Game of Forks

BTC Forks

Bitcoin Gold

In case you didn’t know, Bitcoin(BTC) had another hard forking of its code base. This new fork is called Bitcoin Gold(BTG) and this fork occurred on Oct 24th at block 491,407. So how do BTG’s creators claim BTG will be different than BTC? BTG will have a different proof of work (POW) algorithm known as Equihash, which is used by the popular, more anonymous cryptocurrency known as Zcash. Equihash will essentially make BTG ASIC resistant and effectively make it less centralized than BTC with respect to mining. Another new feature of BTG is the difficulty adjustment will be every block instead of every 2016 blocks like with BTC. This will most definitely help it perservere in the beginning because when the fork occurred from BTC, BTG inherited everything from BTC including its insanely high difficulty. Had they not implemented a new difficulty scheme, BTG would have been dead on arrival unless most miners switched to mine BTG instead of BTC, which absolutely will not happen when the chain goes live around Nov 1st.

So far, most reactions to the BTG fork have been glaringly negative with most calling this new fork a s#%t coin. Most of this is because of its small anonymous developer group and the fact that BTG had not implemented strong replay protection. But I have noticed that since all of this criticism BTG now clearly states on their website that they are going to implement strong replay protection. Now the question everyone that holds BTC is thinking, do I now also have BTG? The short answer is, if you hold your private key(s), yes! Now getting them is another story. That will require a little patience. Keep an eye on statements coming out from BTG as well as whatever wallet provider you have your BTC stored in for coming support for BTG. I will also be giving updates on this subject in coming posts. Here on this blog.

 

Segwit 2x

Now for the much anticipated Bitcoin hardfork… this is the second part of the New York Agreement or (NYA) which was signed by the majority of Bitcoin miners and exchanges back in May of this year. The Bitcoin Segwit2x fork will occur when block #494,784 is mined. Given the current Bitcoin block schedule this event should occur on Nov 16th, 2017. When this happens, there will be two chains because nodes running Bitcoin software with different rules will participate which will not agree with the other nodes creating a conflict, and thus a split in consensus. The tricky part is deciding which one of these two will be refereed to as “Bitcoin”. Depending on which miner or exchange you ask, you will get different answers. My opinion is that of which has majority hashing power (miners) will be the one I call Bitcoin going forward.

This fork is very different from the Bitcoin Cash (BCH) fork we had in August or the recent Bitcoin Gold (BTG) fork we just had last week. The big difference being difficulty adjustment. You see, when BCH forked off from BTC back in August, it did so with something called (EDA) or Emergency Difficulty Adjustment which allows that chain to scale difficulty way down to meet its current hashing power. This was something it desperately needed, being that only a fraction of hashing power went over to the BCH chain from the BTC chain. Had they not implemented this, BCH would have never mined another block immediately after the split. It would have forked and died right there because the amount of time it would have taken to mine the next block would have been years with that hashing power and that BTC difficulty. I don’t know about you but I would not use a currency that would take me years to send a single payment!

Also, with Bitcoin Gold (BTG) there is a new difficulty adjustment as well changing every block, but also more importantly there is a different POW algorithm. What this means is that immediately after the fork from BTC chain, it won’t need miners from BTC because you can mine BTG with a GPU just like most other cryptocurrencies. This will most likely ensure its survival as well.

Now with the Segwit 2x fork none of this is true. It will have the exact same difficulty as BTC and the same POW algorithm. Because of these two things, I find it likely that only one will survive. If most miners go with legacy1x chain (BTC), then Segwit2x (BTC2x) chain will take years to mine the next block effectively dying right there. On the other hand, if most miners stay true to the NYA they signed back in May pledging to participate on this new chain, then BTC will die off. Should be fascinating to watch, but don’t worry about your BTC. If you currently hold BTC and BTC2x wins out and BTC chain dies, your BTC will just basically turn into BTC2x. If you hold BTC and BTC2x dies off, then nothing really significant happened for the most part. Here is Coinbase’s statement on this coming event.

 

BCH Fork

Yes that’s right, Bitcoin Cash (BCH) is about to have its 1st fork as well. The rules are set to change Nov 1st for nodes but won’t activate until Nov 13th. Remember when I mentioned that BCH had a different difficulty adjustment that allowed it to survive forking from BTC’s monstrous difficulty level? Well, it did what it was supposed to do as far as allowing BCH to survive and get a footing and a steady following, but now it needs to be tamed back. Because the nature of the difficulty with BCH it turns out that its easily manipulated by the miners. Miners game the system by piling on after the difficulty drops dramatically making it more profitable to mine BCH rather than BTC. When the difficulty shoots way back up, everybody jumps off and goes back to mining BTC. This in turn again drops the difficulty way down completing the cycle. This has caused erratic block times in a almost predicable oscillating pattern.

The big trick is going to be to get the miners to adopt the new change which will take away some of the quick profits they have been able to make in these times of low difficulty on the BCH chain. Should be interesting to watch and will provide more data in this ever evolving cryptocurrency, free market economic experiment. Get your popcorn ready!

One last thing regarding BCH I would like to mention. Yours.org is a social media platform sort of like Steemit where the content creators get paid for their content. Unlike Steemit Yours has a very straightforward reward scheme and does not use an additional token layer. To use Yours, just go over make an account, load it with some BCH and post or comment. It’s really slick, sleek and simple to use. I have been using Yours as a source of much knowledge regarding the blockchain space. The people there are friendly, knowledgeable and encouraging. If you have an opinion, want to express it and potentially get paid, head on over to Yours.org and set up an account. See you there!

 

ETH Fork

Ethereum had a hard fork as well which was part of their road map for switching from POW to Proof of Stake (POS). This was part one of a two part series of forks in the Metropolis phase called Byzantium, the second of which will be called Constantinople which is expected some time in 2018. The Byzantium fork occurred at block #4,370,000 on Oct 13th. This fork changed Ethereum in a number of ways to better enhance security and anonymity. But most importantly this fork started something called  the difficulty bomb, a code change that gradually slows down the rate at which Ethereum blocks are created in order to persuade users to move over to a new chain. This coupled with the fact that Byzantium also limits the block reward from 5 to 3 ETH per block should slow the supply schedule down significantly with Ethereum. And if you limit the supply of something and demand stays static, what does that do to price again? Something to think about for those of us hodling ETH, as it could be a good sign for price stability.

6 thoughts on “Game of Forks

  1. Wow! That’s a lot about BTC that I did not know and haven’t seen mentioned in the regular news sources. I wish I’d bought more BTC when I started buying at $500!!

    • Hey thanks Justin I appreciate the feedback, glad you are viewing it this way. That is my goal to try and make something complicated as simple as possible. Not always the easiest thing to do, lol. Feedback is always appreciated, thanks again.

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