The recent Bitcoin Cash fork and the drama between the two competing chains has brought to light one aspect of mining that isn’t often highlighted in our crypto mainstreams media, that is hash wars and shadow mining.
This Bitcoin Cash hard fork which was staged by Craig Wright and his SV chain has inspired a hash war.
This increases the stakes for both the ABC chain and the new SV chain.
Reason being that instead of just having competing, coexisting chains like we’ve seen with Bitcoin and Bitcoin Cash after that hard fork last summer, this hash war is fueled by the SV chain’s motivations to kill the ABC chain.
This is also what Craig Wright was referring to when he tweeted that there would not be a split, he was implying that his SV chain would dominate.
There are a couple different ways that a hash war can materialize. I found a great medium article that actually is broken up into three parts that describes very well what is happening with the hash war we are seeing with Bitcoin ABC and SV. In it is described the different kinds of hash wars.
They can be like what we are currently seeing with ABC and SV where the miners associated with each chain are battling it out constantly to have the longest chain and ultimately prove to be the dominant and profitable chain. This is very costly, we’re talking millions of dollars a day. This cost would only increase as each chain would need to beef up their mining power to continue competing with the other chain.
Or you can have an attacking chain who’s aim and perhaps only capability money-wise, is to disrupt the dominant chain and wreak a whole lot of havoc in the form of disrupting transactions on the defending chain. This disruption would most likely necessitate many exchanges that list the defending chain to disable users ability to deposit or withdraw the coins of the defending chain from that exchange. This could also be what Craig Wright was referring to in his threat of 2 years of no trading of Bitcoin Cash.
There have also been claims that Bitcoin SV has been doing some shadow mining. Simply put, they’ve been mining blocks without broadcasting them publicly. This could be true, or it could be a way of bluffing as a tactic to intimidate the other chain.
If you’re wondering exactly how much each of these chains have spent in this war so far, Bitmex Research has developed a tool that monitors both chains.
As of today, only 4 days after the hard fork, the ABC chain has lost over $3.1 million and the SV chain has lost over $2.9 million.
It’s worth it to note that the chain which can hold out the longest will recoup a lot of these losses, while the losing chain will not.
Even though this hash war seems like a battle of the egos, it is as it always is, all about money.
Unfortunately just because this war is essentially between Bitcoin ABC and Bitcoin SV, it doesn’t mean that there won’t be or hasn’t already been collateral damage.
In this case, we might see Bitcoin suffer from each of these chains using their BTC investments to fund this war, ultimately creating a lot of selling pressure and prolonging this bear market.
Now I’m certainly not claiming that this is in fact what has been causing the most recent dramatic drop on prices but it’s something worth considering.
I want to end this video with this idea about competition which I learned from the book Zero to One by Peter Thiel.
In it he explains his viewpoint that although competition can certainly push you to achieve new goals and stay sharp, there is a very real chance that you can become consumed with the competition itself instead of achieving greater things for innovation sake.
I’m afraid that’s what we’re witnessing here and there will be a lot of money lost not only by these two blockchains, but also by many investors in this crypto space.
Additional Reading/Links:
Hash wars are expensive
51% attacks and hash wars (Medium article) Part 1
51% attacks and hash wars (Medium article) Part 2
51% attacks and hash wars (Medium article) Part 3
Bitmex Monitoring Tool
Shadow mining gossip
Shadow mining explained