23/11/2018/08:00CET
I want to take a moment to analyse what happened to all airdrop coin crowd post BCH hardfork. Did they win or lose?
Markets in pre hardfork...
The price of BCH had gone on a rally in the days preceding the BCH hardfork around the 1st and 2nd week in Nov. (2018). To be honest about price level of BCH pre hardfork, we should look at the period of time about a month beforehand where #BCH was trading at about 450usd. We will use this as our base of calculation.Bitcoin cash pre hardfork:
Since the hardfork there has been a pretty major dump in the crypto markets going from an overall market cap of around 210B USD to today at 139B. That is a drop of almost 34%
If we take Bitcoin as a secondary measure of "the ensuing correction" then the calculation would go like this: early Oct #BTC price was about 6400 USD and today it is 4300 USD, a drop of almost 33%
So we can say that in last 9 days since we have seen the most recent flush in the cryptoverse overall market cap, one could say that generally speaking a 1/3rd of the market has been wiped out. Ouch! But what about BCH in all this?
So how fared the BCH airdrop speculators?
Well the dust has settled and we now have 2 BCH's (Just to create yet another layer of confusion for any newcomers to the cryptoverse)
They are elegantly called:
- BCHABC - so named to represent the camp that is represented by the developers that supported the main implementation BCH - who called it Bitcoin Cash ABC (so named in the Github repos)
- BCHSV - the SV standing for 'satoshi's vision'. The camp lead by Craig wright, (who claims to be Satoshi himself! but refuses to irrefutably prove it, because he cannot, because he is not!) claiming to be staying true to the spirit of the original Bitcoin whitepaper. (I'll take this chance to encourage you all to read it. Its not a hard read and will be worth every minute of your time if you intend of getting into the cryptoverse. download it here)
These 2 coins are now trading at 201 and 40 USD respectively. That is a combined total of 241 USD. Here are their new charts...
BCHABC
BCHSV
So they have not been spared the bloodbath of the overall cryptoverse. But what is the final accounting on those that speculated on BCH in the prefork hype?
The final score
So those who held BCH in the pre pre hardfork period, the period before the hardfork became priced in (by those that thought they could make some quick money from the ensuing airdrop), the calculation looks like this:
Pre hardfork BCH was 450 USD, post hardfork combined value of both chains, 241 USD. That is a drop of almost 47%
And if you were one of the FOMO victims that bought into the hardfork hype at 625 USD, then your losses are 61%
My conclusion
So it seems this time around, the hardfork gods did not rain free money on the heads of the loyal worshipers.
I am not going to get into any part of the topic of whether the very contentious and acrimonious bch hardfork had anything to do with the overall market rout. But any casual observer in the future, studying what went on at this time would be very tempted to concatenate these two events.
What I want to hypothesis on here is a new and healthier attitude to hardforking.
Hardfork - why they are good and bad all in one.
Hardforks, for those that do not know yet what they are, is when an open source code base of a running blockchain is altered by a group of developers in a way that prevents it being operationally compatible with the existing, running blockchain nodes. Accidental hardforks are a real danger for developers working on running blockchains (Could be akin to working on the engine of a truck while it is being driven on the highway)
Why they are good?
They are a tangible and very public testament to the true open source credentials of a blockchain. Hardforks are a normal and expected phenomenon in the world of public and open blockchains. In order to have absolute transparency in such blockchains, the source code of the nodes must be freely available. This way anyone can audit the source code and any time and verify for themselves how the SW operates and what it can and cannot do.
In addition to this, Open source SW code invites maximum diversity of software developers to audit the code. This diversity is huge. The result is far more robust, and bug free code.
This concept of open source code should be placed in contrast with its twin: closed source, proprietary SW who's source code is a fiercely guarded corporate secret. Microsoft office, Google search, Facebook, are just the tip of the iceberg in proprietary SW. Chances are that a vast majority of the SW you interact with on a daily basis is closed source, proprietary SW.
Why are they bad
Hardforks are an obvious side effect of open source blockchain code. Anyone can copy open source code, change it (or not), and deploy it themselves under a different name. This holds not only for blockchains but for any software.
Almost any running blockchain by default has a community. I would argue that it is the community which gives a blockchain it's power, its value. This statement held true for most any software, but with the advent of leaderless blockchain networks like bitcoin, the value of the community is greatly enhanced.
For running blockchains, the community can be categorized in 2 camps, the devs and the users.
Devs (developers) are key to keeping the node sw up to date and bug fixed. But they play a far greater and more subtle role, and that is to show that the blockchain is 'alive'. It is being improved upon and there is a group of devoted devs supporting the blockchain. They must also be public and communicate with the rest of the community.
Users are the rest of the community. Those that put their faith and money into a blockchain because they:
- share in the overall vision and character that is represented by the blockchain.
- wish to speculate on its price because they believe more people will join this blockchain in the future driving its value up.
- have a use case for which they need the native token of this blockchain. This point is intentionally vague because many of these use cases remain theoretical today.
Politically or financially motivated hardforks hope to hijack, absorb or replicate the community from another blockchain. How that community reacts to the hardfork is the real issue.
For those owned bitcoin (I mean control the private keys) and lived through the original bitcoin cash hardfork (1/8/2017) were suddenly owned the equivalent amount of bitcoin on the bitcoin cash chain. Free money or so it seemed.
Bitcoin itself did not seem to suffer much at all, but it was in the start of quite a bull run.
Bitcoin cash opened trading a few days later at a price of about 250usd, about 10% of Bitcoins price. In other words, the hardfork gifted all bitcoin holders with a 10% dividend.
In the ensuing months, a whole raft of bitcoin clones followed suite. The list is long and many do not trade. For a quite complete list take a look at this site https://www.forks.net/list/Bitcoin
As far as I can remember, Bitcoin Cash is the fork of bitcoin that has retained the best chunk of the bitcoin community. But in the process, the personalities behind it have polluted this blockchain and cast a pall of infightining and petty politics into the overall #cryptocurrency space.
The Last Fork
Now I would be recklessly bold as to profess the death of the hardfork, especially since it is a totally legitimate and necessary feature of public and open blockchains. It is the most direct method by which they can evolve. But when I speak of a hardfork in this way, these hardforks are for primarily technical reasons . Arguably the original fork, Bitcoin cash was a technical hardfork. It occured at the height of the scaling debate and was all about splitting off a second solution to scaling for bitcoin. But it was overshadowed by the politics of the case which I will not go into here.
Most would be surprised to learn how many hardforks there have been. A pretty comprehensive list can be found here. I cannot vouch for the completeness of this list or if these were technical hard forks or forked for other reasons.
What was different this time around was the acrimony and power greed that drove the bitcoin cash hardfork creating BCHABC and BCHSV. In addition to this the fork occurred at a vulnerable time for bitcoin with very low volumes on exchanges and a dearth of volatility. The ensuing market rout has taken out such a great bite out of the overall market valuation of the cryptoverse.
The fact that Bitcoin cash overall valuation (both chains) have taken a larger than average hit will give those ready and eager to fork for other than technical reasons pause. It is this that stands as my reason for 'the death of the hardfork.'
I know the name is a bit click baity, but I do believe that the community psyche has linked these 2 events together and blame this most recent market rout on the bitcoin cash hardfork fiasco.
One can never identify with certainty which pebble started the avalanche, but the market has a memory, especially when pain is involved.
I will leave this post here for you to mull over the events in the market following this hardfork.
25/11/2018/18:00CET I just got around to polishing off this post and getting it out now. Markets have been very volatile and moved even lower. The calculations I present above are as of the timestamp at the top of the post.
As always guys, leave comments, have fun and trade safe.