How Bitcoin Unlimited ( $BTU) will be erased
I didn’t want to write an article about it this fast again… But some interesting things came up which apparently not many people get…
Charlie Lee created an interesting tweetstorm in regards of Bitcoin Unlimited:
So TLDR; the way Bitcoin Unlimited is currently designed: if the original Bitcoin chain ever gets more work than the BTU chain, the entire BTU chain will get reorganized (deleted).
Then we have Gavin joining the conversation:
Lets think about this for a second: you are a big miner that can influence the hash rate and difficulty of a coin. What would be the most profitable thing to do?
You start mining BTU with most of your miners. After the first difficulty adjustment on BTC, you start pointing some miners there, not too much, but you’re accumulating BTC (lower difficulty so you’re actually getting more blocks/coins than before).
You keep doing this until at one point you know that if you take away all your miners from BTU and point them at BTC, BTC will catch up on “most work done” to BTU and erase the entire BTU chain. Financially hurting some of the competition that aren’t immediately dumping all their BTU coins. Meanwhile you actually bought the cheaper BTC (with the money made from your dumped BTU) and kept the BTC you mined at a lower difficulty than you could’ve ever imagined. Win/win.
Note: This has nothing to do with block count but with “most work done”. This is calculated by adding up the difficulty of all blocks. Charlie explained this to me as, like many, I initially thought that just having the longer chain (as in block count) was enough.
Roger Ver is 100% BU. We can assume that as soon as BTU forks away from BTC, he will dump his BTC and only keep BTU. This will significantly hurt the Bitcoin price short term and I’m sure he will use the money he gets from dumping BTC to support/pump the BTU price (and some of his altcoins).
The businesses and ecosystem will keep using BTC, so once he dumped everything and is full BTU, BTU might temporarily be the longest chain with most work and actually have a higher value but it would be extremely vulnerable. At this point the other major players would short BTU, support the plan I described in the miners incentive part and effectively make Roger Ver-y poor.
Although thinking about it, the short would have to be closed in time because how do you close a short when the value isn’t go to just zero but the coins just completely disappear (because of the reorg).
All this would cause huge PR damage and set Bitcoin back several years again, like MtGox². Long term it might actually be a good lesson that some people need to experience. People are in it for the money, if they can get big financial gains and/or destroy competitors by erasing BTU, they will.
I only focused on 1 part in this article of how BTU could be destroyed by external actors. There are plenty of internal issues that could make it destroy itself. (see How Bitcoin Unlimited Users May End Up on Different Blockchains and Why Bitcoin Unlimited’s “Emergent Consensus” Is a Gamble)
PS: If you enjoyed reading this feel free to donate something at 1FMy1kpeCY7BESwUaVcM5XAy1bmaWJaXKv. With the previous donations my wife was able to buy toys for 7 children in an orphanage for Christmas. Everything is greatly appreciated, but I don’t do it for the money. I just sometimes get people who ask how they can donate :).