Bitcoin Cash faces uncertain future after rollercoaster first day

Bitcoin Cash - a new ‘fork’ of the popular cryptocurrency Bitcoin, formed as the result of a heavily publicised rift within the cryptocurrency community - had its first block mined on Tuesday evening.

Shortly after the alternative blockchain was put into use, its price leapt 48% to $422, before cooling off heavily to $247.

At the same time, the Bitcoin itself was trading at around $2,750.

The new currency has been designed to optimise fast and cheap transactions, to countermand Bitcoin's limits on the speed of which it can be traded.

Where the previous blockchain could only add one megabyte of new data every 10 minutes, Bitcoin Cash will be capable of producing blocks up to 8MB in size, which its developers believe will aid in speeding up processing time.

However, due to the larger block size, Bitcoin Cash does necessitate more storage space from computers involved in the mining process than its predecessor.

“Bigger players with access to server farms and big budgets will have no problem running bigger nodes, but smaller operators could be squeezed out,” said Dr Garrick Hileman of the Cambridge Centre for Alternative Finance.

As Bitcoin Cash has access to Bitcoin's entire historical ledger, people who held bitcoins before the fork are eligible to an equal amount of the new currency for free, which can then be traded for fiat currencies, such as euros or dollars.

It is yet to be determined the level of success Bitcoin Cash could see, as depending on where it stabilises it could command a total market value of several billion dollars.

Coinbase - one of the more widely used digital currency exchanges - said that it would not support Bitcoin Cash at this point.

The Silicon Valley-based trader said it would reassess its position, however, based on the ability of Bitcoin Cash to "prove itself stable and secure" through its first few days.

“I believe Bitcoin Cash will be around for some time, but in the long term, I don’t see Bitcoin Cash going anywhere,” said Luis Cuende, co-founder of Aragon, another cryptocurrency.

“Probably a fatal bug will crash the whole network - it already happened with Bitcoin Unlimited, Cash’s predecessor - or people will just lose interest in a currency engineered to look decentralized while being totally centralised.”