The major crypto-currencies are getting smoked in Asian trade today.
Ethereum has lost as much as 8% and a short time ago had fallen below $200 for the first time since May. Meanwhile, Bitcoin was around 6.5% lower.
It follows steep falls overnight, when Bitcoin crashed by 7% and Ethereum shed a whopping 13.53.%:
A looming showdown in the Bitcoin development community looks set to come to a head. More on the background here.
Currently, Bitcoin is traded on a blockchain that only allows up to 7 transactions per second. Given Bitcoin’s popularity, that creates delays and order backlogs.
Bitcoin developers are split between two camps as to how to speed things up: either increase the number of allowable transactions on the current network, or create a secondary network to help manage the load.
According to Bloomberg, the dispute pits big Bitcoin data miners against developers who want to maintain the original core platform.
The big data miners (most are based in China) use expensive equipment to mine the remaining Bitcoin, and don’t want their market power reduced by the set-up of a secondary exchange.
Developers who want to keep transaction volumes low argue it’s to maintain the blockchain’s high level of security.
The stand-off also partly reflects an argument about what Bitcoin actually represents: whether it’s a freely traded currency substitute with high transaction volumes, or whether it should act as a finite commodity like gold.
The Bloomberg report said the two sides recently reached a compromise, with the roll-out of a new platform to double transaction volumes.
It will be introduced on July 21, and the Bitcoin community will then monitor how many developers adopt the new system. If the take-up rate is above 80% to the end of July, the new system will remain in place (for the time being).
Some argue that the compromise has been reached as the Bitcoin community looks to ward off the looming threat from Ethereum.
It may go some way to explaining Ethereum’s decent in July, although the delicate negotiations among Bitcoin developers suggest that investors in both crypto-currencies should brace for more short-term volatility.
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