arguing that larger block sizes are the better scalability solution for Bitcoin. When the SegWit plan got community approval, Bitmain and other developers who had a different vision of Bitcoin launched Bitcoin Cash.
A hard fork includes copying the parent blockchain in order to keep all the past transactions valid in the new fork, however, developers can make changes (upgrades) to change the direction of the cryptocurrency.
In the case of Bitcoin Cash, the hard fork resulted in the creation of a new digital currency and differences to increase BCH’s block size, allowing faster transactions than Bitcoin’s.
What Is the Bitcoin Cash (BCH) Coinbase Controversy?
The creation of Bitcoin Cash sent shockwaves around the cryptocurrency ecosystem and it wasn’t clear how other players, such as cryptocurrency exchanges, would receive the developments.
Coinbase and its sister platform GDAX (now Coinbase Pro), announced in August 2017 that Bitcoin Cash would be available on the platform though it wasn’t clear whether they would allow users to trade BCH on the platform or just provide withdrawal.
Coinbase is famous for its diligence for complying with regulations and listing only valid digital currencies. At the time of the fork, Coinbase only listed three cryptocurrencies: Bitcoin (BTC) and the of the biggest altcoins, Ethereum’s Ether (ETH), and Litecoin (LTC).
Since the hard fork copied the original bitcoin blockchain, everyone who had Bitcoin at the time of the fork gained an equal amount of Bitcoin Cash.
Coinbase announced on December 19 that they would allow GDAX and Coinbase customers to begin Bitcoin Cash trading on the platforms as soon as GDAX reached “sufficient liquidity”.
However, when the Bitcoin Cash prices on the cryptocurrency exchange surpassed BCH prices at other cryptocurrency markets, such as Binance, by thousands of dollars within a few minutes of the Bitcoin Cash Trading launch, Coinbase froze BCH-USD trading, citing “significant volatility” and scrapped the order book.
Coinbase launched an insider trading investigation after the price of the digital currency hit around 8,500 USD on the platform, while it was traded for around 3,000 to 4,000 USD on other cryptocurrency exchanges. Some theorized that members of Coinbase staff who knew the digital asset would be added to the platform might have taken advantage of the increasing trading volume through their insider knowledge, however, a Coinbase investigation found no signs of insider trading.
What Happened to Bitcoin Cash?
Bitcoin Cash hit its all-time high in December 2017, when it launched on Coinbase, trading for 3,785 USD. For a short while, it enjoyed its rank as the third biggest cryptocurrency in the crypto sphere thanks to its market cap, but it was replaced by other altcoins in the following years (currently Cardano is the third biggest cryptocurrency after Bitcoin and Ethereum).
In 2019, Bitcoin Cash gained a hard fork of its own, resulting in the creation of Bitcoin SV.
A Few Words Before You Go…
The launch of Bitcoin Cash spurred many controversies and the digital currency’s addition to Coinbase on December 19 repeated the pattern by immediately lending itself to an insider trading investigation. Thankfully, Coinbase found no traces of insider trading and Bitcoin Cash trading is available on Coinbase for all users.