Expecting mainstream media coverage of Bitcoin’s surge past $5,000, today I browsed over to one of my favorite news websites: Ars Technica. I was sorely disappointed at what I found, and at the fact that the preeminent tech news site simply doesn’t “get” Bitcoin.
Why and wherefore
The piece by Ars Technica immediately begins by questioning the reason behind Bitcoin’s high price, first speculating that it’s due to the ICO boom, then suggesting that “one factor may simply be that the Blockchain bubble hasn’t run its course.” The author goes on to suggest that Bitcoin’s price is even more surprising in light of its recent—and upcoming—forks. Finally, he concludes that maybe people are hoping that holding Bitcoin pre-fork will result in financial gains post-fork.
It seems that it never occurred to Timothy Lee, the author of the article, that Bitcoin might just be a world-changing technology that’s merely in the foothills of adoption. As Jihan Wu, co-founder of Bitcoin mining firm Bitmain, said in a recent blog:
“Bitcoin has the potential to become the best and fairest form of money to ever exist. It essentially rolls gold, cash, and our credit card system into one. It takes the strengths of each and leaves the weaknesses behind. It has the limited supply quality of gold, but can be used to purchase everyday items. It has the speed of a credit card, but respects and protects your privacy. Transactions are settled instantly like cash, but are recorded on a public ledger.”
Maybe, just maybe, Bitcoin’s price is rising because its potential is finally being realized. Crazy thought…
Forks here, there, everywhere
Lee makes some serious factual errors in his article, asserting that the “contentious” Bitcoin Cash fork “split the Bitcoin network in two in August.” A few paragraphs down, he gets even more specific, stating that “the August fork split the Bitcoin network in half.” But it didn’t.
The network wasn’t anywhere close to being split in half, by any possible metric. Did half of Bitcoin’s miners move to Bitcoin Cash? Did Bitcoin lose half its value? Did half of Bitcoin’s nodes go offline and come back up as Bitcoin Cash nodes? Did Bitcoin lose half of its exchanges, wallet providers and other businesses to Bitcoin Cash? Did Bitcoin Cash steal half of Bitcoin’s users, half its potential, half its media coverage?
Bitcoin Cash began with around five percent of Bitcoin’s hash power, approaching 40 percent a couple of times during very brief windows when Bitcoin’s miners exploited Bitcoin Cash’s broken “emergency difficulty adjustment” algorithm. Today Bitcoin Cash trades at 0.06 BTC per BCH, having reached a high (for only a few hours) of 0.25 BTC per BCH.
In absolutely no sense was the Bitcoin network “split in half.”
Good forks?
Ars Technica’s article makes it sound as if serious, dangerous, forks are happening all the time in Bitcoin-land. Nothing could be further from the truth. As Cointelegraph reported earlier this week, neither Bitcoin Cash nor Bitcoin Gold had or have any chance of “taking over” or “splitting” the Bitcoin network. They may cause some confusion in the marketplace due to their improper appropriation of the Bitcoin name, but they aren’t a threat to the network itself.
The upcoming hard fork in November, should it occur, is a much different animal. That fork is contentious and risky, but following F2Pool’s recent decision to stop signalling for the SegWit2x fork, it seems that even that risk is dying down.
In fact, I’ll go so far as to take the position that Bitcoin Cash, Bitcoin Gold and any other such forks are actually good for Bitcoin’s long-term growth. Why? Because these minor forks provide a safety valve for discontents.
Safety valve theory
The US’ Homestead Act of 1862 was born out of the “safety valve theory.” The idea behind the bill was that, by giving away land for free in the sparsely populated West, immigrants and unemployed in the East would be able to leave the overcrowded towns, move West, and relieve the pressure on cities that were already bursting at the seams.
Bitcoin Cash and Bitcoin Gold do the same thing for Bitcoin. Supporters of big blocks who decried the adoption of SegWit now have a currency to call their own—Bitcoin Cash. They can focus on how best to design their new currency in an effort to one day try and compete with Bitcoin. The same goes for those who complain of miners having too much power, they can join the Bitcoin Gold project and go on about their way.
Removing discontents from Bitcoin actually strengthens the currency in the long run.