Why do Bitcoin and Bitcoin Cash have the same wallet addresses?

2018-01-24 00:00:00:

What if I send Bitcoin Cash to Bitcoin / Bitcoin to Bitcoin Cash? Instruction manual

What if I sent Ethereum to Ethereum Classic / Ethereum Classic on Ethereum? Instruction manual

Everyone who uses cryptocurrencies is at risk, because transactions are irreversible - this is no secret to anyone. And one of the problems that token holders periodically encounter is the transfer of their assets to a wallet designed for a completely different cryptocurrency. How did it happen that different cryptocurrencies have an absolutely identical wallet address format? How to get my money back? Let"s figure it out.

To understand why it is impossible to send, say, Zcash to Dash, and Bitcoin to Bitcoin Cash and vice versa - you can - let"s turn to the history of cryptocurrencies. Wallets of each peer-to-peer system, as they appear, have their own individual format of a certain number of characters and contents, so a transaction to an address that does not match the format will always be rejected by the wallet. But with some cryptocurrencies the situation is more complicated - for example, with Bitcoin and Bitcoin Cash - they have the same address format, moreover, any address can have and consume both of these digital assets at the same time. Why?

The block size in the Bitcoin chain is 1 MB. In the early years of the blockchain, this was more than enough - the network coped with the load without any problems. But then, as Bitcoin grew in popularity, the mempool (a set of transactions awaiting confirmation) periodically began to overflow, which led to an increase in the waiting time for confirmations and an increase in commissions. To avoid these problems, two options were proposed: remove the 1 MB limit or allow storage of information outside the blockchain. On July 20, 2017, 95% of miners voted for a compromise solution that combines both options and called “SegWit2x”, but with one condition: an increase in block size to 2 MB will not happen immediately. Some participants refused, having come to the conclusion that the introduction of this protocol will simply postpone the problem, and on August 1, 2017, a branch called Bitcoin Cash separated from the main chain.

The new network offered a significant increase in blocks - to an unprecedented 8 MB. Due to the features of the blockchain, all users who have Bitcoin on their wallets at the time of the hard fork received exactly the same amount of Bitcoin Cash at the same wallet addresses. Thus, the separation of the blockchain has led to the possibility of the so-called “Double spending” - you can conduct different transactions from the same wallet using the same access keys, but only in different networks, since the assets of each of them are independent from each other.

On January 14, 2018, the Bitcoin Cash network changed its address format. The address format identical to Bitcoin addresses was called P2SH, and the new one is called Bech32. Addresses in this format have 42 characters and begin with “bc1”. It has a significant advantage over P2SH - transactions are much faster.

This innovation has another huge plus - it partially reduces the conflict of Bitcoin and Bitcoin Cash addresses, and it became impossible to send any currency other than Bitcoin Cash to addresses in Bech32 format, but it does not deprive it of this possibility - Bitcoin Cash still supports the transfer of tokens to addresses in the old format.

Also, many are interested in questions - why is there Ethereum, and is there Ethereum Classic?

How do these cryptocurrencies differ? A similar situation happened with these “crypto-money”.
The Ethereum blockchain platform began its existence on July 30, 2015 and quickly attracted the attention of investors, crypto enthusiasts and even banks, as it was positioned as the next generation cryptocurrency, offering the possibility of conducting transactions through smart contracts. The “The DAO” decentralized investment project, which attracted 14% of Ethereum tokens existing at that time, was no exception. The project received significant support from users and even developers of this cryptocurrency and actively developed until June 17, 2016 the largest hacker attack in the history of the cryptocurrency industry took place. Unknowns used the critical vulnerability found in the platform and stole a third of all tokens available from the platform. The amount amounted to 12 million ETH, which at that time amounted to more than $ 60 million (more than $ 15 billion at the beginning of 2018).

The Ethereum community asked a question - what to do in this situation and how to return stolen tokens to investors? It was proposed to “roll back” the blockchain in order to return it to the moment when the tokens were still in the possession of investors, which happened on July 20, 2016. But part of the community rejected the hard fork, pursuing the principles of the immutability of the blockchain. This is how the division of the network came about - the new blockchain continued to be called “Ethereum”, and the old one got the symbolic “Ethereum Classic”. It was these cryptocurrencies that became the first “culprits” for users to lose money due to the transfer of one asset to the wallet of another, because they had the same address format.