The prediction of 50 Bitcoin splits this year sounds crazy. But it may actually be right.
In a report by Bloomberg, Autonomous Research global director of fintech strategy Lex Sokolin says there could be as many as 50 splits from Bitcoin this year. This sounds like a crazy assumption. But what’s even crazier is that it may actually be right.
A hard fork is a change in a blockchain’s protocol that is not backwards compatible. It requires consensus or at least an agreed minimum percentage of the network’s miners to proceed smoothly. If this percentage is not met by the arranged fork date (set on a certain block number), the blockchain splits and a new coin is born.
While it sounds frightening, a blockchain split is actually a valid method of exploring different proposals to issues such as scaling. It allows users to sort of live out “alternate universes” in cases where there is a disagreement on which direction a blockchain like Bitcoin should take.
While there are other coins born out of hard forks of the legacy chain, the most successful so far is Bitcoin Cash, which forked away from the legacy chain in August last year to escape what users saw as a hijacking of Bitcoin by central bankers. Bitcoin Cash proceeded to scale by increasing the block size and pledged to continue the roadmap based on the vision behind the Satoshi Nakamoto white paper, effectively keeping fees low and transaction times stable. This makes it perfect for mass adoption of the cryptocurrency, particularly for commerce and micropayments.
However, the success of Bitcoin Cash has attracted a swarm of opportunists hoping to cash in on the action. And it can quickly go out of control.
As if creating your own token simply for a quick pump and dump ICO wasn’t easy enough: a trend of fork generators that would enable anyone to instantly fork a blockchain could be flying all over the web soon, much like a project called Forkgen. This is a goldmine for scammers—they will be taking full advantage of this before the cryptocurrency hype dies down.
After all, it’s far easier to clone the original chain—there’s no need to build things from the ground up, and it’s substantially more profitable to exploit the familiarity attached to the Bitcoin name. Forkgen aims to ride on this, and they say so unapologetically.
“It gives you the entire Bitcoin user base instantly on inception. If your coin is worth a single cent, it means it is of interest to a large number of people in the world. You can ride on the coattails of others without the hardship of talent acquisition. Use this to your advantage to build a new, better coin fitted to the religious dictates of your user base,” it blatantly says.
Admittedly, there are several problems with the legacy chain. But here’s why people should be wary of any additional forks down the road:
Anyone can fork any open blockchains, but most will not have good intentions.
With over $500 billion currently invested in cryptocurrencies, the industry is attracting lots of opportunistic actors. The main incentive is to make quick bucks by riding on the hype, luring investors in to blow up the coin’s value, and then selling off before others do.
This is why the word “pre-mine” rings alarm bells for the more experienced crypto enthusiast, particularly if the developers pre-mine a huge amount of coins before releasing their source code. Although this is a reasonable way to award developers for their hard work, a heavily pre-mined coin suggests that the developers can easily dump their pre-mined coins and abandon the project, leaving investors holding the bag as the coins drop in value.
Hard fork coins can die out as soon as they launch. And this is where it could get ugly for hype buyers.
As usual, this mainly benefits its instigators, who often run off with the profits while investors suffer the losses. As a result of the pump and dump scheme mentioned above, coins can rise exponentially shortly before the hard fork kicks in—and drop very soon after. Malicious devs are not the only ones watching for the perfect time to dump, you are also racing against people like yourself who do not want to be left holding the coins once the dump begins.
If you want to take part in a pump and dump, by all means, no one is stopping you. But be reminded that there are only two types of people at the end of this risky, unethical, and illegal manipulative scheme: those who were in on the dump, and those who are left in the dump (pun intended).
There’s no guarantee that even those with good intentions and ambitious roadmaps will actually pull it off.
Very few will succeed and there are several factors at play that would determine whether a coin will thrive in the long term. For coins resulting from a split of the Bitcoin blockchain, the only thing the Bitcoin name guarantees is just that—the Bitcoin name. This means there is a higher chance that more people will look twice at this coin, but it does not guarantee that the devs behind it are competent enough—even if their intentions are serious enough.
Blockchain technology is still in its infancy stage and even the most experienced developers are groping through it carefully. And so should you.
The Genesis protocol upgrade on February 4, 2020 is a monumental step in the history of Bitcoin, and will see BSV returned as close as possible to the original protocol as envisioned by Satoshi Nakamoto. Visit the Genesis Hard Fork page to learn more.
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