What is Bitcoin SV? (BSV)

Bitcoin Forks

Background

Since its inception in 2008, Bitcoin has undergone numerous upgrades. However, not every upgrade has garnered a unified consensus within the community. In 2017 and 2018, Bitcoin experienced two major upgrades, yet the community’s opinions on these upgrades were different, leading to the birth of BCH and BSV. Both BCH and BSV are forked versions based on the BTC network, and currently, they hold prominent positions in the cryptocurrency market.

Hard Fork and Soft Fork

When a blockchain network undergoes significant upgrade changes, such as alterations to the consensus mechanism, hard forks and soft forks can occur. The distinction between hard forks and soft forks lies in the following: A hard fork is a non-backward-compatible software upgrade approach. When a network experiences a hard fork, node clients must synchronously upgrade and become new nodes to access the upgraded blockchain network. However, if some nodes are unwilling to participate in the upgrade and continue running the previous node client version, two blockchains will emerge. One is the upgraded blockchain network running on the new client, while the other is the original blockchain network that remains unupgraded. This approach is known as a hard fork.

On the other hand, a soft fork is a backward-compatible software upgrade approach. Even if nodes do not engage in client upgrades, they can still access the upgraded blockchain network and interact with other nodes that have already upgraded. This method does not result in a hard fork of the blockchain but rather maintains two versions of the blockchain network.

As shown in the above diagram, when Blockchain X undergoes a hard fork, it transforms into a new blockchain, Blockchain Z. In the case of a soft fork, which is an iterative process based on the previous version, it evolves into X+Y. Here, Y represents optional modules or features that can be installed, all while maintaining compatibility with the original Blockchain X. If the network remains without any fork upgrades, it will continue to preserve its initial version.

Bitcoin’s Hard Forks

The scalability issue of the Bitcoin network has consistently been a focal point of community discussions, primarily revolving around the 1MB block size limitation that constrains the number of transactions processed within a single block. Consequently, the community has undergone multiple upgrades to address this issue, as follows:

In August 2017, certain community members aimed to enhance the performance of the Bitcoin network by directly increasing the block size. However, these members leaned more towards off-chain scaling. The lack of consensus between these two approaches led to a hard fork in the Bitcoin network. Community members advocating for an enlarged block size executed a hard fork upgrade, resulting in the creation of the Bitcoin Cash (BCH) blockchain network with a block size of 32MB. Meanwhile, those supporting off-chain scaling maintained the existing network (with a block size of 1MB), continuing to operate the original version, which is the current Bitcoin network.

In October 2018, after BCH had been operational for a period, the community aimed to expand the functionality of BCH to further develop its ecosystem. The Bitcoin ABC development team sought to incorporate additional features into BCH, laying the groundwork for smart contracts within the BCH ecosystem. However, the blockchain mining company nChain rejected the proposals from Bitcoin ABC, asserting that these added functionalities would deviate from Satoshi Nakamoto’s vision of creating Bitcoin as a peer-to-peer electronic payment system. nChain’s goal was to restore two segments of the older Bitcoin code and increase the network’s block size limit from 32MB to 128MB.

Ultimately, disagreements within the BCH community led to a hard fork upgrade, giving rise to the BSV network. BSV stands for Bitcoin SV, where SV represents “Satoshi Vision.” This term reflects the commitment to uphold the vision of BTC, aiming to realize the original vision set forth by Satoshi Nakamoto in the Bitcoin whitepaper. The subsequent development of BSV also garnered support from entities such as nChain and Craig Wright, also known as “Satoshi Nakamoto.”

Operating Mechanism of BSV

Unlike other BTC hard fork networks, BSV’s development roadmap is dedicated to restoring the original functionalities and stability of the Bitcoin protocol, along with achieving significant scalability. This enables large enterprises to build project applications on the BSV network.

In terms of network operation, similar to BTC, BSV continues to utilize the Proof of Work (PoW) consensus mechanism. The total supply of BSV tokens is 21 million, with block rewards halving every 4 years. Initially, the block size of the BSV network was 128MB. In a subsequent upgrade in July 2019, known as the Quasar protocol upgrade, the block size was expanded to 2GB. Additionally, adjustments to block size determined by the network consensus mechanism were allowed. This means miners can adjust the size of the blocks they wish to mine. This change aimed to enable the BSV network to process more transactions in a single block, generating increased transaction fees to offset the reduced block rewards.

According to a report released by BSV in July 2020, the network averages 300 transactions per second, with peak capacity on the mainnet reaching 2,800 transactions per second. The team also claimed that their gigabyte testnet (GBTN), with its unlimited block size, can process up to 5,500 transactions per second. For instance, in May 2020, TAAL, an enterprise blockchain service provider focused on Bitcoin SV, processed a 369MB block on the Bitcoin SV mainnet containing 1.3 million BSV transactions.

The adaptable design of block size provides the BSV network with impressive throughput and cost-efficient network efficiency. Currently, BSV also supports writing smart contracts on the network using Solidity code. The official compiler allows developers to seamlessly migrate existing Solidity contracts to the BSV network, facilitating rapid deployment of applications on the BSV platform.

Comparison of BTC, BCH and BSV

Currently ranked as the number one cryptocurrency by market capitalization, BTC remains the original Bitcoin network, having undergone significant network upgrades such as Segregated Witness and Taproot. BCH, derived from a fork of BTC, and BSV, which forked from BCH, are both products of the BTC network. Behind each of these distinct networks, there exists a corresponding community supporting their respective development.

Data Source: https://www.coingecko.com/zh

Overall, the Bitcoin network continues to uphold its essence as the earliest peer-to-peer network, with BTC being recognized and held across the entire cryptocurrency community as digital gold. The BCH community aims to use cryptocurrency for daily transactions, thereby constructing a global payment system. On the other hand, the BSV community is more focused on enhancing user experience and aims to bring more global users into the BSV network through its highly scalable network’s execution capabilities. In 2022, BSV expanded its block size to 4GB, which is 4,000 times larger than the blocks on the BTC network, enabling it to process nearly 6 million transactions per day.

Development and Current Status of BSV

Here are some key events in the development history of BSV:

• May 20, 2020: BSV network’s testnet experienced a transaction backlog due to the Bitcoin halving, resulting in the mining of a large 309MB block.
• June 14, 2020: Binance Pool and SVPool stood as the two largest independent mining pools on the BSV network.
• July 13, 2020: Developers launched Layer 1 tokens based on UTXO on the BSV network.
• June 11, 2021: In a stress test, the BSV blockchain processed 1.88GB of data in under two hours. The BSV node team’s future goal is to generate terabyte-sized blocks.
• August 4, 2021: BSV suffered a “massive” 51% attack during the night.
• March 27, 2022: The total transaction volume on the BSV network surpassed one billion transactions.
• October 24, 2022: An unknown miner gained control of over 51% of the hash power on the BSV network.

Source of Images: https://whatsonchain.com/

Currently, the BSV network maintains a daily transaction volume of around 2 million. Furthermore, on the official BSV website, there are nearly 500 registered ecosystem projects. However, the overall project types tend to lean towards basic DApps, revealing a significant gap in application diversity compared to Ethereum.

Source of Images: https://www.bitcoinsv.com/projects

In terms of the community, the BSV Discord community comprises approximately 25 million members, with around 12,000 followers on Twitter. Presently, community operations for BSV are primarily led by the nChain team. Previously, they participated in the London Blockchain Conference, advocating for the BSV network’s potential use cases in enterprises, including food and automobile insurance.

Simultaneously, nChain is driving the development of blockchain applications centered around Central Bank Digital Currencies (CBDCs) within the financial industry. Implementing CBDCs requires selecting the appropriate blockchain technology. Different blockchains offer distinct design possibilities, including token-based or account-based approaches. Each option has its advantages and applicability. Scalability and low cost are identified as two fundamental factors for blockchain success. nChain is actively pushing for BSV blockchain’s future development to become a potential candidate for CBDC adoption.

On the other hand, since its inception, the BSV network has experienced multiple attack incidents. Examples include the double-spending attack in July 2021 and the 51% attack in August. In November 2022, an unknown miner controlled over 51% of the BSV network’s computational power, resulting in multimillion-dollar losses for exchanges. While larger blocks have enhanced efficiency for the BSV network, they’ve also introduced the risk of centralization. According to the BSV community, the network’s peak capacity reaches 2,800 transactions per second. Regarding network performance, BSV significantly outperforms the current stages of BTC or BCH.

However, adopting block size increases brings a corresponding issue: centralization risk. As a scalability solution focusing on increasing block size, it elevates hardware requirements for network nodes, potentially leading to a limited number of operators (currently only 50 nodes in the BSV network) running full nodes (storing the entire network’s transaction history). Block generation in the current BSV network is primarily dominated by operators of the TAAL and Mniing-Dutch mining pools. This potential centralization introduced by the block size increase approach might be one of the underlying reasons for multiple attacks on the BSV network.

Presently, Ethereum has chosen Layer 2 as its scalability solution due to the “impossible triangle” challenge (security, performance, decentralization) posed by the current state of blockchain technology. BSV’s one-sided focus on performance improvement, including concepts like limitless scalability, removal of transaction scripts, transaction volume limitations, and even allowing miners to freely decide block sizes without restrictions, inevitably exposes its network to the risk of centralization.

Conclusion

As a product of the cryptocurrency world’s evolution, BSV has a history of 5 years since its development in 2017. Throughout this time, its network has undergone numerous iterative updates. Despite its chosen path of scalability through block size increases, which far exceeds the processing capabilities of BTC and BCH networks, BSV’s potential as a global payment system in enterprise-level scenarios remains a possibility.

How to Acquire BSV Tokens

To obtain BSV tokens, you can use centralized cryptocurrency exchanges. For instance, you can purchase BSV on reputable exchanges like Gate.io, which supports BSV trading. First, create an account, authenticate it, and deposit the desired tokens. Once the account is set up, you can follow the prompts to complete the purchase and acquire BSV. Remember to conduct research and compare prices across different exchanges before purchasing, and ensure that the acquired tokens are stored in a secure and reliable wallet.

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