I believe the fundamentals behind the price of Ether are future expectations. Right now it’s still a toy (at least compared to what it could turn into). Smart contracts need to be made a lot safer. Real-world applications should be able to cooperate with existing legal frameworks. It’s unclear what the real “killer apps” will be. Still, we believe in its future potential. We believe it has some amount of chance to reach mainstream adoption, in which case Ether would also be a lot more valuable. In a really simplified formula, current price equals potential value in case of mainstream success, multiplied by the chance of success. There’s no way to reliably predict either the chance or the potential future value, but this is what markets are for. Those who make better predictions have more money to influence prices.

The situation got even more interesting now that we have two Ethereum chains with a different community consensus, a different perception of values attached to them. Actually, I think this difference in perception is the only important distinction between the two. For some strange reason, many people believe that these two versions of Ethereum now have two different development teams. Which would be a possible scenario if the disagreement that left us with two chains would be about technical issues, with different views about the preferred direction of future development. Currently this is clearly not the case, all updates and technical upgrade forks released by Foundation developers will be applicable (and probably applied) to both chains, they will simply evolve side by side.

This means that if we try to apply our simple formula to ETH and ETC prices, the future potential of the technology of ETH and ETC is the same because it is exactly the same technology. The difference is in the perceived chance of mainstream adoption. Which leads us to a really interesting conclusion: the ETH/ETC market is basically a prediction market.

Probably one of these currencies is going to be considerably more valuable than the other in the future too, but as long as there are believers of both on the market, it’s never over. The majority does not win over the minority. It’s a free market, not a democracy. The smaller the minority side becomes, the bigger the potential market gains. What’s really cool about this is that a short burst of enthusiasm towards one side will not make final decisions. Long-term market response is a lot better than emotionally driven short term decisions. There is time for correction, and those who decide with a cool head will be rewarded. Community sentiment can be driven by emotions but in the long run, the ecosystem is self-healing.

My preferences and beliefs about the current issue are no secret, I think this whole fork was an absolutely irrational panic reaction. I never pushed this view strongly on forums and message boards because I don’t think that childish shouting war is useful for anyone. What I’m really curious about is long-term market action. I’m not saying that ETC will surely take over, but I think it has a chance to do so because it is at least based on more solid principles. And if it did, that would mean that Ethereum can basically fix itself. It is so resilient to changes that even a 99% “majority attack” coordinated by the Foundation itself failed eventually. Not sure if it’s going to happen but if it did, that would be the one of the coolest stories in the crypto world so far.

Unfortunately, one can have assumptions falsely perceived as widespread consensus. These false assumptions will remain undiscovered until an event happens that creates a disagreement about what should be done, whether a fork of the chain would be more valuable than the original one. At this point, it’s already too late to discuss core values and reach consensus, the damage is done. Where interests were aligned before, there is a conflict now. Everyone is biased and also everyone can assume that others are biased too. We believed in the existence of a “social contract” and suddenly realized there is none (or at least some people are breaking it according to our understanding, and we are breaking it according to their understanding). You cannot kill the other chain, but you wish it would die. Logical arguments get lost in the flow of hate. A war began.

Either you believe in the forked chain or the original one, war is not good. Surely a united community with a single chain would have been better, but we cannot have that since we don’t agree in core values. Not even inside the foundation. Not having a well-defined “blockchain social contract” at genesis time was a huge mistake. By the way I had a false assumption about it too, it was a shocking experience for me to find out that some people inside the foundation actually support the idea of intervention. I thought we all agree that there should be no higher “justice” than the result of EVM execution and the “stolen” money is the rightful property of the “thief” and we should be proud of creating a system that can protect his/her property even amidst public outrage. And I was definitely not alone with this belief in the Go development team. As it turns out, we were wrong, people still value their sense of justice higher than immutable law of code. This realization made me a bit sad, but whatever, being paid to develop the coolest software technology ever is still a dream job, even if (at the moment at least) the majority of people think about it in a different way. I will not call those people stupid. I don’t think they are trolling. I also don’t think they are right just because they are the majority. Truth doesn’t work that way. I intend to keep an open eye, perceive the events closely and learn as much as possible from the evolution of the current situation.

What I realized so far is that a blockchain without a well-defined social contract will sooner or later face serious problems. At this moment, interestingly, the old “classic” chain is the one that already has a better human consensus about this question. It’s the one that hasn’t been changed, but splitting off the majority of its value into a new chain changed its implied social contract. We can assume that whoever finds the old chain valuable believes that unintended smart contract behavior is no reason to fork. That chain will never face another crisis because of a similar event. On the other hand, ETH holders of the new chain might still disagree if this fork was a precedent for all similar cases or just a one-time disaster fix that shouldn’t happen ever again.

I’m not saying that the forked chain is doomed. What I’m saying is that it still lacks a strategy for such cases. Until the next major unintended event happens, we might still have time to figure out and reach a consensus about what to do in such a case, so that people can make their decisions in the sure knowledge of what can and what cannot happen to the chain they’re trusting their money with. In any case, I urge everyone to calm down and not be hostile towards the people of the other camp because what happens now hurts the project and both chains a lot. Everyone has a right, even moral obligation to follow their own set of values, and it would be really easy to do this in a civilized way. Maybe the old chain will survive, maybe not, the main reason I’d like to keep it alive is because it’s such an interesting and important experiment to see how two similar chains with different implied agreements will evolve. It might even increase the overall chance of success for the project (and your chances of not losing all your money in a potential next crisis if you’re keeping ETH on both chains).

P.S. it’s nice to see that the guys behind https://ethereumclassic.github.io/ stand behind keeping the old chain alive, but let’s make it clear that we (the Ethereum developers) have never abandoned it. We never forked the chain. We have implemented a switch in our client to give users a choice to fork if they want to and that’s all. The “Ethereum Classic” chain is just as much our child as the forked one and if both of them survive (which is the users’ choice, not ours), then I intend to take care of them equally in the future too.

A Tale Of Two Chains was originally published in Decentralize.Today on Medium, where people are continuing the conversation by highlighting and responding to this story.