Bitcoin fork
Here's Bitcoin getting forked. It totally works like this (via Shutterstock).
Alt coins,  Bitcoin,  Innovators

Expert trader gives the ABCs (and SVs) of the impending big Bitcoin Cash hash battle

Bitcoin Cash’s fate will be decided November 15. Here’s what that could mean

By  / November 13, 2018 /

The contest to control Bitcoin Cash—essentially, two billionaires in a game of chicken—is about to come to a head. The “hash battle” will be decided on November 15, 2018. On that day, BCH will have a hard fork; the winning hash will retain the title of Bitcoin Cash while the loser—if it survives—might be forked into a brand new coin (though that’s debatable).

The stakes aren’t small; Bitcoin Cash currently has a $9.4 billion market cap, making it the fourth-largest crypto.

In the 10 years since Satoshi Nakamoto release the original Bitcoin white paper for “electronic cash,” many cryptocurrencies have seen “forks.” There have been coins “burned,” too. However, we haven’t seen a full-on “hash war.” This happens when some mining pools on the same blockchain change how they handle transactions. The mining nodes then have to decide which rules they prefer, with the winner ultimately controlling the coin. That’s what we’ll see on Thursday.

But even the winner might become an instant loser in this game. On one side is Bitcoin ABC and on the other, there is Bitcoin SV. Behind each is a crypto titan:  Bitmain’s Jihan Wu (#teamABC) against Craig Wright’s nChain (#teamSV). Wright hopes to keep the BCH status quo by aligning with billionaire Calvin Ayre, who runs the world’s largest Bitcoin Cash mining pool, CoinGeek.

The “ABC” in Bitcoin ABC stands for Adjustable Blocksize Cap. It’s a hard fork of BCH. It will leave open the ability in the future to “burn” some BCH in the form of a smart contract under the “Wormhole” protocol. Meanwhile, “SV” stands for “Satoshi Vision.” This is being billed as the closest to the original Bitcoin as it gets.

Which one is better? It  probably doesn’t matter. All cryptocurrencies work on consensus. The one we use the most is the one that’s best. Therefore, one of them could plummet in value even if it is a better product. And it might be the one sitting in your Coinbase account right now (more on avoiding that in a minute).

To get some insight, we reached out to CryptotradersPro.com’s Kurt Wuckert, Jr.  He runs Cryptotraders, a community of retail traders looking to become professionals. Wuckert takes amateurs and turn them into pros. “We have a community of about 70,000 people on social media and discord for crypto best practices. Not get robbed, not get scammed and not lose money.”

Whether one coin or the other is “better” is somewhat subjective. But losing value in your account during the hash war is another matter. That’s why we reached out to Wuckert. He prides his company on sharing prudent advice that will help traders.

Modern Consensus: What does this mean to some long-term HODLer who just wants to buy some BCH on Coinbase and hope that the attention leads to a price increase?

Kurt Wuckert, Jr: Don’t leave it on an exchange like Coinbase or Binance. Send your BCH to a secure wallet. On Android, I would use handcash or Centbee and on iOS the bitcoin.com wallet and Centbee. Centbee is agnostic to the hash war. Leave it where it’s at. Just sit on it and let the dust settle if you want to hold through. As soon as the consensus is reached on chain, it will either be the ABC rules or the SV rules. The only threat is of both sides threatening to attack known wallets on the other side.

So it’s safe in a BCH wallet where you control the public and private keys. But if you leave it on an exchange like ABC-aligned Coinbase or Binance you could lose big?

Coinbase can make the political choice to go the ABC, still call it BCH and can keep it on their exchange. They can hold it for you as ABC and then ABC could plummet in value. If they split and split permanently they will give you a 1:1 split to export into your SV wallet or your ABC wallet, assuming they are coins in a permanent state. But it is vital to be in control of your private keys.

Are we right in saying this is totally unprecedented?

Yes, and it’s worse than that. A lot of people are dreadfully looking at this like an incoming dividend, an opportunity to make some money. It is written into the original white paper that this is how we determine which coin is Bitcoin. It has ended in a handshake every time it has come down to this point before. But they are progressing further.

What if they call it off by the 15th?

I guarantee SV will not. They have more hashing power and more guile. The ABC team could certainly relent. They could fork their own way and concede. Or decide to follow the SV rules set and break bread after taking some slaps on the wrist from Craig.

Could a clear winner and loser lead to price speculation?

For someone with no experience, I would say just watch the fireworks. It’s a dangerous play because it is unprecedented. There’s a lot of things at play and it’s not a time for speculation.

 

 

Even in the bitcoin whitepaper, we became weary of a “51% attack”. But this is essentially two unstable 51% attacks at once, which sounds impossible. But it could happen if 51% bail to ABC and then 51% of the remaining miners go hard to SV. The winner won’t be obvious.

The ABC team has Bitmain backing them. The nChain team has SVpool and Coingeek. Coingeek will be processing transactions and forcing them on the SV. Coingeek will be putting some horsepower behind it. If it happens relatively quickly, those transactions will be assimilated into the chain—anything in between the split and the next coinbase every 100 blocks—roughly every 1,000 minutes.

So there’s a race to the first 1000 minutes?

Just for context, this is what happens on every block: Ten miners are all competing to orphan the other guy. One might get to 99 percent when someone gets to 100% And that 99 percent proof-of-work just dies. That 100 percent block becomes the foundation of the beginning of the next block. Mining is pure Darwinism. You’re fighting the others and it keeps the blockchain secure by making it unmanageable to hack.

So even the winner of the ABC/SV split could be the loser if miners jump ship.

The big question is: Is Craig right or is Craig crazy? Craig’s problem is they took Bitcoin and added stuff that was unnecessary to create their own vision. He thinks Satoshi’s vision can scale without going outside of principle.

Who are the actual people behind ABC and SV?

ABC are the people that forked away from Bitcoin Core. They are the originators of Bitcoin Cash. The lead developer is name Amaury Sechet. They fundamentally believe that the original white paper doesn’t have efficiency. They also want to change how the miners relate to the core. They’re not right or wrong. It’s just not Bitcoin. If we got the ABC direction, then there is no coin that follows the white paper. And so bitcoin—small B—is no longer. But these ideas are not widely tested. They take out the economics of the Bitcoin white paper.

In your video, you mentioned how some of these people are acting like what we would call Bible-thumpers. People obsessed with the original word, but not always asking whether that’s helpful or not.

SV came out in the last couple of months and said no, you can’t change the relationship between the miners and the network. You can’t change the order in which transactions are chosen from the meme pool. That’s what C-Tor—or canonical transaction ordering—is for. It’s a minor software change, but it’s significant because it’s inorganic. It allows bigger blocks to occur so you have more reliability of making larger blocks every 10 minutes.

Your explanation makes it sound like Satoshi is a prophet who came to explain the Word and then left shortly after.

Satoshi appeared with the white paper in 2008 and then disappeared in late 2010. In the BitcoinTalk Forums he said that Bitcoin version 0.1 is it. Anything after that is somebody else’s idea. What SV aims to do is return to 0.1 and start there are the foundation and just scale up block size with the existing script there in the code.

Is there anything about emerging technology today that makes the original SV more doable? Like if a new computer comes out next year is 0.1 still the way to go?

Satoshi had said there would likely be farms of servers, but we don’t know what hardware efficiency is. At the same time we have Samsung putting out next generation ASIC chips. They used to think prop planes had a limit to how fast they can go and then engineers designed a jet. It wasn’t that they were wrong about what a plane could do, they were just only thinking in terms of prop planes. Whatever the next generation after ASIC is will be a jet-like leap forward. But that doesn’t make an airplane not an airplane.

When Craig got raided by the Australians there was a big PR push from nChain all related to his crypto patents. Is this just land grab from nChain to push their patents onto the blockchain?

It’s possible. I really don’t know. I’m not an expert on patent law in open source projects. The problem is: Craig is.

If Craig really is Satoshi Nakamoto, then he is the one who came up with the “selfish miner paradox” in the white paper: the idea that it’s easier to play by the rules and make money than it is to change the rules to cheat. Wouldn’t he be screwed if he cranked his patents into the code? Even if years from now he said that his patent ran the whole thing and everyone owed him a part of each transaction, everyone could still split off, right?

It’s just like Bitcoin Core splitting it Bitcoin Cash. Forking is a defense mechanism. If five years from now BitcoinSV is the biggest coin and Craig put up a paywall, we could just change the proof-of-work or another protocol to defend against him. SHA256 is limited and BTC and BCH run on SH256. So if whoever is the minority would go multi-algo like digitbyte. You have to create a new hashing algorithm.

So nothing happening on the 15th is going to make it so I can get a beer at my bodega with BCH?

Haha! No, there will be a winner. The ticker is a political variable. Bitmain owns Coinex. They’re pro-ABC and they might get involved. There’s a lot of that. Like on Binance, the ticker symbol for Bitcoin Cash is BCC not BCH. The exchanges are not regulated, so they can do whatever they want.

Let’s get back to Coinbase: are people going to see a new ticker symbol?

No. For one we don’t know how long the hashwar will go. If SV wins the hash war quickly, it will be business as usual. If ABC wins, Craig says he will fight. He will use hashing power to detangle, to screw up their blockchain. He said “We will grind them to dust.” He intends to win at all costs. It’s Coingeek vs Bitmain. ABC can decide to follow their rules. If ABC goes their own direction, then it’s on Coinbase to make a wallet for ABC and give it to them.

Meaning that Coinbase will have to give its users a 1:1 duplicate wallet of ABC and SV?

Yes, technically. Other wallets should do that quicker if it ends up that way. It’s just another reason to keep your wallets out of exchanges.

Here’s the big question: What if the nerds win at ABC but the miners notice they aren’t making the same fees on the new “winning” system and they bail for SV?

ABC is Bitmain, Bitcoin.com, and ViaBTC. Every miner has the option to switch to Coingeek, SVPool, or BMG. That’s literally what voting by hashpower means.

Is there any opinion on where miners will earn more?

It appears they would earn more with SVpool. But there is a lot of propaganda. It’s up to the pool to give a percentage and I believe they have the highest rate. There’s also a new pool called Sharkpool that plans to mine empty blocks on alt-coins and payout the blocks on BCH. It’s rumored to be the nChain people.

What is the business model of nChain? They have a lot of money.

I think a lot of it is an understanding that if they are right, then the gamble makes them the most valuable company in the history of the world. If they’re wrong, it’s so inconceivable that they have not reason not to just swing for the fences.

So what? Like so one day all transactions happen here?

If they can make the most secure, most efficient blockchain people won’t have any choice but to get on board. They’re not just developing Bitcoin Cash stuff—they’re developing apps that can connect to it. Craig has even said he intends very much for Bitcoin to replace the internet itself. It think he’s talking about full revolution. It’s a futurist bet. It’s like Elon Musk and Tesla. He ran that company at a loss because he believes the value is long term. That’s miners’ vision too. There are big mining companies that take that gamble and invest hundreds of millions in startup costs.

Gotcha. We’ve been reporting on a story in Iceland about the miners up there. They’re not in it to mine Bitcoin. They’re in it to pay themselves to build out Iceland as a cloud computing brain that could power all the self-driving cars of the future.

That’s why Bitmain exists. Jihan Wu is a futurist and the founder of Bitmain and for him, Bitcoin is not the goal—it’s the incentive to create computation power to fuel an artificial intelligence unit. The profits are only relative insomuch as they get him to his grander goal.

So the winner of this battle could decide the fate of tech over the next 20 years. I gotta ask: why does it make any sense to go back to Satoshi 0.1. When that tech from 2008 might be holding us back? Isn’t that a vote for ABC?

We don’t know because we haven’t tried. Litecoin came out not long after Bitcoin. Charlie Lee said, let’s have 2.5-minute blocks. Then there’s a whole host of other coins. Monero made everything mix to create all this cryptographic anonymity. But the thing we haven’t actually tested at scale is peer-to-peer digital cash. We haven’t actually let it out to fly.

What about Jihan Wu? Does he want a winner?

He is pro-ABC because he makes a lot of money with the exchanges that he owns. He also has Wormhole Cash that is a smart contract platform that burns BCH in order to utilize Wormhole. He has his own personal incentives, just as Craig has it own with his patents. 

 

I think about this a lot: crypto doesn’t work when you imagine it’s a bunch of billionaires trying for domination. We need to imagine that there’s a Satoshi Nakamoto out there who just wants us to have electronic cash. Like in the early days of the internet we had to believe that we were building something bigger than AOL and Pipeline.

I don’t know. That’s kind of the beauty of it. Every person sitting in the church pew hasn’t shaken hands with Jesus Christ, either, but they do believe he is real. Whether they do have a supernatural relationship is irrelevant. And it’s shaped the last 2,000 years of world history. And I think that’s kind of okay.

I guess there comes a point where It kind of doesn’t matter whether we think

It’s one of those things that comes out in the open. Satoshi is a similar figure. As time goes on you’re going to have a position on whether you use Bitcoin or you do not.

You made a point in your video of thinking of the white paper as a Holy Bible.

It is the standard by which Bitcoin should be judged. Like “Christian” is decided by a standard that is anchored in the Bible. Most religions are a decentralization project. The Catholic Church is the central authority and you have the ability to fork it off and become a Presbyterian or Lutheran. The Lutheran is a smaller fork, but it’s not insignificant.

Are we being fundamentalists? Usually, fundamentalists are nutjobs.

To a degree, yes, but I think it really depends on why it matters. There are vile, dangerous fundamentalists and there are fundamentalists who devote their lives to feeding the poor. Mother Theresa was a fundamentalist. Are there ignorant Bitcoin fundamentalists? Absolutely. There are people like myself who look at is as a tool for liberation. And the tool matters more than the personalities behind it.

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Brendan Sullivan is a writer, producer, and author of the memoir Rivington Was Ours: Lady Gaga, the Lower East Side, and the Prime of Our Lives. Disclosure: he owns cryptocurrencies. Follow him on Twitter.