I’ll bet you $5,000 that bitcoin’s first hard fork works out just fine
There has been a lot of debate on Twitter after I posted some slides arguing that:
- Bitcoin is not splitting, it is upgrading
- Hard forks are one of the most important innovations of bitcoin
- Multiple teams working on the bitcoin protocol is a good thing
Slides also available in Chinese here.
- Samson Mow and the folks who signed the call for consensus letter, write that “any contentious hard-fork contains additional risks and potentially may result in two incompatible blockchain versions, if improperly implemented”.
- Aaron van Wirdum writes that the “Minority can simply refuse to upgrade, or quit.”
- Alex Morcos writes that “To say there is only one coin after fork is very misleading. We do not know, and two coins is realistic if no consensus.”
- Meni Rosenfeld writes that “this view is easily contradicted by the existence of hundreds of alt[coins]”
I don’t mean to call those people out in particular, they are certainly not alone in their view — they are just recent examples I saw this morning.
I’m not 100% sure I’m right, but I am sure enough that I’m willing to bet $5,000 (payable in any equivalent amount of crypto or fiat currency to the charity of the winner’s choice) that bitcoin’s first hard fork will be an upgrade of one single currency, not a split, and everything will work out fine. I think the economic incentives are aligned for that to happen.
It’s tough to define “works out fine”, so let me try to clarify. To win, I will need to be right about all 3 of the following conditions.
- At the moment the network upgrades (or forks), 95% or more of all hashing power will be on a single chain. This will be true regardless of what threshold is used to trigger the upgrade — for example, BitcoinClassic uses a threshold of 75%, and other forks could use an even lower threshold — but, irrespective, 95% or more will be on a single chain by the time the network upgrades.
- At the moment the network upgrades (or forks), 95% or more of all consumer wallet and merchant companies (by number of users) and exchanges (by trading volume) will support the new version. This may be tough to measure, but for example we can look at public numbers of users for major wallet and merchant software, and the trading volume is public on most exchanges, so I think we can reasonably approximate a 95%+ threshold.
- Two days after the upgrade (or fork) takes effect, the bitcoin price will be higher than it was 1 month prior to the upgrade (or fork) happening.
To be clear, I think the real numbers will be closer to 99% on the first two, but I’m leaving myself some room by saying 95% since it could be difficult to measure in practice.
The winning fork I’m defining here as the longest bitcoin chain (measured by amount of “work” or hashing power done on it) originating from Satoshi’s genesis block. I’m defining the “moment the network upgrades” as when the proposed change takes effect. For example, blocks may start to be mined with a vote for BitcoinClassic, but it is not until 751 out of the last 1000 blocks are mined with a vote AND a 28 day grace period elapses, that the change takes effect and 2MB blocks can start to be added to the longest chain. So in this example, it is not until the 2MB blocks can be added to the chain that I’m saying the upgrade (or fork) has ‘happened’. Finally, I’m going to limit this bet to the first hard fork that occurs in the next 12 months from the date of this post. I think there will be at least one during that time, but if not I don’t want to leave this bet going on forever. If no hard fork occurs during that time, then there is no winner.
This bet is open to any public figure in bitcoin or tech who is willing to accept it (I’ll choose one person if more than one accepts it).
P.S. This is mostly just for fun because I want to see how willing people are to put their money where their mouth is. And the money goes to charity, so try not to take it too seriously.
P.P.S If you’re wondering why I didn’t denominate the bet in BTC, I was worried that people would accuse me of trying to game it (if I’m right and the fork succeeds, the bitcoin price will likely go up and the loser will pay more, conversely if I lose and the price goes down I’ll have to pay less). Therefore, the bet is payable in BTC but the price is denominated in USD.
Thanks to Sam Altman for inspiring this bet.
Update: no one was willing to take me up on my bet — so I’m officially withdrawing the offer. I even offered 10:1 odds and still no takers. If nothing else, I hope this provided some good estimates about how sure people are in their opinions on the next hard fork. Time will tell if I was right!