How Bitcoin Cash dies
BCash is in a dangerous position where survival in its current form is dependent on its price not falling too low.
Among BCash’s finer engineering decisions was to keep the same proof of work algorithm as the parent project. Due to this oversight, the BCash network is susceptible to attacks from Bitcoin’s hashpower, which as of August, 2018 is 10 times larger than BCash’s hashpower. BCash is already within striking distance of individual Bitcoin pools, and if it drops much further, it won’t be very costly to attack either. As hashpower follows price, any change in BCash’s price will have profound security implications. The secondary effects from successful long block reorgs will be people accurately calculating the number of confirmations necessary to ensure these attacks can not happen, and they will not favor usability. Several dozen confirmations may be the standard for BCash’s future.
BCash is already falling further and further behind Bitcoin
The original differentiator between Bitcoin and BCash were the scaling solutions each were pursuing. Bitcoin is pursuing second-layer networks like Lightning and BCash is pursuing larger blocks at the expense of decentralization. There are many differences between these projects as of one year post fork, but for the purposes of how the future might unfold:
- Bitcoin retained the vast majority of contributors over BCash. I personally do not know of any developer converts.
- Lightning has made significant progress. Several implementations exist on main-net. Over just a few months, there are now 100 BTC, 3000 nodes, and 11k channels.
- Bitcoin core has 3000 more commits and 100 more contributors than Bitcoin ABC.
- Bitcoin isn’t having a transaction fee crisis like what big blockers predicted. The median transaction fee is $0.15 for Bitcoin.
- The number of transactions on BCash is minuscule. In fact, Bitcoin blocks are more than 10 times larger than BCash blocks, and Bitcoin blocks aren’t even full.
All of these things I would describe as severely discouraging for BCash’s progress and likelihood of somehow changing the course of the trend. BCash’s main advantage over Bitcoin, low on-chain transaction fees, are ironically far outdone by lightning’s fees, being on the order of one Satoshi per transaction. I am skeptical that lower on-chain transaction fees will provide much of a competitive advantage on its own.
What happens when BCash falls far enough behind
If BCash’s price relative to Bitcoin drops too low, smaller Bitcoin mining pools can execute intermittent 51% attacks on the BCash network. They don’t need to be ideologically motivated to do so, as an attack like this can defraud an exchange. It can be immensely profitable.
If successful attacks cause a market panic and the price drops further, attacks can become even more frequent, but this is not necessary to cause lasting damage. The merchants accepting BCash are going to lose money and subsequently confidence in the six confirmation heuristic. Instead they will perform accurate calculations on the number of confirmations required to prevent a reorganization taking into account Bitcoin’s hashpower.
What might be a safe number of confirmations? Conservatively, whatever hashpower goes into Bitcoin’s 6 confirmation rule. If BCash has 10% the hashpower of Bitcoin, then that would mean approximately 60 BCash confirmations. Or 10 hours. Liberally, whatever the longest block re-org is plus one, for the brave. Anybody transacting with non-trivial amounts of money will need to be especially cautious regarding BCash.
What if BCash changes their proof-of-work algorithm?
This is the only sane and rational countermeasure to mitigate the problem of being the non-dominant PoW algorithm cryptocurrency. If they switch to some alternative they start over entirely with their mining infrastructure and their claims of being the “original Bitcoin” diminish even further. It is worth mentioning that switching a PoW algorithm is a major design decision that requires a kind of specialized knowledge and skill the BCash community is less-than-likely to have. If they make a mistake in design, coding, or testing, more exploits and attacks may follow.
Since this was an entirely avoidable problem, waiting until attacks are carried out will diminish confidence in the maintainers / leadership of BCash as responsible and competent. Even if the community does have the foresight to change the PoW algorithm ahead of time, it may fundamentally alter the believably of BCash’s claims as the true Bitcoin.
BCash keeping the same PoW algorithm as Bitcoin is a questionable decision given that Bitcoin’s hashpower can attack the BCash network with relative ease and low risk. It is at the point that BCash can realistically be attacked by several Bitcoin mining pools. Since hashpower trails price, BCash must keep its price from falling too low relative to Bitcoin unless everyone using it is willing to wait a few dozen confirmations per transaction just to be safe.