Brace yourself, a hashwar is coming
Difficult to not realize something is going on in the cryptocurrency world. Bitcoin is down 11% the last 24 hours at the time of the writing, Ethereum is about to hit the lowest price this year. What is going on?
The answer lies within Bitcoin Cash (Bitcoin’s little brother) today’s hard fork. Fork is something well known within the community and implies a change in the core software that leads to a split of the main chain: depending on the software version you are running, the transaction you create and block you will hear about will be valid on either of the future chains, thus leading to several distinct “sidechains”.
So what about the bitcoin price drops? Indeed, the usual outcome of a hard fork is either a smooth upgrade, with every node following the new core version (such as latest Monero hard fork) or two main communities with different rules (such as the BTC/BCH fork). In these cases, even though painful, the competition is healthy.
Today, BCH will undertake a hard fork at 11:30 am (EST), and will show 3 mains players struggling for the crown:
- Bitcoin ABC: proposed its new core specs (new OP_CHECKSIGWIT, the introduction of the canonical transaction ordering: a bedrock for a huge scalability improvement, and some minor fixes). This version is a legitimate continuity of the original Bitcoin Cash roadmap.
- Bitcoin Satoshi Vision (SV): it was proposed by the nChains company (controlled by Craig Wright, the self-proclaimed Satoshi, creator of Bitcoin), that wants to revert back to a more “true” version of bitcoin and to give more power to miners. It implies mainly an increase of block size from 32MB to 128MB.
- Unlimited Bitcoin: This third player wants to propose a software solution that will enable miners to use either of the aforementioned upgrades.
So far, nothing unusual regarding the upcoming hard fork. This was the case before it becomes a real game of thrones: Craig Wright “the villain”, threaten Bitcoin ABC to destroy them in a war to come. A war implying sweaty computer scientist and heavy bandwidth usage. His army consists mostly of miners (around 70% of the total hash power) with obscure (greedy?) motivation. On the other hand, ABC supporters include a large part of the community and wants to follow the initial roadmap introduced by bitcoin Cash.
What could they do? Well, from “Satoshi shotgun”, 51% attack or transactions storm, one with enough hashing power could attack any network and force miners to leave, and a POW network without miner is bound to fail. So in one hour, the two factions will likely compete to enforce the longest chain (legitimate) by using all the hashing power they can get. This is what happens during the BTC/BCH fork and miners went back and forth between the two chains depending on profitability. This is something Craig does not want as it will reduce the hash majority he already has. So the game of thrones goes on and he threatened the bitcoin miners that he will sell huge amount of BTC to finance the war if the BTC miners switch to BCH (claiming it will lower the BTC price to 1000$).
There we are, the uncertainty about who will win the hashwar and will Craig be able to lower the price of bitcoin, leads the whole market to feel unsecured. For what results? Well, you already know it: Everybody is leaving the boat to take refuge in the beautiful island of Stablecoin, until the storm passed. Add to that graphical analysis, and hop, you get a crash.
What will happens? We will see. But winter is coming and the crows await.
[edit] The fork happened and the hash war is still on. ABC team surprised by switching lot of hashing power from their BTC mining pool to reinforce their claim, leading ABC fork to take the crown, for now… Indeed, SV is not far behind and we can expect ABC hashing power to slowly decrease as the rented hashing power goes back to BTC. What did the market do about that? It crashed again by 10% (Ethereum is down to 150$, the lowest since July 2017).
