Nobody will "win" the SV and ABC fork war

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Steve Sokolowski
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Nobody will "win" the SV and ABC fork war

Postby Steve Sokolowski » Mon Nov 12, 2018 2:33 pm

It's always amazing to me to see how much conversation, online and offline, is dominated by people who lack historical knowledge about the topics they are discussing. People talk about the latest Spider-Man movie as if the story is something new, forgetting that the last reboot of the series occurred just 15 years ago. Discussions about science fiction are dominated by people who think "Game of Thrones" has the most mysteries ever, while forgetting it was just 8 years ago that "Lost" was stupifying viewers with an even greater number of secrets. Those who think that the Kavanaugh hearings represent a new low for women in politics fail to recognize how the vote count actually represents progress from the Clarence Thomas confirmation battle.

In cryptocurrency, people seem to have even shorter memories. Rather than forgetting things that happened years ago, they fail to remember events that take place in the preceding months. Thus, it's not surprising that we now see discussion dominated by the idea that the upcoming Bitcoin Cash split is going to be "won" by the group with more hashrate, or even won by anyone at all. At least half of the posts on uncensored forums seem to be engaged in a battle about which chain is going to survive, as if the other is going to disappear somehow.

Therefore, let's get back to the basics. Something has value if someone is willing to offer another thing in return for it. In the case of coins, that almost always means that a coin has value if it is listed on an exchange, the exchange does not have a "locked wallet" that prevents withdrawals, and the exchange has at least one buy order. Coins that are not listed, or coins that only have sell orders, have zero value. Coins with "locked wallets" also have zero value because the exchange is not trading actual coins, but instead is engaging in (usually illegal) paper trading.

Hundreds of coins have forked in the past few years. One type is the uncontested fork, like when ZCash updates its transaction format every few months to add new features. All of the exchanges are notified by the developers, they upgrade their wallets, and they don't list the other chain. Those who aren't aware of the fork, like we often aren't, end up on a worthless chain and need to resend payouts on the other side. The old fork is worthless because it is not listed on any exchanges, and that is why people do not continue to use it.

Contested forks, the othe rtype, end up with a different outcome. When there are enough people supporting both sides of the fork, exchanges list the coin to make money. Ethereum Classic is a dramatic example of a coin that switched status instantly after Poloniex decided to list it in June 2016. Prior to Poloniex's listing, it was accepted that the fork called Ethereum would be the only survivor of the split. After Poloniex listed Ethereum Classic, it suddenly had value, and today serves as a useful chain on which to host apps that have been forced off Ethereum due to high gas prices and network overload. It should be noted that loud complaints from people who supported blockchain immutability did not give ETC any value. Poloniex's decision to list the coin was the initial act that gave the coin value, which is why it is argued by some that then-owner Tristan D'Augusto acted immorally in rewarding the thief who stole the DAO's funds.

The Bitcoin Cash fork will end up almost exactly like the Ethereum fork. There are enough supporters on both sides that they will provide value to both chains initially. Indeed, the two BCH futures markets at Poloniex have more volume than any other coin except current BCH itself. After the split, it is likely that BCHSV, the less valuable fork, will see a dramatic rise in price up to about 0.6 of the other coin's price, which is what happened after the launch of ETC and BCH. Then, all of those gains will be erased, and both forks will remain at around the same ratio for a long time after that.

None of the discussion in this post has involved miners, because miners do not have any influence at all in which chain becomes successful. The only way that they can try to have any say at all, which isn't much, is to make public statements that they support one of the forks, or to try to convince exchanges to not trade in the other fork. The irrelevance of miners in the eventual value of the forks is shown by how mining pools with 67% of current BCH hashrate will be mining the SV fork, but SV is worth just 15% of the total value of the two coins. Its value has not changed much since it began trading, despite an increasing number of pool operators stating their pools will only mine the SV fork.

One widely ignored secret is that most miners don't usually pay attention to these disagreements between development groups, since there is so little manpower and such small margins as it is to maintain mining rigs and mining pools. In this particular case, I wager that it has been especially difficult for people to even understand what the reasons for the fork are. To me, it seems as if the differences in the implementations are almost trivial - or at least certainly not rising to the importance of whether to deal with 15% of the coins being stolen, as happened with ETH. I'm not aware of any actual truthful and unbiased news sites that cover cryptocurrency, while articles in mainstream media publications usually focus on "expert opinions" instead of actually explaining the technical differences.

Therefore, once the fork actually occurs, people will finally notice they have less money and most of the hashrate will quickly shift to the ABC chain, if prices remain stable as they are now. We recently polled customers on which attributes of a mining pool were most important, and you can see the results here: viewtopic.php?f=4&t=5905. As you can see, profitability, a lack of bugs, and transparency in how the pool operates are the three most important reasons people choose pools. I concluded from other polls that people are willing to give up quite a bit of money for good customer service and trustworthy owners, but there is a limit. That limit is not 93% of their profits, which is what the profit ratio is going to initially start out as if the fork had occurred on November 12 at 2:00pm EST.

Since these are pool owners, not individual miners, who are making these declarations, it currently looks like these pools are going to go out of business fast on the day of the fork. Don't be surprised to see their hashrate fall to 25% of what they currently are by the end of the first day if prices hold. Miners who switch first stand to earn a huge amount of money, so hashrate on these pools is going to start to fall off as soon as tomorrow. Miners will go to pools that support the ABC chain to be read before the fork.

Some might believe that miners will continue to mine the less valuable fork for political reasons, but it's not clear what the purpose of doing that would be. 51% attacks aren't accomplished by mining the fork you support. Those who think they can crash the market capitalization of one of the forks by selling coins, like this rumored Sharkpool will, aren't going to do so by selling coins of the fork they support. And even if by some miracle there remained a profitability imbalance between the forks, people mining Digibyte, which is currently the most profitable SHA-256 coin about 20% of the time, would quickly pick up the slack.

In conclusion, it's important to remember historical precedent when making projections. It's also important to note that (at least outside of quantum mechanics) things don't change for no reason at all. There has to be a specific reason for there to be a different outcome if the historical precedent is violated. In the case of coin forks, the precedent is that there will always be two forks, that exchanges will continue to trade both, that there will be a price spike in the less valuable fork to a ratio of about 0.6 (and there will probably be panic and fortunes lost at that point), that miners will not violate economics and run at a huge loss to mine one fork, and that if they do, it will not affect the outcome because exchanges and merchants determine the value of a coin.

The Bitcoin ABC fork has the support of many exchanges and big players like Purse.io and Coinbase, and this is being reflected in its significantly higher price. Those who mistakenly believe that Bitcoin SV is going to become the majority chain solely because of its higher hashrate will be surprised, and those who claim that there will be just one coin surviving from this fork will also find themselves bewildered next week. If Bitcoin SV becomes more widely used, there will have to be a change in the fundamentals, like the major payment processors reversing course.

Finally, this is finally a post where I can say that if you are a SHA-256 miner, consider joining us and earning dollars while all these other people posture and argue. Chris will be awake at the moment of the fork block and the pool will start to automatically switch between BCHABC, BCHSV, BTC, and DGB regardless of what everyone else is doing, as this is the time when the most money will be able to be made. You can completely ignore all the volatility and drama and laugh all the way to the (old school) bank, and also protect yourself against replay attacks (viewtopic.php?f=4&t=6022).
Last edited by Steve Sokolowski on Mon Nov 12, 2018 3:07 pm, edited 1 time in total.
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GregoryGHarding
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Re: Nobody will "win" the SV and ABC fork war

Postby GregoryGHarding » Mon Nov 12, 2018 2:47 pm

No offense , but for people on the go like me, I don't have the time to read the entire article, can I have a tl;dr version please
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CSZiggy
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Re: Nobody will "win" the SV and ABC fork war

Postby CSZiggy » Mon Nov 12, 2018 3:18 pm

---SUMMARY--
Miner's have no say....exchanges that sell or support a coin are the value setters.

Fork...smork. It's happened before, it will happen again, nothing has changed, people who think it will are delusional. Those who think THIS is the one to break it all...will be shocked come next week when things are still running as always.

Mine on Prohashing, we take care of the coin swapping for you, no matter what the prices are, mining here will always be the win!
dra2120
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Re: Nobody will "win" the SV and ABC fork war

Postby dra2120 » Mon Nov 12, 2018 3:22 pm

thanks for once again, giving insight into the "inner workings" of the crypto world. I always look forward to these posts, as you explain exactly what is/will happen, in-depth enough to really know what's going on, without it being so technical I have no idea what you're talking about.
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dragonbyte_llc
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Re: Nobody will "win" the SV and ABC fork war

Postby dragonbyte_llc » Mon Nov 12, 2018 4:14 pm

Great post and great summary (Ziggy)!

Cheers!

DB
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GregoryGHarding
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Re: Nobody will "win" the SV and ABC fork war

Postby GregoryGHarding » Mon Nov 12, 2018 7:08 pm

CSZiggy wrote:---SUMMARY--
Miner's have no say....exchanges that sell or support a coin are the value setters.

Fork...smork. It's happened before, it will happen again, nothing has changed, people who think it will are delusional. Those who think THIS is the one to break it all...will be shocked come next week when things are still running as always.

Mine on Prohashing, we take care of the coin swapping for you, no matter what the prices are, mining here will always be the win!

thanks man
Foxx
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Re: Nobody will "win" the SV and ABC fork war

Postby Foxx » Fri Nov 16, 2018 8:20 am

GregoryGHarding wrote:https://www.reddit.com/r/btc/comments/9xhbl0/bitmains_plan_for_the_attack_entails_winning_the/
thoughts?

reads like BCHSV wrote it.

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