What is Bitcoin

Bitcoin faces a pivotal moment as investors are about to receive an entirely new asset called Bitcoin Cash after the blockchain supporting the cryptocurrency is forced to split in two.

“The creation of Bitcoin Cash is certainly a pivotal moment for Bitcoin and its community,” Charles Hayter, founder of digital currency comparison website CryptoCompare, told CNBC on Monday.

“The inception of Bitcoin Cash may prove to be exactly what Bitcoin needs.”

On August 1st, a ‘user activated hard fork’ will take place. Members of the bitcoin community unhappy with the direction of the digital asset have set up an alternative ‘node’ called Bitcoin ABC.

Nodes are required to send messages across the bitcoin network, but Bitcoin ABC will use a different set of rules, causing the blockchain (the digital ledger which records every bitcoin transaction) to fork and create two separate digital assets: the original bitcoin and Bitcoin Cash.

And because Bitcoin Cash will have all the history from the old blockchain, any investors with bitcoin tokens will receive the same number of tokens on the new blockchain.

However, Bitcoin Cash will likely only be worth a fraction of bitcoin. The original digital currency is trading around $2778.39 today, but future values for Bitcoin Cash on the website Coin Market Cap are just $288.35, or 0.103 of a bitcoin.

Why is bitcoin splitting?

The bitcoin community has been divided on how to solve its scaling issue. Currently, only 1 megabyte of transactions can be processed at any one time, leading to delays.

“Demand for Bitcoin has been so high in recent months, that those creating the cryptocurrency can’t keep up, slowing transactions,” Iqbal Gandham, U.K. Managing Director at eToro, said in a press statement on Monday.