Kate Talks Crypto: The Forking Game
This here is a human story.
It strikes me as odd that I’m the girl that people come to, to talk about cryptocurrencies. But in some odd ways it makes sense, beggars can’t be choosers, and until very recently, there have been very few people legitimately interested in crypto, the technologists and the financial crowd. Everyone else has been wary of it because it is something they don’t understand, and thus don’t have use for.
I first heard about it when I was in university, this was maybe 6 years ago, and for the crowd I was running with, this was late. My boyfriend at the time was running a DogeCoin mining operation on the school computers. I was part of the Computer Science Student Union and people would come into the office and start talking about the theory behind it. Nerd cred was all the rage. Coinbase ran a promotion that gave students $10 worth of Bitcoin (BTC) to anyone who signed up for a wallet (good marketing on their part), and as poor students do, we spread this around our department really quickly.
A few years later, a client of mine started doing deals with one of the Big Five banks in Canada, he was selling a patent on an algorithm that used blockchain technology (essentially the backbone of cryptocurrencies). It started coming up in my radar a lot more. At the time I still had student debt and it wasn’t feasible for me to buy Bitcoin, so it wasn’t until much later that I started becoming more… invested in it.
I’ve always been a proponent of the technology. The idea of decentralized currency spoke to my “anti-institution” sensibilities. I could spend time explaining the why’s and how’s of the technology, but smarter people than me have already done so (Google is your friend). A lot of people believe that you need to understand the technology to invest in it and believe that it is sound. My experience with people and stock markets? That is not the case, and this is why the finance crowd is making it big. They understand people, and they understand numbers, and here we have the intersection of both.
This is the place where fake news about the creator of Ethereum (another cryptocurrency) drove down the prices. This is the place where the potential of wealth will drive up prices. This is the place where fear, will do strange and volatile things to the market. It’s people acting en masse, following leaders, being led by greed, and running from fear.
Let’s talk about the forking game. What is a fork? (Not the kitchen utensil silly) A fork in programming is when another copy of the code is created. Since cryptocurrencies are digital, they are actually just pieces of information and are “controlled” through a code base. This code base is a set of instructions and rules that dictate the architecture and the behaviour of the cryptocurrency (if you think about it too hard it becomes a complete abstraction). There are two types of forks, soft forks, and hard forks. Soft forks occur with minimal disruption to the system; they allow new rules to be enforced with backwards compatibility (for Canadians: When they introduced the picture health cards with expiry dates, but people could still use the old red health cards with no expiry dates). Hard forks are the ones that create volatility, and can split communities. Hard forks create two versions of a coin with distinct differences.
On August 1, 2017 Bitcoin had a hardfork, and out came Bitcoin Cash (BCH). BCH was the answer to a scalability problem (the ever elusive problem of what happens when there is too much data passing through a system). BTC transactions started to take upwards of hours, and the mining fees associated with a transaction were rising to accommodate the surge (the act of mining in the crypto-sphere is to lend computational power, this includes both the discovery of new coins as well as helping maintain a ledger of transactions in the system). BCH proposed to lower transaction time and fees.
For owners of BTC on Aug 1, this meant that when the fork occurred they would have equal amounts of BTC and BCH, if they maintained a local wallet, or were with an online wallet who honoured the fork. Coinbase (one of the largest North American wallets) said they would not support the fork, and as a consequence, ALMOST deprived their customers a bunch of “free money”. At the time of writing BCH is worth about $650 per coin, in the past couple of days it has risen about 30% in price, depending on which exchange you’re looking at. And BTC has broken an all time high of $7500. Now on Nov 16 BTC is to undergo another hard fork: Segwit2x. And preceding that, on Nov 13 BCH will undergo a hard fork as well.
What I’ve been noticing? Money is pumped in before a hard fork, and then there’s a period of fear based turmoil, and people flee back to fiat or alternative crypto. At the end of the day this game is about creating wealth and being ahead of the curve. It’s an intensely interesting landscape for me, and it takes me into a rabbithole. While some people write trends based on numbers, I write based on feelings. Leave some comments, let’s dive into the rabbit hole together. Ask me questions, I’ll try to answer them.
