This Week In Bitcoin — The Hard Fork of Ethereum
July 25, 2016
Some History
I gave a speech at this year’s CoinFest in which I explained The History of Money as protocol battles: Silver vs Gold, Gold vs Paper-backed-by-Gold, Paper-backed-by-Gold vs Central Database Money. These battles continue today:
One set of battles I did not examine is that of the minor historical monies: silver, copper, and nickel. While each of these monies “fought” against gold for respect, acceptance, and value, they also waged side-battles against each other. Coins were defaced, diluted, melted, scorned, and refused. Today, analogous side-battles are being fought among minor cryptocurrencies.
Background
In the past year there has been a lot of talk (but no action) about increasing bitcoin’s maximum block size via hard fork. [What’s a hard fork?] Unknown consequences of a hard fork were a big reason for the lack of action. Would the blockchain split causing each bitcoin be duplicated? How would we know if we were spending a “big-block bitcoin”, a “small-block bitcoin”, or both? Would tokens on each chain have their own exchanges and valuations?
The Ethereum Hard Fork
Patronizing bitcoiners often refer to altcoins as “TestNets” because they can provide insights about blockchains in general. This week Ethereum implemented a hard fork, giving bitcoiners a risk-free sneak peek into those (previously) unknown consequences.
Supporters of an Ethereum wanted a hard fork to rollback transactions that controversially took funds in the bug-ridden DAO (Decentralized Autonomous Organization.) They wanted a mulligan: a one-time do-over to fix a costly misstep. Dissenters of the fork call it a bailout and an unforgivable betrayal of the integrity of Ethereum.
Although the voter turnout was low, supporters won and celebrated with cheaply-labelled champagne.
The majority of the hashrate was redirected to mine the rollback/bailout chain, but a small contingent of miners continued working on the original chain. This team branded itself Ethereum Classic, striving to provide an “alternative for people who disagree with DAO bailout.” Since the Classic community was mining at the same difficulty with a fraction the power of the rollback/bailout team, blocks were found slowly at first. However, a day later the difficulty had decreased and the Classic blockchain was recording transactions relatively smoothly.
Pre-fork ethereum tokens (ETH) now exist in two separate realities: ETH (rollback/bailout tokens) and ETC (ethereum classic tokens.) This has caused much confusion. Some people don’t even realize they own ETC. Others don’t know if they’re spending them. Transactions are at risk of a so-called “replay attack. Complex spending guides have been written.
For those of you who are totally lost, here is a decent analogy (‘LTC’ is Litecoin):
On the exchanges, ETC is trading at just $0.6 whereas ETH is trading at $13. Big names from the bitcoin space are supporting ETC:
… and big names from the ETH camp are pushing back:
… and other big names from the ETH camp are telling those who are pushing back to stop!
It’s another fascinating drama from BitcoinLand and if only there was some sex or guns it would be a Hollywood hit.
My position on the whole affair mirrors my position on the historic analogy: I’m not anti-copper, anti-silver, or anti-nickel, I’m just skeptical any of them has any chance (or ever had any chance) of dethroning gold. Gold’s emergence as the preeminent money was due, in large part, to the trust engendered by its unchangeability. The same is true of bitcoin.
In Other News
Elon Musk has announced that Tesla owners will soon be able to rent cars as autonomous robots “for money.” No word yet on which currency will be used ;)
