[Email Series] Bitcoin Forks
Email with Mr. JJ | October 23rd, 2018
In response to the questions:
11/23 is a key date — why?
Recently, bitcoin split into bitcoin & bitcash — correct?
What are the differences?
Bitcoin Cash (BCC), Bitcoin Gold (BTG), SW2X/NYA (BTC1) are recent/upcoming forks of the main Bitcoin (BTC) codebase and network.
There have been factions brewing in the bitcoin industry for the past few years, and their key issue relates to the size of blocks. More abstractly, it has to do with some people wanting Bitcoin to be used more as a settlement system, some prefer it as a store of value, and some prefer it as a payments system — sometimes with varying combinations of those goals.
These forks are a way for these groups to splinter off from Bitcoin while still practicing many of the same beliefs. Akin to schisms of Christianity with proverbial Martin Luthers leading new religions… whilst all calling themselves the true and divine form of Christianity.
Nearly all of Bitcoin’s utility is still encapsulated in these splinters. Their disagreements are relatively trivial.
Bitcoin is like a multi-branch form of government in that there are miners, users, businesses, mining pools, investors, celebrities, researchers, developers, etc. with some holding checks and balances over each other. Each category has its own agenda, and so naturally — there is strife among them. My opinion is that most of the checks and balances are not formalized, but have evolved rather than being planned. I see this as a weakness that future systems (or Bitcoin itself) could improve by having concise governance infrastructural planning. Although governance infrastructural planning is at odds with Bitcoin’s major philosophical theme of trust-less decentralization. Perhaps Bitcoin is the form which tests the efficacy of anarchistic of capitalistic forms of governance.
If we look at Bitcoin as an experiment, it has had a substantial impact for many fields — computer science in particular. The technical advances are genuine and have found themselves into leading research publications, and textbooks for CS classes at prestigious universities.
I see several long-term solutions to these governance concerns, along with several other issues that have become apparent since Bitcoin’s inception. I hope that there will be many experiments in order to wiggle society closer to better systems for public infrastructure. A competitive landscape of blockchain technology feels like a positive outcome from the research perspective. Although it will likely cause a new era of volatility, confusion, and even a lack of confidence.
At this moment it is hard to say which splinter will become the dominant form of Bitcoin. Right now I see SW1X (BTC) and SW2X (BTC1) as the primary contenders. November 23rd is the approximate date for when SW2X (BTC1) goes live and begins to compete for market usage share. It pits the user and developer groups against the miner and businesses groups.
This is a concerning situation for investors since there is a lot of money to be gained or lost by picking the right horse. The conservative strategy is to acquire Bitcoin in the months leading up to these events, and hold it until the dust has settled. Each of the splinters is honoring past holdings of Bitcoin — so if you hold “legacy” Bitcoin — you also hold coins on the various splinters (in theory).
In the case of Bitcoin Cash: Gemini (a leading and highly regulated exchange) credited its clients with BCC proportional to their BTC holdings. Many investors quickly sold this BCC (trading at $325) as they feel that BTC ($5700) is superior. A similar scenario will likely play out for future forks in that exchanges will credit their clients with coins on the new fork, and allow their clients to decide a course of action or inaction.
I hope this was a useful, albeit long-winded explanation of current themes in the Bitcoin ecosystem. Simultaneously there are noteworthy initiatives in the ICO, Ethereum, and non-bitcoin blockchain spaces.