Any new fork could potentially be a diamond in the rough – a shiny new software code that polishes up to be a better Bitcoin. However, with so many forks on the horizon for 2018, it’s becoming harder and harder to figure out which ones are actually valuable. Bitcoin Cash, the first hard fork on the Bitcoin blockchain, blew everyone away. But have any of the subsequent forks created new value for the market?
Buyer Beware – Bitcoin Diamond Raises Serious Concerns
Bitcoin Diamond (“BCD”) was a hard fork on the Bitcoin blockchain that occurred at block 495866. Starting around late November of last year, anyone holding Bitcoin on a compatible exchange or wallet could claim BCD coins at a generous ten-to-one payout.
Bitcoin Diamond launched early in the fork game. It was the third hard fork on the Bitcoin blockchain, and many investors hoped it would follow the early success of Bitcoin Cash (“BCH”) and Bitcoin Gold (“BTG”). Bitcoin Cash increased blocksize to accommodate faster transactions, and Bitcoin Gold updated the Bitcoin protocol to curb the consolidation of power in the mining community. But what did Bitcoin Diamond do?
According to its top executives, BCD was designed to fees and costs associated with Bitcoin transactions. However, it appears the only strategy they have for lowering the cost is by increasing supply – hence the generous airdrop. The supply of Bitcoin Diamond is 210 million, not including the hefty 40 million premined BCD. Bitcoin only has a circulating supply of around 17 million coins, and the BCD team argues that the high cost of these limited coins keep people out of the market. Of course, since crypto coins are divisible to the eighth decimal, this claim just doesn’t hold water.
Bitcoin is divisible to the hundred-millionth unit. So, in order to achieve parity with the U.S. dollar, a Bitcoin would need to cost at least $1 million. At that price, a single Satoshi (the lowest divisible unit of Bitcoin) will actually cost you a whole penny. Bitcoin is currently trading at a respectable $11,500, but nobody is excluded from the market by this high price because it is divisible into such tiny fractions.
There have been some notable hacks – including forged wallets and fake exchanges – associated with the BCD fork. However, security issues are not the only concern investors have with the new coin. Some top members of the BCD team also have close ties to some crypto exchanges, which has led many experts to believe it’s a money-making scheme based on industry collusion. Conspiracy theory? Perhaps. But, at press time, BCD was worth less than one-third of its initial price. BCD dropped from around $61 to under $14 in just a couple months. So, regardless of whether it’s a scam, a conspiracy, neither, or both, BCD is not a very good investment.
Garbage In, Garbage Out
Bitcoin is the world’s first virtual currency, and it has carved out an unshakeable position in the global economy. However, it’s no secret that Bitcoin does not function as well as originally intended. Relative to current technological capabilities, the Bitcoin blockchain is slow and cumbersome. There’s lots of room for improvement, which is exactly what a hard fork is meant to be.
Unfortunately, many of the hard forks planned for the Bitcoin blockchain create no new value for the market. Like many of the ICOs we saw in 2017, most of the hard forks on the horizon look like just another way to separate naïve investors from their hard-earned Bitcoin. This has already cost investors millions of dollars, and – if there is ever going to be a stable, value-based crypto market – it needs to stop.
Many members of the crypto community tend to blame the victims of these garbage ICOs and hard forks. It’s easy to point and laugh at folks who buy snake oil from convincing salesmen. But when it comes to the overall market, we are all victims of these junk assets.
Valueless forks don’t just impact the people who buy them. They dilute the market and take away resources from the talented tech entrepreneurs who are actually doing the challenging and innovative work necessary to launch cryptocurrencies into the mainstream. They also undermine investor confidence and overall trust, which are critical to building legitimacy. The technology underlying blockchain currencies will change the world, but not until it’s taken seriously. So, seriously guys – stop with all the garbage.