Welcome to my beginner’s guide to Bitcoin Diamond, where you’ll learn everything you need to know about this exciting new coin.
Over the years since Bitcoin was created, numerous new cryptocurrencies have been formed from the Bitcoin network. The process in which they are formed is called a hard fork.
The most famous Bitcoin hard fork is probably Bitcoin Cash (BCH) but plenty of others have followed it on to the market. There’s Bitcoin Platinum, Bitcoin Atom, Super Bitcoin and even a Bitcoin GOD! Some people are calling 2018, “The Year of the Fork.” So, now is a great time to start learning about them!
In this guide, I’m going to tell you about a hard fork called Bitcoin Diamond (BCD). I’ll talk about who created it and why. I’ll also show you how it works and what makes it different from Bitcoin and other Bitcoin hard-fork coins. So, what is BCD?
When you’ve finished reading, you’ll have all the information you need about Bitcoin Diamond. You’ll also have a good understanding of its place in the market and in the future of crypto.
Let’s start with the basics though, so what is a hard fork?
- 1. What is Hard Fork?
- 2. The Basics of Bitcoin Diamond Fork
- 3. Diamond Coin Market Stats
- 4. How Can BCD be Used?
- 5. Bitcoin Diamond Wallet
- 6. How do Transactions Work?
- 6.1. BTC/BCD Transaction Similarities
- 6.2. BTC/BCD Transaction Differences
- 7. Is BCD Secure?
- 8. Bitcoin Diamond: Pros and Cons
- 8.1. Pros
- 8.2. Cons
- 9. Conclusion
What is Hard Fork?
Every cryptocurrency has its own set of rules. These include; how information is recorded, what transaction fees users will pay and what rewards they can earn. These rules are called its protocol.
Sometimes changes are made to the protocol. Cryptocurrencies have no central leader or management so changes to the protocol are made by the cryptocurrency’s community. These are the users who support the network and carry out important tasks on it.
Changes to a cryptocurrency’s protocol are called forks. Try to think of them like software upgrades. Some systems on the network will support the changes and upgrade; others won’t. There are two different kinds of forks;
- Soft forks: These involve minor changes to the network. They are called backward-compatible changes. This means that the network continues to function as normal even on systems that haven’t been upgraded.
- Hard forks: These are major changes that affect how the network processes new transactions. The systems that upgrade will become a new cryptocurrency. The ones that don’t will continue operating with the old protocol. This means that there are now two different cryptocurrencies. I’ll use an example to make things clearer; Imagine ten cars driving down a road. One car decides to turn right. Four of the other cars think that’s a great idea so they turn right as well. The remaining five cars think turning right is a bad idea, so they keep going straight on. Instead of one group of cars going in a single direction, you now have two groups going in separate directions!
So, now you know what a hard fork is, let’s examine the Bitcoin Diamond fork more closely...
The Basics of Bitcoin Diamond Fork
In 2017, two Bitcoin miners called Team Evey and Team 007 decided to change the network’s protocol which is called Bitcoin Core. They were unhappy with the way that Bitcoin was working and thought they could improve it. Evey and 007 named their improved protocol, Bitcoin Diamond.
Note: Miners are Bitcoin users who do special tasks which help to process Bitcoin transactions. They play a vital role in the Bitcoin community.
The main improvements Evey and 007 wanted to make to the Bitcoin protocol were;
- Faster transaction times: Most cryptocurrencies are struggling to reduce the time it takes for transactions to be completed. The Bitcoin network can only process about 2-7 transactions per second (Tx/s). Payment processing services like Mastercard and Visa can process thousands of transactions per second. The BCD team felt that it was time for Bitcoin to catch up!
- Lower transaction fees: Each transaction on the Bitcoin network is charged a fee. The fees for transactions have become very high in recent years. Cryptocurrencies are supposed to help users avoid paying high bank-transfer fees so Evey and 007 felt that Bitcoin’s fees should be going down, not up!
- Encourage more new users: Bitcoin has become very expensive. Today, one Bitcoin is worth more than 6,500 USD. This makes it very hard for new users to buy one Bitcoin. The creators of BCD feel that Bitcoin should be for everyone, not just those who can afford it.
Team Evey and Team 007 wrote changes into the Bitcoin protocol that they hoped would achieve these goals. The Bitcoin Diamond fork happened on November 24, 2017. The fork affected the whole Bitcoin community and I’ll tell you how in the next section. First, let’s have a quick look at how Bitcoin Diamond coin has performed in the market so far…
Diamond Coin Market Stats
Unfortunately, this didn’t last and prices began to go down across the market throughout January 2018. The price of Diamond coin has since dropped to an unimpressive 2.44 USD.
What is BCD going to do for the rest of the year? We’ll have to wait to find out!
Even though its price is low, the total value of all the BCD on the market is still well over 350 million USD. The market is becoming very crowded with Bitcoin fork coins and only the ones with the best protocols will succeed. Next, I want to talk about what the Bitcoin Diamond fork means for Bitcoin holders and the rest of the crypto community.
How Can BCD be Used?
Bitcoin Diamond coin could win over a lot of Bitcoin users with its faster transaction times, lower fees and easier access to new users. Bitcoin is a hugely popular coin but it can be quite difficult to use! Many critics of Bitcoin argue that the coin won’t be a valid replacement for normal money until users can make small purchases; quickly and easily.
A network offering these features will also appeal to small businesses dealing in low priced, high-volume goods like coffee or fast food. However, in my opinion, the price of Bitcoin Diamond will have to be more stable before it attracts any big-brand clients like Starbucks or McDonalds.
So, who can use BCD?
- Bitcoin holders: Hard forks on the Bitcoin network put holders of Bitcoin in a unique position. Whatever amount of Bitcoin they hold, they get the same amount of the new currency, free! The Bitcoin Diamond fork increased the total supply of the coin. For every one Bitcoin users held, they actually got ten BCD for free. Good deal, right?
- Non-Bitcoin holders: If you own Bitcoin, then you already own some Diamond coin. The rest of the crypto community will have to pay for it! There are 29 cryptocurrency exchanges offering BCD for trading listed on the BCD homepage. The most well known are Gate.io, Okex, and Binance.
Whether you buy it or you’re lucky enough to get it for free, you’ll need a place to keep your BCD. For this, you’ll need a Bitcoin Diamond wallet. So, what is BCD wallet storage?
Note: A wallet is a software application or hardware drive that stores important access codes for your cryptocurrency. You can also use a paper wallet to store your access codes.
Bitcoin Diamond Wallet
It can be hard to find wallets that support new coins. There are eight sites offering a Bitcoin Diamond wallet at the moment. They’re listed on the coin’s homepage. Each is software wallets offering mobile, web and desktop storage.
BCD’s homepage also contains download links for two multi-platform wallets called QT and Electrum. Both can be used as a Bitcoin Diamond wallet. I always recommend using a mix of software and hardware wallets.
Top Tip: When you start using new cryptocurrencies it’s very important to use exchanges and wallets that you trust, so do your homework!
Now you know who can use BCD, what they can use it for and where they can store it. Next, I want to tell you a little more about how BCD transactions work. What is BCD doing differently to Bitcoin and what is BCD doing the same?
How do Transactions Work?
In some ways, Bitcoin Diamond transactions are very similar to normal Bitcoin transactions. The two share a lot of the same code from the Bitcoin Core protocol. I’ll talk about the similarities first. What is BCD doing the same as Bitcoin?
BTC/BCD Transaction Similarities
Bitcoin and BCD are networks where users can store and transfer information. All this information is stored in huge databases called blockchains. A blockchain is a very long list of all the transactions that have ever been made on the network. Blockchains are stored across thousands of computers called nodes.
New transactions are put into groups called blocks and checked by nodes to make sure they’re valid before being added to the blockchain. Miners play an important role in processing transactions on both the Bitcoin network and on the Bitcoin Diamond network. Each platform takes about 10 minutes to process one block of transaction information.
For more information about the role of miners on the blockchain, check out my Blockchain Explained guide!
Both networks are also planning on using the lightning network to speed up transaction times. Evey and 007 have announced that BCD will start using the lightning network on July 31, 2018.
Note: The lightning network will allow users to form mini-networks where real-time transactions can take place away from the main blockchain. These transactions are then checked and added to the main blockchain as a whole. This takes a lot of pressure off the main network.
These are the similarities between BCD and BTC transactions, what are the differences? What is BCD doing that BTC isn’t?
BTC/BCD Transaction Differences
Remember; Bitcoin Diamond plans to be faster, cheaper and easier to access than Bitcoin. Here’s how;
- Larger block size: Standard Bitcoin blocks hold 1MB of transaction information. Bitcoin Diamond blocks hold 8MB. This means that whilst both platforms have the same block time (10 minutes), the BCD network is processing eight times more information.
- Higher total supply: The total supply of Bitcoin is 21 million coins. The total supply of BCD is 210 million. The BCD team hopes that a larger supply will keep the price of each coin at a level that all users can afford.
- Easier mining: Miners get rewards for the tasks they perform on the blockchain. These tasks require a lot of computer power. Miners on the Bitcoin network use powerful equipment called ASIC miners to complete their tasks.ASIC mining is often done in large warehouses with hundreds of machines. It’s loud, expensive and can get very hot. This means that most members of the Bitcoin community can’t mine Bitcoin. Team Evey and Team 007 think this is unfair. BCD mining is easy enough for almost all users to do. BCD mining can be done using a GPU. If you’re a gamer, you’ll know this as a graphics card!
Now you can answer the question, “What is BCD offering that Bitcoin isn’t?” Next, I want to talk about the important issue of safety. What is BCD doing about network security?
Is BCD Secure?
Blockchains are a very safe way to store and transfer information. Big companies like Visa, Google, and Facebook store our information on a limited number of central servers. If these servers are attacked, our information can be put at risk. Blockchains spread our information across thousands of different computers. This makes attacking a blockchain extremely difficult!
One of the main safety features of blockchain technology is encryption. Private personal information is hidden using computer code. Some critics of Bitcoin think that not enough user information is encrypted. For example, all transactions and their amounts can be seen by anyone using the Bitcoin network. This can make tracing the real identities of users fairly easy for governments and other organizations.
The team behind Bitcoin Diamond wanted to encrypt more user information. However, they have recently decided not to add more privacy features to BCD. They feel that governments will soon start passing laws that stop cryptocurrencies from hiding user data. In a statement published on Medium, the team noted Japan and Russia as examples of this trend.
The team also thinks that businesses won’t want to support coins that offer a high level of user privacy. On April 20, 2018, they said that they had, “realized that more exchanges might delist anonymous cryptocurrencies in the future.” This news will disappoint a lot of die-hard crypto fans who value privacy very highly. It shouldn’t affect the overall security of the blockchain though.
The real risks that Bitcoin Diamond coin faces are scammers who target the release of new hard-fork cryptocurrencies. Who are these scammers and what is BCD doing about them?
How Can it be Abused?
New hard-fork coins are often abused in the confusion following their launch. Whenever new coin forks from the Bitcoin network, holders of Bitcoin are targeted by scammers.
After the hard fork in November 2018, Bitcoin holders who didn’t understand how to claim their free BCD were tricked into depositing funds into a fake Bitcoin Diamond coin wallet. Instead of getting free Diamond coin they lost their Bitcoin deposit!
If you hold Bitcoin, then you should be very careful with your coins when hard forks happen. Always use a combination of hardware and software wallets. If you have coins stored on an exchange like Coinbase, make sure they support the new hard-fork coin. If they don’t, you might not be able to claim the new coins that the fork creates.
Most importantly: Don’t be fooled by offers of “free” money. Only use wallets you trust. New coins can cause a lot of uncertainty, so take time to consider your options.
Before you go, let’s have a quick recap of the pros and cons of Bitcoin Diamond. What is BCD doing well and what is BCD doing not so well?
Bitcoin Diamond: Pros and Cons
The Bitcoin Diamond team love Bitcoin but think it could be improved. Have they succeeded? Firstly, what is BCD getting right?
- It’s faster than Bitcoin: Bitcoin Diamond is processing much larger blocks than Bitcoin in the same amount of time. Larger blocks mean more transactions and quicker average transaction time.
- Inclusive mining: Bitcoin Diamond makes it easy to mine BCD with less powerful computers. GPU mining allows more users to get involved in supporting the network and this can only be a good thing.
- High volume/low-value transactions: Bitcoin is the world’s top cryptocurrency but it’s still quite difficult to use. Diamond coin’s high transaction speeds and low prices could make it perfect for buying and selling small and inexpensive products like coffee or bus tickets.
Next, let’s have a look at a few cons. What is BCD getting wrong?
- Privacy features: Bitcoin Diamond hasn’t increased the level of user privacy. This will annoy users who think that Bitcoin transactions are too easy to track.
- The lightning network: The BCD team has promised lightning network technology but hasn’t launched it yet. They failed to improve privacy features so they might also fail to launch the lightning network. We’ll have to wait until July 31 to find out!
- Trust: Hard-fork coins need to win the trust of the crypto community. No one knows who Team Evey and Team 007 are. A lot of users don’t think it’s legit and some even accused it of being a scam when it launched. Bitcoin Diamond will have to prove itself over the next few months or it could disappear completely!
You should now have a good understanding of what Bitcoin Diamond is and how it works. I’ll finish with a brief conclusion…
A mysterious coder called Satoshi Nakamoto wrote the Bitcoin protocol. Then they disappeared. The Bitcoin protocol was their gift to the world. Nakamoto wanted developers to study it and make improvements.
Hard forks are a part of an ongoing process to build the perfect cryptocurrency. Bitcoin Diamond has made some important changes to Nakamoto’s software. A diamond coin isn’t a perfect cryptocurrency but neither is Bitcoin or Bitcoin Cash. However, each new idea brings us closer to a world where the transfer of important information is fast, easy and free!
2018 is the Year of the Fork, it’s a year for trying new things and seeing what works. These are very exciting times for cryptocurrency and I think hard-fork coins should be watched very closely. They’re like science experiments. The things they do well should be copied and their failures should be remembered so they don’t happen again!
What do you think about Bitcoin Diamond? Is it better than Bitcoin or a lame rip-off? I’d love to hear what you think so let me know!