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Something that people dont normally consider: when someone says BSV or BTC what is it that you think of? Is it the coin which is traded on an exchange? Is it the platform, upon which people develop blockchain applications? Is it the peer-to-peer network of nodes? Or is it the software that runs said nodes?

Well if you are not sure, then rest-assured you are probably part of the vast majority. It is the hope of this article to clear some of this up, as the crypto industry is rife with many misunderstandings and misdirections, of which this is one of the most common. After we have cleared up the differences between these, I wish to turn to the issue of chain splits (sometimes called forks), which may occur when the nodes of the network do not come to majority consensus on what the ledger state should be. Why is this relevant? Well, as we all know, chain splits are very disruptive to blockchains, leading to splitting of the developer community, and battles over which side gets to keep the standing token ticker symbol. Why is understanding chain splits important? Well, because as blockchains in general become integrated into the common law of society, we need to arm ourselves with the knowledge on how the implementation of law will affect the operations of blockchains.

Up until this point, the narrative that has been pandered is that blockchains, due to their decentralized nature, live completely supra-legal, and outside of the reach and understanding of common laws. This cannot be further from the truth, as given enough time, laws has a way of catching up with whatever technology or society can invent. There were no airline safety laws before the time of the Wright brothers, nor were there laws against using radioactive radium in toothpaste at the turn of the century, but would it have been reasonable for scientists to argue that laws surrounding the harm done by invisible forces such as radiation poisoning could never be devised? Well by that same reasoning crypto proponents have been claiming for years that laws could never be enforced against a decentralized network such as those employed by blockchains and people to this day still believe it. And this is relevant and topical considering the upcoming clash between the common wisdom of crypto and the law in the cases surrounding Craig Wrights claim for his stolen bitcoins. But first, lets clear up some terminology.

What is BSV, BTC?

BSV is a ticker symbol that represents a protocol, and the Bitcoin SV node is simply software for a node which is compatible with that protocol. Similarly BTC is a protocol, and BTC-Core is node software that adheres to the BTC protocol. Of the protocols, BSV is the closest to the original Bitcoin protocol as described in the original Bitcoin white paper, as it does not include any of the changes that were pushed into the BTC or BCH protocols in order to support different higher layer protocols and platforms1 such as Lightning Network. The BSV protocol function by function is closest to what Bitcoin was in 2009. With that understanding, Bitcoin SV is just what happens to be the most prevalent node software available presently, but it is by no means the only one. In fact, there are several other node softwares available for those who do not wish to use the official version, including ones implemented in Go, Rust, and an upcoming one called Teranode, which promises to be able to process terabyte sized blocks. No matter the node software you run, however, as long as it adheres to the open protocol of BSV, BTC, or BCH, your node will remain in sync or in consensus with other nodes that run on that protocol.

Seen in this light, chain splits are just a simple matter of some servers falling out of consensus with each other, and not being able to follow the chain. If they fail to upgrade their software to the version that the miners (henceforth referred to as block producers) are running, then they simply never receive any new blocks, and to them, the blockchain will have essentially stopped. They may see plenty of transactions and traffic on their network, but blocks will simply never come. Listening-only nodes have no ability to cause a chain or ledger to split. They have no power whatsoever, as they are listen-only.

A chain split is when the block producing nodes dont all agree on the rules. When a significant proportion of the producing nodes are running incompatible software, with incompatible protocol rulesets, then a potential for chain split exists. This is what happened twice in the pastfirst, when BTC split away from Bitcoin with the introduction of the SegWit change, and then later, when BCH introduced a change to enable tokens which the majority did not accept. In each of these past splits, the protocol which remained the closest to the original ruleset had to change the ticker symbol of their token, due to the fact that the exchanges where tokens were traded were confused over which of the token ledgers would use the existing ticker symbol, and which would be given a new one. However, generally speaking a chain split is unlikely (because it is costly2) to result when a majority of the block producers are in agreement with which version of the node software they will run, and therefore which ruleset they will support.

From the perspective software, BSV, BTC, and BCH node software is simply a set of protocol rules to follow, and different block producers running different software will result in seeing different versions of the ledger. The effect of this is that with every ledger split, a new token is created3 or airdropped. This is how the current situation came to be, with 3 major tokens all claiming to be Bitcoin. But it is only upon the examination of the protocol and ruleset that they enforce that one can start to form an opinion of which is the closest match to what bitcoin truly is. Contrary to popular belief, it is not necessarily the ledger token that the exchanges have decided to award the legacy ticker symbol to. The exchanges, after all, do not get to decide what a product is.

Therefore, if bitcoin is just a protocol, and not the network, or a coin, then the BSV node is just the version of software that you run, and what software you run determines what version of the ledger you see. What this means is when the time comes for law enforcement to effect the freezing of coins, whether it be to stop the proceeds of criminal activity or to recover lost funds, all that is required is for a majority of block producing nodes to be running the version of software that will honor the confiscation of frozen coins. And given that any sort of confiscation transaction cannot be created unless a majority of block producers agree on the status of the coins in question, there will be nary a chance for a chain split. The current method for effecting the freezing and re-issuance of coins by court order while implemented only in the BSV node software, was written to be compatible with BTC node software, so it is conceivable that block producers could contract developers to patch the BTC node software with the necessary changes in order to comply with the asset recovery process. Whether or not authorities will be able to compel a majority of the block producers to upgrade their software, will be a different matter, and an issue that will be played out in the real world, and not on the blockchain. But that, is for the lawyers to worry about. Not the technologists, or the users.

Jerry Chan

WallStreetTechnologist

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Notes:

[1] Arguably because they were tooted as a solution to the false scaling problem of bitcoin, which BSV solved simply by reverting to the original bitcoin rules.

[2] in order to support a chain split, the minority side must constantly burn cash in producing blocks which may have no future value, perpetually.

[3] although which is the new token and which is the old token is indeterminate and up for endless pointless debate.

Watch: Heres how Bitcoin works as a base layer for other blockchains

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Difference between Bitcoin software, network, and protocol - CoinGeek