Wednesday, November 15, 2017

The Flippening - 120 Billion Reasons Why They Won't Let It, plus Innocent BTC holders will be harmed

                     27/10       27/10    30/10      10/11      11/11     12/11      13/11      13/11
                         A             B           C              D            E              X           F            G
BTC  Hash    14.00       6.50     11.04       12.51      6.21      5.85         3.43       10.13
BCH Hash       0.46      3.26       1.08       0.80       3.80      5.11        6.84        0.92
BTC               5910      5866      6199        7198       6491     5402       5799      6257
BCH                360         351       464         863       1622      2863       1391       1188
BTC Diff        12.00     14.50     14.50     14.50      13.60    13.60       13.60     13.60
BCH Diff         0.67      0.67        2.70       1.13        1.30      1.30         5.22        5.22

1) A - B
    7.5 EHash left BTC.
    2.8 EHash migrated to BCH.
    4.7 EHash left system

2) B - C
     2.18 EHash moved from BCH to BTC
     1.74 EHash returned
     3.00 EHash still out

From A to C mining profitability is affected by difficulty adjustment only. BTC (B) and BCH (C). Prices were largely unaffected.


3) D - E  ( BCH Price Push )
     6.3 EHash left BTC
     3.0 EHash migrated to BCH
     1.0 EHash more left System
     4.0 EHash in total now withheld from system

4) D - E - X ( November 12  Hash Rate Crossover )
     0.3 EHash migrated from BTC to BCH  leaving 5.85 EHash
     1.0 EHash returned to mine BCH  increasing to  5.11 EHash
     3.0 EHash Still off the system

5) X - F  ( Hash Rate Flipped )
     2.42 EHash taken off BTC  leaving only 3.43 EHash
     1.73 EHash  added to BCH to max of    6.84 EHash
     Additional 1.0 EHash taken off system

6) F - G ( Hash Rate Returned )
     6.0  EHash migrated back to BTC and order was returned to the system
     3.0 EHash still off the system

Bithumb servers went offline for several hours

On the 11 of November there was a 100% price movement in BCH from $863 to $1622 and a sell off of BTC from $7198 to $6491. This resulted in a "Black Swan" event driving the price of BCH to a high of $2863 and BTC to a low of $5402 at 6.00 am on 12 November (Bitfinex).

For yet unexplained reasons when BCH price peaked at 6.00 am, Bithumb  servers crashed. This took out most of the demand out of the market and sell pressure from the remaining exchanges was able to bring the price of BCH down to around $1400 by 10.00 am. All this while Bithumb was off-line.

This massive increase in mining profitability on BCH caused miners to switch and the hash rates on the two chain crossed (X). Had this carried on the BTC chain would have succumb to the Chain Death Spiral as the hash rate between the two chains did flip (F).

My guess on what happened.

I believe nobody was prepared for this. It was a "Black Swan" event. Bitcoin markets are unregulated and there are no trip mechanism built in. More than likely the major players realised what a disaster this would be if the Bitcoin market crashed and maybe even go to zero as the hash rate was rapidly exiting the BTC chain.

The decision must have been to "turn off" Bithumb servers to kill the demand. At the same time they borrowed BCH on margins to sell BCH down. Those who bought at peak on Bithumb and were unable to liquidate lost big time. Many would have been bankrupted. Still facing limited number of lawsuits is better than having the whole BTC market collapse with total wealth transfer from BTC to BCH.

So we now have a trip mechanism in the crypto markets. We turn servers off. May this be a warning to all those who trade in this market.

BTC Recovery

Over the next few days the price of BTC recovered and as of today 15 November is over $7100. Here is the problem. How can anybody put money into a coin that has a non existential possibility of going to zero because it does not have the protection of an Emergency Difficulty Adjuster (EDA) like in BCH.

On top of that it is practically useless because of extremely high fees and long confirmation times. I sent some BTC over 10 days ago with 0.0002 BTC in fees and that transaction is still in limbo. I tried to send $500 out of my wallet with priority fees and the fees was calculated at over $200. This coin has turned out to be a joke so why does anybody want to support it?

Of course there are 120 billion reasons that it must be supported. And think of all the people who bought into BTC since 1 August. What can we tell these people if BTC went to zero and BCH became the new Bitcoin. Something has to be done. If the problem is bad at $7000 how much worse at $10,000 or $100,000 per coin.

It is very simple. The coin without EDA (BTC) cannot share the same POW algorithm as one with EDA (BCH) and expect to survive without intervention. Another "Black Swan" event is just around the corner. If we want to protect innocent people who have purchased BTC since 1 August we have to hard fork EDA into BTC. This way both coins can compete for mining hash power on their respective merits.

Segwit2X Solution

It is possible that there may be a solution round the corner. In less than a day the "cancelled" Segwit2X will activate. 3.0 Exa Hashes of mining power is still unaccounted for and did not play a part in the last crisis.

What if Bitpico is real and they really do control 30% of total hashpower. They could hard fork Segwit2X with EDA built in and this could replace Segwit1X as the new BTC. Segwit1X would of course die without EDA in this tussle. This way all BTC holders are protected and both chains can co-exist. The value between BTC and BCH will depend on their merits, usefulness and adoption. It also allows for orderly transfer of values between the two chains.

Here is another link that say Bitpico retracted. We are kept guessing.




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