--There’s a saying that goes something like “if you put together a monkey, Johnny and a fishbowl and then you decide to judge them on their ability to climb a tree, the fishbowl won’t most likely do very well”; on the account of being a fishbowl, incapable of climbing trees--
Bitcoin price has skyrocketed and everyone went bananas again. There’s also a way more interesting topic: the next bitcoin “hard-fork” (don't worry, it's just a fancy way of saying an update of the protocol).
Before I start babbling about blockchain upgrades, a quick note on why the protocol matters. Bitcoin is simply a message between two parties which follows a set of rules, that states how much A is sending to B. Following this logic, you know how much A and B have. These transactions are encrypted so you do not know who A and B are. They’re a bunch of bytes represented in an address, most commonly known as wallet, which is a code randomly generated that differs in size. Some wallets are literally bigger than others (due the randomness on the cryptographic code generating the address). The wallet represents “yourself” on the blockchain. Can you have a bunch of wallets? Sure, just don’t lose the private key, please. You always get a private key associated to each wallet, by the way, so you’re the only being capable of accessing your wallets. Even if the main blockchain “websites” go down, you can always download the blockchain. And keep track of your wallet and transactions (with a bit of code, sure. But still).
This is a very basic-and-missed-a-lot-of-details-idea of how the blockchain works. At the end of the day, bitcoins are simply messages between parties which follow a set of rules; and the blockchain's the ledger where those transactions are stored.
What happens then, when there is an upgrade?
Surprise, surprise: the rules change.
Let’s fast forward a bit. Today, everyone is betting on free money. But as I said, the future is bright. When there’s an upgrade of these sorts, the coin separates into two different coins, as the blockchain “forks”; a new chain is created on block XXX, and two chains remain active. It happened with bitcoin cash, it happened with ethereum classic, and it will happen now with bitcoin gold.
Right, now you’re most likely thinking I’m going to blast some theory like “What’s Gonna Happen To Bitcoin? Are We In A Bubble? Is Bitcoin An Elaborate Evil Scheme By Some Guy?”
Not today, nope.
But when something like an upgrade happens, and the coins split, how do the new coins get created? Who maintains the new chain? Can 2 chains exist at the same time? More importantly of course:
Do you actually get free money?
Yes.
Bitcoin gold for example; if you have your bitcoins stored in a wallet, like the blockchain wallet, that you own (a wallet address for which you have the private key), then you get some free bitcoin gold on the new bitcoin gold blockchain. By a 1:1 ratio, actually. Same happened with bitcoin cash after the segwit2x update on the blockchain. The ethereum protocol suffered a split too, that created ethereum classic. Another upgrade is coming up, that makes interesting changes towards proof of stake (in the ethereum protocol). The byzantium upgrade. It seems it will be making it hard for miners to stay on the old ethereum chain. The “difficulty adjustment algorithm” has a time bomb that will make blocks impossible to be mined, in about 1.4 years I think. Remember last time, I wrote about how the miners solve these mathematical problems, in order to mine blocks and receive some sort of e-currency, as a reward?
(On this case, as it’s regarding the ethereum network, miners receive ether)
Well, this is the thing. The "difficulty algorithm adjustment", which dictates how long it takes for a new block, on average, to be mined (12.5 sec in eth, for example) is set to increase exponentially. It works as an incentive for miners to go to the new chain. So this could already establish that, whoever stays in the old chain will be supporting a dead coin?
(Ethereum had a previous hardfork, where some miners decided to continue mining on the old chain, hence creating a new ehtereum chain and coin: the ethereum classic)
This time, there won’t likely be a new coin. That is because 99% of miners will go to the new chain. What does this have anything to do with proof of stake? Well, Byzantium lowers the block reward from 5 eth to 3 eth. This clearly seems a safeguard against a group of miners forming a new chain when they go from a profitable business to a 0 value business. And that is coming in more or less 2 years.
--Note: proof of stake is a couple of years away, according to eth developers and other blockchain experts of sorts. I have no idea. I only hope so. Check sources below--
Proof of stake will become an enforced reality. Quicker on ethereum than on the blockchain. It’s interesting that, although that has always been the goal, it will be very hard for people who started this new economy, to simply abandon businesses and profit, and live happily forever. These upgrades make important changes, not only in terms of improved security or transaction speed, but also on the enforcement of rules, to make sure the network moves on the right path, towards a greater good.
(I agree. This sounds super shady and evil. But it really is not)
I wouldn’t speculate on the price of something I cannot predict. But still, and even not being a developer, i understand that what these people are doing has to change the world at some point.
basic ref:
@youtube.com/watch?v=BSkUGfilJ
@reddit.com/r/Bitcoincash/comments/721r5m/bitcoin_cash_whitepaper_released/
@ethereumclassic.github.io/
