Summary of events, Bitcoin vs. Bitcoin Cash:
- Summary of events, Bitcoin vs. Bitcoin Cash:
- --- The Set-up
- * It's easy to mine Bitcoin in China - from chip production to cheap electricity – creating a huge concentration of mining power in its territory.
- * This mining power slowly accumulated and concentrated into a few hands, partly due to government intervention. It's hard to make money in China without the authorities noticing.
- * These hands, we’ll call them "Jihan" as a code name also belonging to one of their leaders, decided that with so much mining power, there’s no reason why they shouldn’t have more significant control over the currency itself.
- * They created a new currency, Bitcoin Cash, which purportedly deals with one of Bitcoin’s classic pain points - its inability to scale up and support the increasing throughput on the net.
- * The way they tried to achieve this relies on a further concentration of mining power and network control - foregoing some of Bitcoin’s defining characteristics as a decentralized currency.
- If anyone has any doubt about this move not being cold and cynical, remember this: Bitcoin Cash is not going to be as decentralized as Bitcoin, and its creators know this full well.
- --- The Propaganda
- * After Cash was issued as a split from Bitcoin, Jihan and his friends waited until anyone who wanted to sell and get rid of the currency does so. The price collapsed, and most of the larger crypto community ignored the coin.
- * The Chinese miners were instructed to continue mining the coin, even at great financial loss, to support a pretension of value and use, minimally sustaining its life. When the price troughed, those who were in the know about the plan accumulated it in large quantities.
- * Our plotting friends waited for the Segwit X2 split. They knew there would be a lot of confusion, that Bitcoin's mining power would be split between the two networks, and that the scaling and fee debate would be at the front.
- * The split did not come, but the machine was already calibrated and ready. The scaling debate raged on, with those who do not understand the mechanisms enabling Bitcoin to work in a decentralized manner accepting Bitcoin Cash as a real alternative – all as part of the planned PR campaign. If “Bitcoincom says it’s true, it must be so!
- --- The Manipulation
- * In recent days, since the news of Segwit X2’s demise, the price of Bitcoin was expected to decline. With the value of the S2X coin, previously factored into Bitcoin, priced between $1000-2500 in future contracts, evaporating, it was only a matter of time. To push this along, a timed sale of Bitcoin, from the huge stock available to the conspirators, struck the market in force.
- * The people involved have tremendous financial power. Just as it was easy to push the price of Bitcoin down, such was it easy to pump the price of Cash up.
- * Concurrently, massive Chinese mining power has switched to work on Cash; at present, hashrate is almost equal between the two networks. Meanwhile, the missing mining power for the Bitcoin network has made it much slower.
- * The Bitcoin network is also undergoing a spam attack. Anyone trying to send Bitcoin is forced to wait long hours even using high fees; there’s now a queue of more than 100,000 transactions awaiting approval.
- * Many Chinese exchanges are listing BCH, Bitcoin Cash, for trading against Altcoins as the base currency in an attempt to make it the new standard, as BTC has been to date in all exchanges.
- * Anyone who sees and experiences the above, all the while seeing the enormous and rapid price change, gets struck with FOMO and hurries to buy Bitcoin Cash.
- * The price increases, Jihan and his group of friends cash out making ridiculous profits after having spent many resources on this plan for the better part of 2017, and laugh in everyone’s faces.
- In a few hours, Bitcoin Cash’s mining difficulty will increase fourfold; To still be profitable to mine, Cash will need to be priced at a minimum of 40% of Bitcoin. It will be interesting to see what the miners do at that point, when Bitcoin becomes more profitable to mine again. One po
- ssibility is that this will mark the end of the pump and everything returns to normal (although it is doubtful that Bitcoin price will continue increasing any time soon), but it is also possible that the strong reaction by the market and community may lead to a situation sustainable enough to lead the manipulators, who perhaps were initially only interested in a masterfully coordinated pump & dump, to try and take the reigns all the way and push their centralized Bitcoin onward. Someone did pay more than half a Bitcoin for a silly clone of it today, after all.
- Bitcoin does not have a mechanism for quick mining difficulty adjustments, common today in most of Alts (and soon in Cash). If miners continue abandoning it, the network will be sluggish, or even paralyzed completely, for months ahead and until the next automated difficulty update. This is the nightmare scenario of this attack – a slow death to Bitcoin while a currency that looks like it to most, but is actually controlled by a handful of conspirators (or the Chinese government?.. ) takes the lead.
- Our white-horse knights coming to the rescue may be Wallstreet traders, who've been looking for a way to enter Bitcoin and financially take control over the currency. They an infinite capacity to buy Bitcoin, and will be happy to take it from anyone lost to the propaganda. They’ll give a fight to the Chinese, and perhaps save the fate of the decentralized currency. And while it’s not clear which of these two forces is more of a bad-guy in our usual stories, at least the Americans will support the real coin.
- However, as befits a decentralized currency based on the good will of a community spread worldwide, the real way to prevent this catastrophe is to spread the above information. It is your duty to ensure that everyone understands that this is ugly manipulation, a hijacking of one of the most beautiful things happening in the world in recent times, and to explain in all directions why Bitcoin Cash, is not, and will never be, a real substitute for Bitcoin.
- By Dor Konforty, CEO and founder at Synereo