With Bitcoin (Core) setting a new record-high market price almost daily – for several days in a row now – it’s easy to overlook the fact that BTC hasn’t been doing much innovating. Its newest “feature” is Rootstock – and that’s simply Ethereum’s Virtual Machine imported in such a way that Bitcoin’s blocktimes are bottlenecks and centralization becomes an issue. [More about Rootstock]
What Bitcoin has generally had this year, rather than innovation, is scarcity and brand recognition. These are, apparently – almost self-evidently – extremely valuable in the cryptocurrency space at the moment. That’s worse news for Bitcoin than one might be inclined to imagine – because both attributes are threatened by forks.
Not everyone in the Bitcoin community is partying – many are looking toward the future and are increasingly concerned about Bitcoin’s present lack of innovation. This seems justified – after all, the rest of the crypto space isn’t exactly standing still. The concerned Bitcoin community members are taking initiative and innovating the Bitcoin protocol themselves. Of course, doing so requires a hard fork… because the developers behind Bitcoin Core can’t be convinced to mess with their market success.
As of publication, Bitcoin Cash, Bitcoin Gold, and Bitcoin Diamond have already forked. Before year-end at least six more Bitcoin forks are planned:
- Super Bitcoin (block 498888)
- Bitcoin Platinum (block 500000)
- Bitcoin Uranium (block ?)
- Bitcoin God (block 501225)
- Bitcoin Cash Plus (block 501407)
- Bitcoin Silver (block ?)
There were only ever supposed to be 21 million Bitcoins in circulation, remember? Even if a few of these forks are unsuccessful (like Bitcoin XT has been) – there may easily be well over 100 million “Bitcoins” in the crypto market. While the effect on scarcity can be argued in detail, the fact that the brand will become more diluted seems irrefutable.
Assuming that these new Bitcoin forks can get themselves onto exchanges and into the Bitcoin ecosystems – as Bitcoin Cash is successfully doing – investor confusion seems guaranteed. What’s more… is that all of these Bitcoin forks hijack the network effects of Bitcoin. For anywhere that there was a Bitcoin and for any investor that held a Bitcoin, now there is a Bitcoin fork coin… or nine. If 100 million (or more) Bitcoin’s can exist, even on different chains – and they can provide at least the functionality of the original Bitcoin, then what valuable advantage will the original Bitcoin still possess?
The knee-jerk response is that “Bitcoin” will always be “Bitcoin” – ie, “the expensive one”. What happens if a fork eventually becomes more valuable, though? (And why couldn’t that happen – why couldn’t innovation ever lead to higher valuation?)
Even now, some forks insist on being called Bitcoin – full stop – regardless of market value. The Bitcoin Cash community insist their Bitcoin is actually the “real Bitcoin“. They even make convincing ideological arguments as to why. Who should get to decide which Bitcoin is really Bitcoin in this decentralized space? Worse still, what happens if the naming conventions fall out of sync?
Will investors have to start making investment decisions based on chronological references (Bitcoin v2017.08.1 or Bitcoin v2017.12.25)… or, will all of this push investors to start examining features and tech more closely? Either way, the Bitcoin party is clearly about to get ever-more crowded. #WhichBitcoin is going to get ever-more relevant.
Innovation is inevitably going to happen…
…and some coins are going to be seriously forked.