Most people in the Bitcoin environment is probably aware that we will have a chain split probably at the 16th of November; the Bitcoin will split into a BT1 and a BT2 token, where the purpose of BT2 is to be a protocol upgrade. I wrote an article on this in August. Time for an update.
Revisiting the scenarios outlined in my previous post
In my previous article I outlined four scenarios:
- A quick and painless win for the BT2-chain; BT2 becoming universally recognized as Bitcoin (except by some few core-fanatics) and BT1 becoming irrelevant shortly after the fork.
- A clean split, where BT1 will take the role as an altcoin
- A messy split
- The New York Agreement being defected, with the 2X-branch dead-on-arrival or the fork being called off completely.
While a lot certainly can happen within the next ten days, it seems quite clear that we're heading for the messy split. I find the current optimism on the BTC-price, a messy split will most likely cause the BTC-price to fall.
It also seems quite clear that the chain split is an unstable situation. There is only room for one BTC - particularly due to the long intervals between the bitcoin difficulty recalculations. Within some weeks we probably have a winner and a loser. There is a certain imbalance there, the purpose of 2X is a bitcoin protocol upgrade, if 2X fails to become bitcoin, the 2X-supporters are likely to abandon ship. Not so with the 1X-branch, there are most likely a significant number of people fanatic enough to mine on that chain with all the old hardware they have, even if it should take half a year to reach the next difficulty recalculation. How those people are going to transact, I don't know ... slips of IoU-notes?
How BT2 may win
With more than 90% of the hashing power going to BT2 and no replay-barriers, it will almost not be possible to transact on the BT1-chain. Exchanges can't support a coin that cannot be deposited nor withdrawn, they will have to declare BT2 as the winner after a while.
How BT1 may win
I used to think that BT2 surely must win with so much miner support - but I'm not so sure anymore.
BTC has become more of a speculative asset class than anything else. Most transactions are going off-chain, on the exchanges. A speculative asset class doesn't really need a well-working blockchain, the tokens can still be traded on the exchanges.
Many exchanges have already told that they will support both BT1 and BT2, but BT1 will keep the BTC ticker after the fork. There is a lot of value in the trademark and the ticker. Probably clueless outsiders will be buying BTC after the fork without knowing anything of the "fork wars".
Price always depends on supply and demand. The demand may be there, but is there any supply? I believe, not so much - with most miners mining on the BT2-fork, the supply of freshly minted coins will become much less. With the blockchain working non-optimally (and probably quite some exchanges will close down the possibility for customers to deposit/withdraw around the fork date), it will be very difficult to get BT1 deposited into the exchanges - and people have been encouraged to keep their bitcoins in their wallets because that's "safest". We may see the BT1-token surging market price after the fork. While most miners are supporting the New York Agreement, we may probably see defections if the BT1-token stays much higher in value than the BT2-token.
How Bitcoin Cash may win
Bitcoin may be in a bubble now, the value may drop a lot due to the confusion and chaos of the fork. There is a chance that it will be most profitable to mine Bitcoin Cash after the fork - and that it will even remain most profitable to mine Bitcoin Cash as the mining difficulty increases. Ryan Charles thinks Bitcoin Cash winning is the most likely outcome of the fork.