Bitcoin Fork Mania is Bound to Take Off
In these last few months, we have seen a few Bitcoin-related projects taking off trying to introduce new features to overcome Bitcoin’s limitations. In August, it was the first time we saw a dissident faction of Bitcoin developers creating a new payment network called Bitcoin Cash – Ticker BCH, which has sparked off a wave of airdrops and ‘altcoins.’
In theory, there already a lot of Bitcoin-based spinoff currencies which were called altcoins. On the contrary, these projects are all trying to introduce new features that would be capable of surpassing Bitcoin limitations; however, lately what we have seen is an entirely different thing.
Bitcoin Spinoffs and ‘Dividends’
The Bitcoin Cash project introduced modifications to the Bitcoin code and changed it so that it could support bigger block sizes. By introducing a bigger block size, the network would be able to include a lot more transactions in one single block, and with that, it was solving the scalability problem. To address this problem, Bitcoin Cash was created, and it seems that its spinoff actually went quite well, with the coin gaining a lot of followers and consequently, its price going up to surpass the $1000 mark.
The main difference BCH had from other Bitcoin spinoffs was that it was directly created out of the Bitcoin Blockchain, and as so, there was a network split which enabled all those who already owned Bitcoin to own the same exact amount of Bitcoin Cash. This was basically free money created out of thin air.
Having that kind of move on the table, it was inevitable that others would try the same thing. At the beginning of November, another team of developers publicly launched a new fork. This made it the third split of the Bitcoin network, and the newly launched coin was called Bitcoin Gold – Ticker BTG. This Bitcoin fork version changed the current mining process by introducing a memory-hard algorithm that in the hopes that it will make it resistant to dedicated mining Hardware. Bitcoin Gold developers say they are trying to bring back Satoshi’s Bitcoin mining original idea, making it once again possible for anyone to issue coins using their home PCs.
The idea of bitcoin forks as dividends has lead to the creation of indexes to track the value of bitcoin combined, if the user kept all of these spinoffs. For example, BambouClub created the Cold Storage Index to track the value of BTC, BCH and BTG combined and aid investors with asset allocation.
Much like what happened with Bitcoin Cash, Bitcoin Gold split off from the main Bitcoin blockchain, allowed anyone who owned a normal bitcoin to get the same amount of “gold” Bitcoin after the fork. However, unlike Bitcoin Cash, right after the fork, the team behind BTG mined approximately 100,000 bitcoins before opening the network to the public. The Bitcoin Gold network is evaluated in $4.39 billion making it the eighth most valuable cryptocurrency according to Coinmarketcap. BTG is now worth around $260, so the team basically created a $27 million fund for itself, stating it would be used to support the development of the project.
Now, a new batch of projects has already announced new forks. There’s Bitcoin Clashic, Bitcoin Platinum, Bitcoin Silver, Bitcoin Uranium, Bitcoin Cash Plus, Bitcoin Diamond, Super Bitcoin, and even Bcash. No one knows how many more developers are going to try the same move. With the potential of creating money out of thin air, the potential to see new Forks coming our way is immense, but in theory, almost all of these projects will not succeed or will die before the takeoff.
But the thing is, with so much potential to create free money a lot of scammers are going to try the same trick. The BTG team created a currency worth $4.5 billion keeping $27 million for its own use, which means that this kind of trick will only get more attractive.
It’s not an easy task to understand how many of these projects are actually trying to introduce positive changes and what many researchers are now saying is that a niche for a new type of scam is all set and ready to go. For instance, Bitcoin Uranium, with a ticker symbol BUM, sounds like it’s probably a scam while others have little or no information available. The Bitcoin Cash approach has a couple of advantages over starting a new cryptocurrency from scratch. The obvious one is that using the Bitcoin name causes people to pay attention but others claim it is a fraud, stealing the ‘brand.’
Saturation Point Reached?
The fact that Bitcoin Cash and Bitcoin Gold were successful doesn’t mean that other forks will be. Both projects have shown that they are actually trying to introduce benefic changes to the ecosystem, while other we simply don’t know.
When a fork is created the newly created coins go to whoever controls the private bitcoins keys on the Bitcoin blockchain, and in that sense, anyone who have coins deposited with an exchange will eventually have the right to receive their tokens. However, exchanges could easily keep these coins as they control the secret keys of coins kept in exchanges. These companies could simply keep the money for themselves, but that would be a sure shot to their own death, so most exchanges will only turn them over to whoever owned the corresponding bitcoins at the time of the split. But what about the ones those weren’t at exchanges and were stored in private wallets? Well, the owners can still access their free tokens but to do that they will need to trust someone with their secret keys, and that might lead to a new kind of hacking.
Bitcoin Cash was created by the “big block” faction of the Bitcoin world that believes the main Bitcoin network isn’t dealing adequately with growing congestion. Bitcoin Gold changed Bitcoin’s mining algorithm to try to make the mining industry more decentralized.
Most of the newest Bitcoin forks involve some combination of larger blocks and different mining algorithms. Some are also experimenting with shortening Bitcoin’s 10-minute gap between blocks in the blockchain, which could potentially allow for faster transaction times. But none of the ones we’ve seen so far have a rationale as compelling as those first two Bitcoin forks.
When a new fork is created, holders need to use their private keys from the existing Bitcoin blockchain to access the newly minted fork coins and that might to turn out to be a total disaster. This is why many prominent individuals within the community advice that people move their bitcoins to new addresses before they try to cash out new coins from Bitcoin forks.
While there are some variants of Bitcoin that are introducing needed features, many others are simply scams. So, basically a lot of people could try the same fork move just to access your secret keys and that is why a lot more Bitcoin forks are bound to be born throughout 2018.