BTC is dead - Long live BTC.

On August 1 2017, after years of acrimonious and bitter infighting, Bitcoin Cash (BCH) was forked off of the original Bitcoin blockchain. It took quite a while to find the first block and a long time after for the second block. The reason for this was because of the low hashing (mining) power on the BCH blockchain. The BCH fork had to operate at the same mining difficulty as the main chain, at the time of the split, but with only a fraction of the hashing power. By design, the BCH fork had an Emergency Difficulty Adjustment (EDA) built in, because the developers had anticipated the reduced hashing power. EDA adjusted the mining difficulty on the BCH chain by a factor of 20% if less than 6 blocks were found in a period of 12 hours. This worked perfectly and as at time of writing the difficulty was reduced to about 17% of the main chain. Thanks to the new 8MB limit the next block promptly cleared out the whole mempool. The largest block found was about 4.6 MB. ( Clear That Mempool )

In his article ( Traders guide to Bitcoin Cash and Bitcoin Segwit ) Stein Ludvigsen pointed out that the BTC chain without the emergency difficulty adjustment is particularly vulnerable to slow block times from loss of hashing power. The BTC chain will have no protection against miner defections and will have to wait out the full 2016 blocks before the next difficulty adjustment. Depending on the block time this could stretch out months instead of the expected 13 days.

In his article ( Cashing out of Bitcoin ) John Milibit postulated that if the BTC chain were to lose mining power to the BCH chain, blocks on the BTC chain would get increasingly hard to find, block times would get longer, the BTC chain would get into a Chain Death Spiral and could come to a grinding halt. Furthermore, blocks found on the BTC chain can only clear the mempool at 1MB per block. This at a time when the mempool will be increasing because of all the transactions wanting urgently to get into the next block pushing fees sky high. The BTC chain will become unusable.

The Awful Truth

This now exposes the awful truth about the BTC chain which have been missed. With the BCH chain alive and well, the BTC chain is now totally dependent on miners' goodwill to continue mining, or the Chain Death Spiral will come into effect. Note the emphasis on dependent on miners' goodwill and less on mining economics. There is now another option for miners. They could leave because the BCH chain becomes more profitable to mine or for any other reason, and there are consequences for the BCT chain from their decision. Prior to the fork they could not leave. Now they have to be begged and persuaded to stay. For a rational investor, even the possibility that such a risk exist, makes the system untenable and unusable. We now realise, how important a role, the miners play. Their contribution should have been appreciated and they should have been listen to and given the respect they deserved. Not vilified and demonised. Who would have known?

What happens now?

The short of it is that no person or economic entity can accept or tolerate risks not within their control. They cannot place their financial well being at the goodwill and mercy of others. The Bitcoin system depends on pure greed and capitalism to function. Socialism, Communism, Dictatorship, Appeal to authority or Miners goodwill cannot work. BTC IS DEAD. LONG LIVE BTC.

Only a gentlemen cartel among investors, users and miners for a BTC hardfork to include EDA can save the current BTC chain. However cartels do not work in real life as the economic advantages to be the first to leave is too strong. In this Game Of Forks there is room for only one fork and BTC lost.

If you have not sold your BCH you will not be affected as BCH will become the new BTC. For the rest there are winners and losers. BTC will have no value. The war is ended, but not in any way we wished or planned. We must all now be magnanimous and humble as we pick up the pieces.

I HOPE I AM WRONG. PROVE ME WRONG. PLEASE.

If I am right, we should stop trading on all exchanges, to protect the innocent, for the good of the Bitcoin community.

Is Craig Wright Satoshi and Does It Matter ?

* This post was written before the fork and needs to be updated. I wrote it because I was worried that many Bitcoin owners who will be getting their BCH tokens have been advised in the main forums to ditch them for BTC as soon as possible in order to tank the price of the new token. I felt that this was wrong. At the very least the public should have been advised to do nothing and wait for events to play out. Acting on the wrong advice will lead to losses.

Does it matter if CSW is Satoshi - NO DEFINITELY NOT . Does it matter if you believe CSW is Satoshi - YES. Under normal circumstances no, but these are not normal circumstances. We are getting a hard fork on 1 August. This means we will all have BCC and BTC in our wallet. You have a choice Sell one or the other or keep both. Where you end up depends on what you believe in. I believe that the BCC fork will survive and in the end will surpass the BTC chain.

1) CSW supports the BCC chain.
He is nChain and they are introducing split chain and new op codes for Turing completeness
2) Replay protection on BCC chain

These people are serious and responsible, plus the system they use makes it fraud proof and opens the way for sharding.

These are enormous improvement to the Bitcoin protocol. Turing completeness was the whole reason for Ethereum's inception.

3) Sharding is the holy grail for Ethereum and they have not succeeded. Basically sharing the processing load on different computers. BCC adopts Bip143 style signature, which solves malleability and makes the system fraud proof, which is necessary for sharding.
All these developments are on BCC and not BTC. Can they not be adopted? Sure they can, but Core have proven so far that they don't look outside their sphere. Plus they absolutely hate the big blockers.

4) What happens after the fork?
The first thing is that BCC has bigger blocks while BTC will have 1MB for at least 3 months. So it will be cheaper to transact on BCC. This I believe is the biggest organic push by users to BCC and the miners and developers must follow the users. Also the people on the BTC side of the chain will always be arguing if the 2mb hard fork will be activated while te people on BCC will get on with business. You win by what you do not what you say.

Will BCC chain survive? What if it has low hash rate behind it? It will survive because the community sees the benefit of having a second option in case the first option fails. Means the big miners will not attack the BCC chain. And there will be a second chain because the people behind it are willing to mine the chain even though it is less profitable to do so.

So it is important on which chain you want to be on. You can sit and do nothing and all will be well but what if you want to spend some BTC? Are you going to spend your BCC or BTC? If you want to take a position, taking the wrong position means you will lose your money. So it is important if you believe CSW is Satoshi or not. Long term (6 months) both chain cannot survive one will wither and become an Alt.

Why I believe CSW is Satoshi
It really does not matter if he is or is not, except to satisfy one's curiosity. But look at it this way. What does it take to be Satoshi? He must have very good grasp of programming, cryptography, game theory, Maths, Economics and Philosophy. Is Satoshi one person or a group. I argue that it is one person and he solve the Byzantine Generals problem, help by small group of people after the release of the software. You will also need to have a connection to these small group of people.

Solving the Byzantine General problem is what scientist call a hard problem. It is not obvious and the solution is worthy of the Nobel prize. So why did he release it anonymously? I think because he knew that if it did not get traction and adoption it will die either from within or without. He was worried about Wikileak using bitcoin before Bitcoin was ready. Attracting attention to it will surely get it stomp on by the authorities, and open himself to criminal prosecutions. Every other person who engaged in digital money up to then have had legal and criminal problems to content with. Can you count how many people dismiss it outright at first glance only to rediscover and adopt it later when it refuses to die.

Lastly, this is a gift to humanity. It takes a special kind of person to do that. One must have "lived". Such a person will be a contradiction. A complex person. One where the Yin and Yang flares up easily.

Bitcoin and Crypto Currency - The Evolving Landscape

Do not take this post as Investment advise. At best it is how I see the Crypto space after delving in it everyday for the last 4 years. It is clear now that bitcoin would never go to zero more so as adoption increases worldwide and it becomes more mainstream. Investment is all about value and timing, and of us will have different risk appetite.

Today (15/6/2017) total market capitalisation of all crypto coins and tokens is 110 Billion USD. It is actually incredible that something that is purely a result of computer hashing has aquired this amount of value. Over time there will be jostling for relevance and position among all the coins and some will increase in value while others will trend to irrelevance. That said it is becoming clearer how the coin landscape will settle.

The rise of Ethereum, debut of Zcash and finally the resolution of Bitcoin governance will clear the fog. Underlying every coin is it's utility as a currency. Every coin can be used as a currency, as long as there are people out there who are will to accept it in exchange for goods and services. Which coin is used in the transaction will then come down to how well the coins are distributed and how easy it is to transact in that coin.

The main currency coins are Zcash, Bitcoin, Litecoin and Dogecoin. Ethereum is not designed as a currency but more as a smart contract platform. It currently sits on the second spot in market capitalisation, I am skeptical about Ethereum because is it always just one step away from calamity and disaster. After the DAO, I believe that it would be virtually impossible to recover from another hack, code or user error disaster. That it has found a new use in ICO use is commendable but I really do wonder how that much monetary value can be place on an insecure platform. Quite irresponsible maybe even fraudulent and certainly greedy.

Bitcoin is the first and most secure platform. No coin can even come close to Bitcoin's security. However it has a serious flaw, which is fungibility. Bitcoin is pseudonymous. If a bitcoin address can be link an owner, all transaction from that address and owner is open for view and analysis. For most transactions this is not a problem but in the competitive commercial and sovereign sphere this is not acceptable. Other coins such as Monero and Dash aim to fill this function but it will find difficulty in gaining adoption partly because of security but mainly because most of the coins are held in very few hands. Zcash in my opinion will win the title of being the fungible coin.

Bitcoin has a value today of $2600 USD. As the market capitalisation of crypto coins increases and becomes more mainstream this valuation becomes less relevant. Among crypto coins Bitcoin will be the unit of measure and as more people worldwide use crypto rather than fiat the Btc/USD pair will become meaningless as the USD is an inflationary currency and subject to arbitrary devaluations. Bitcoin will become the unit of measure because it is the most secure coin and no other coin can ever come even close to it. Proof of Work (POW) is the only security that matters. Proof of Stake (POS) is just a rich man's game.

Zcash will be used as the high value transnational coin used by large corporation and nations. If I am right it will achieve a value higher than Bitcoin ie x number of Btc. I see this scenario developing because Zcash is a coin designed with privacy and fungibility foremost in mind. More important is the fact that by the way this coin was introduced no one person holds a large stash. It is very widely and thinly distributed. Zcash is the Platinum to Bitcoin Gold.

Over time (4 years) Zero Electric Coin Company will be the largest holder of Zcash. By then I can envisage nations and corporations holding shares in this company. In the meantime Zcash is very easy to mine on CPU's and GPU's. This will guarantee widespread mining adoption and even further distribution of the coin.

Litecoin will prove itself as highly utilised as a development platform. Litecoin is the Silver to Bitcoin gold.

Dogecoin will be the coin for everyday use. It's value is the number of coins in circulation currently around 109 billion and increasing by 10 billion a year. It has a large number of users and adopters already in place starting as a joke and tip coin.  The younger generation will start with this coin and there are also many lite Dogecoin wallets available on smartphones. Dogecoin is the Copper to Bitcoin Gold.

Fear Not - The Chain Will Split But BTC is still the longest chain.

Update 28/7/2017

Looks like we will have a split. I am on the Satoshi chain that is the chain without Segwit.

As we are very close on the inevitable activation and mining of the first Bitcoin Unlimited block there is great fear and trepidation among the community that the event will result in a chain split.

I have come to the conclusion that this chain split will not occur, because deep down the people who finance Blockstream are rational businessmen. They will move their development to the BU chain.

Back when the bitcoin foundation was falling apart they saw a good opportunity to co-op the very best developers to control the development and upon it build their commercial platform, and they very nearly succeeded. Why do you think the developers were so exasperated that they tried so hard to get Roger Ver to support Segwit, through a series of debates, after they saw the possibility of what they thought was a foregone conclusion (Segwit activation), was slipping away?

I am sure that the total bitcoin holdings of all the people in Blockstream added together is less than that of Roger Ver. I will even venture further to say that all the developers receive their remuneration in fiat and they themselves admitted that they do not use bitcoin regularly. So why are they so desperate to get Segwit activated?

The people funding Blockstream will be savy businessmen and as such they would have dangled a carrot in front of the developers in the form of a bonus when Segwit activates. Normally as developers they would earn their considerable salary. My guess is that, if Segwit activates, they would be even better rewarded with cash and stock options. I too would be totally annoyed, if I see my chance of being a millionaire, slip sliding away.

I think that the chain will not split, because the only important thing to the investors is that their development is on the main chain. It will not matter which chain. Sure they would have more say and control if it is Segwit but even if it is BU their 2.0 platform investment is not lost. Since they also control Bitfury and BTCC they will move that hashing across. There might be some holdout with some developers keeping the smaller chain going but the hash rate will be so minuscule that it would only be academic and can easily be rendered useless. Mining at $1500 beats mining at $20 or less.

Roger being asked if he will endorse Segwit.
https://youtu.be/ZlBKMDQ957Q?t=54m

Tone Vs Roger
https://www.youtube.com/watch?v=XdyIJ-BUPaU

Johnny Vs Roger
https://www.youtube.com/watch?v=JarEszFY1WY&t=18s

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