I haven't posted in a few weeks because of a last minute trip I took abroad to China. I'm back now, and it's amazing how much has changed in such a short period of time. Our crazy crashing crypto market is booming again, and the overall market cap has already moved beyond our previous All Time High of $116B to $123B (currently)!
As you likely know, Bitcoin did a Hard Fork on August 1st. There are now Two different Bitcoins: (1) the original Bitcoin (BTC) and (2) Bitcoin Cash (BCC).
I've spent weeks researching Bitcoin Cash to understand whether I should keep the coins I have, sell them, or buy more. Below are some of the findings that have helped me with my decision. With that said, this is not investment advice. I am simply sharing with you my own findings for my own purposes. If you find the analysis useful too, that's just awesome.
What is Bitcoin Cash? Why does it Exist?
Bitcoin Cash was announced and suggested as a backup plan by Bitmain, a major China-based Bitcoin mining group who have been unhappy with how the Bitcoin Core team has been handling the issue around scaling.
Scaling of Bitcoin has been a contentious topic since 2015, and was left unresolved until the network began to experience the ramifications of indecision through a severely backlogged system during the early half of this year. It forced the Bitcoin teams to drive for a solution.
Segregated Witness Solution to Scaling
That solution was Segregated Witness, which would allow for Bitcoin transactions to be processed at a faster clip. However, many miners, including Bitmain, were unhappy with this solution because they believed it was not a long term solution and because Segregated Witness could actually reduce the reliance on miners.
So Bitcoin Cash was created. It eschewed the Segregated Witness upgrade and instead increased the Block Size from 1MB to 8MB. This theoretically means that there will be less wait time per transaction since each Block can hold more transactions at a time.
Bitcoin Cash Concerns
Bitcoin Cash is exciting to those who woke up on August 2nd to find a newly minted coin in their wallets. However, the reality of what Bitcoin Cash means to the ecosystem and to itself is not all rosy.
1 - Bitcoin Cash isn't Quite Decentralization
The biggest issue with Bitcoin Cash is that it's being developed and maintained by one developer. And, since there is less support for it, the coin can actually become highly centralized by the mining community that supports it. The purpose of Bitcoin was to never have a single group (or groups) in control of it. That's the nature of being decentralized... it cannot be corrupted. However, Bitcoin Cash, instead was created with its own motivation in mind and is one major reason to think twice about investing in it until there is proof of its uptake by a larger community of miners
2 - Trouble with Adoption
The value of a currency is in its adoption and use within the market. Though Bitcoin Cash is brand new, the question remains if vendors will accept it as an alternative. The "Branding" of it being "Bitcoin" is what keeps it relevant in the eyes of the community, but beyond that is it really needed? Will vendors want to put up signs that read "Bitcoin & Bitcoin Cash Accepted Here" and potentially confuse their customers?
3 - Slower Transaction Speed than Bitcoin???!
Bitcoin Cash was intended to be multiple times faster than Bitcoin. However, as of recently the time it actually takes to complete a transaction is averaging an hour or longer! One clue is that there is a real lack of miner support.
Why? Because, the processing effort to mine BCC is lower than BTC, BUT it is proportionately higher than mining BTC when we look at the returns a miner will receive. That means mining BTC is still more profitable than mining BCC. It is stated that the development team is looking to continue lowering the difficulty rate which would put it more in line with BTC. Otherwise BCC will need to appreciate in value to well over $500 before it's on par with mining BTC.
And, ironically, Bitmain has not mined a single Bitcoin Cash coin since its launch.
Bitcoin Cash doesn't have the healthiest of starts in doing what it's reason for being is -- Faster Transaction Speeds!
4 - Price Volatility and Valuation Issues
Bitcoin Cash has had a crazy ride thus far. It started trading before the fork at around $400. Afterwards it dropped to the $200's and then spiked way up to near $700 before dropping back to $200 and then again spiking up to the $300's. If volatility is your game, then as a trader you'll love it. For the rest, there are some question marks.
Bitcoin, after the August 1st soft fork with the addition of Segregated Witness, has soared beyond its earlier All-Time-High. Bitcoin Cash has not put a dent in the confidence behind the original Bitcoin. If it is unable to take market share away from Bitcoin and cannot maintain a high enough valuation then the future doesn't look so bright.
Long Term Investment in Bitcoin Cash?
As a long term investment I'm avoiding it. I feel "safer" elsewhere, as ironic as that sounds in our space.
If you've followed my articles you know I'm not a fan of the "me-toos". And Bitcoin Cash just doesn't differentiate itself enough to jump into it. Maybe Bitcoin Cash will make sense to reconsider investing in it down the road, but with so many other amazing Altcoins which are real innovators I think there are better places to put my money.
My next article will cover a THIRD Bitcoin that may likely appear by year's end to compete against BTC and BCC. Yes, another Bitcoin shaking head
So what do you think? Are you an investor in BCC? Do you see a long term future return on Bitcoin Cash?
Sources:
http://fortune.com/2017/08/07/bitcoin-cash-bch-hard-fork-blockchain-usd-coinbase/
https://www.cryptocoinsnews.com/bitmain-clarifies-bitcoin-cash-fork-position/
http://www.newsbtc.com/2017/08/02/bitmain-not-mining-bitcoin-cash-hints-continued-support-segwit2x/
https://squawker.org/analysis/bitcoin-cash-a-centralized-currency-weakly-disguised/
https://99bitcoins.com/who-support-bitcoin-cash-the-complete-list/
https://www.coindesk.com/bitcoin-cash-eases-mining-difficulty-blockchain-adjusts/
Images:
https://news.bitcoin.com/mining-pool-bitclub-network-mines-first-bitcoin-unlimited-block/