Depending on where you stand when it comes to potentially contentious hard forks, and also what currencies you hold, hard forks can be either a blessing or a curse. Anyone who held bitcoin in early 2017 ended up with an equal amount of bitcoin cash which has proven to be quite valuable.
They would have also become holders of bitcoin gold, bitcoin diamond, bitcoin clashic, and several other bitcoin forks that occurred in 2017. While this may seem like free money, it can also potentially create an unwanted tax liability.
The Era of the Hard Fork Continues
With 2018 now upon us, there are already dozens of forks that are set to occur and create additional blockchain assets. Whether we want them or not.
Some forks don’t intend to create new currency, but instead are intended to resolve issues or to implement updates. One such update is the impending Ethereum Casper, which will transition Ethereum from purely proof of work to proof of stake.
Another point of difficulty with hard forks is how are the newly created assets claimed by someone who owned equivalent assets on the original chain? This has caused a large amount of confusion, and has even resulted in the loss of assets due to people not understanding how to get their forked assets.
For example, a not insignificant number of people were scammed for their private keys when visiting a phishing site that claimed to allow them to check on the balance of, or get access to, their bitcoin gold.
Therefore it is highly recommended that those wishing to access their forked assets do so in a manner that is in accordance with a well respected and recommended guide. They should also know that under no circumstances should they give out their private keys.
The Legacy of Bitcoin Cash
Contentious Bitcoin Cash Fork. Image via Fotolia
The superstar fork of 2017 was undoubtedly bitcoin cash. Promoted by Roger Ver and Bitmain, bitcoin cash started out at a somewhat modest $300-$600, before rocketing up to over $1000. Following its addition to Coinbase, the currency very briefly hit $8000 each, before trading was halted.
Evidence of bitcoin cash hitting $8000 on Coinbase appears to have been removed.
The sudden jump in price that occurred before bitcoin cash went live on Coinbase implied that some form of insider trading may have occurred. Coinbase announced that they would be launching an investigation, but there has so far been no result. Today, bitcoin cash has been hovering around the $2500 mark.
According to proponents of the forked currency, bitcoin cash represents “Satoshi’s true vision“of an affordable peer to peer cash system. Those who support bitcoin cash claim that the transaction fees and general slow confirmation times of bitcoin have caused it to fail in its intended purpose. Therefore, they believe that a bitcoin cash is the true bitcoin.
Last year bitcoin cash already forked once, and the result of that was someone took over the original chain of bitcoin cash and rebranded as bitcoin clashic. Support for the apparently satirical currency has mostly dropped off and the community at large does not seem particularly interested in it at this point.
The purpose of last year‘s bitcoin cash fork was primarily to implement a new difficulty adjustment algorithm.
Bitcoin Fork Madness
Contentious Bitcoin Cash Fork. Image via Fotolia
According to this article on 99bitcoins.com, there are many dozens of impending bitcoin forks that either went live late last year or will be going live in shortly.
Some examples include bitcoin private, ore, lite, interest, smart, pizza, file, top, faith, stake, world, oil, silver, atom, and the list goes on and on. The difference between original bitcoin and all of these forks is typically that the forks will use different consensus algorithms, have different total supply caps, and so on. Some offer proof of stake, some offer CPU mining, some are pre-mined, and almost all of them have more than a 1 MB block size.
Not to be left out of the fork party, Ethereum is also seeing its own hard fork into a new spin off currency. This is called EtherZero. EtherZero will be released at a one to one ratio and have a total supply of 116 million. The project claims to have 20 staff members and be compatible with the Dapps. The fork will occur on January 19th.
Lastly as we talked about in an earlier article here on CoinBureau, Zclassic, already a fork of Zcash (ZEC), will be forking again into a new hybrid of Zcash and bitcoin, to something called bitcoin private. The aim of this project is to not only reinvigorate demand for Zclassic, but to deploy the effective privacy protocol used by Zcash known as ZK-snarks into a friendlier package.
Forks becoming more common than new currencies?
Some people may be wondering why it’s possible to create a new bitcoin and call it “bitcoin”. Isn’t bitcoin trademarked?
The answer to that is no, bitcoin is not trademarked and hypothetically anyone could use the word bitcoin for any purpose. For example, you could make your own brand of donuts and call them “bitcoin donuts”, although they have nothing to do with cryptocurrency.
Once bitcoin cash became so effective and essentially billions of dollars were seemingly created out of thin air, many more people are looking to jump on the bandwagon and create their own forks for a quick cash in.
Of course, some people behind these bitcoin forks are genuine and they do believe in their technology, however it seems reasonable that a large percentage of those behind these forks are creating them just for a quick buck.
As cryptocurrencies get easier and easier to create, it is guaranteed that we are going to continue seeing wave after wave of either forks or new currencies, with many of them existing only to make quick cash.
Therefore, it is up to savvy investors and holders to know which forks are worth paying attention to and which ones are junk.
Featured Image via Fotolia