{"id":340,"date":"2017-08-02T16:03:04","date_gmt":"2017-08-02T16:03:04","guid":{"rendered":"http:\/\/securitycurve.com\/?p=340"},"modified":"2017-08-02T16:03:04","modified_gmt":"2017-08-02T16:03:04","slug":"bitcoin-fork-does-it-matter","status":"publish","type":"post","link":"https:\/\/securitycurve.com\/?p=340","title":{"rendered":"Bitcoin fork: Does it matter?"},"content":{"rendered":"

So Bitcoin hard forked<\/a> the other day, resulting in there now being two flavors of Bitcoin:\u00a0regular and extra crispy<\/del>\u00a0leaded and unleaded<\/del>\u00a0vanilla and chocolate chip<\/del> Bitcoin and Bitcoin Cash. \u00a0The result? \u00a0Well, Bitcoin Cash is up 200% so that’s something.<\/p>\n

I have to confess that I was semi-interested in mining Bitcoin Cash for all of about five minutes. In the short term, there will be room for less efficient (i.e. non-Bitmain mining rigs) to operate less efficiently and still be profitable during the initial bootstrap. \u00a0In other words, it’s an opportunity to make some money before the mining population gets super competitive – probably for about 3-6 months depending on how much miners do or don’t embrace Bitcoin Cash. \u00a0Upon further reflection though, as the impact of mining significantly undermines the performance of Elder Scrolls Legends<\/a> on the computer I’d be using to do that, ergo I decided against it (gotta have one’s priorities straight after all).<\/p>\n

Anyway, hard fork complete. \u00a0The brouhaha is a result of philosophical disagreements about the underlying architecture. \u00a0It’s not exactly about the size of the block, though that’s how it seems like it’s being discussed in the press. \u00a0The block size is actually not the issue though. \u00a0I mean, it matters, but it’s not motivating either side of the debate. \u00a0In reality, It’s about two things: the security of the model vs. the economics of mining. \u00a0To set the stage, there’s a core problem: specifically, transactions weren’t getting processed in a timely fashion. \u00a0To fix that, you can do one of a few things: keep some transactions off the ledger, open the “throttle” on transaction processing, or let it be slow. \u00a0Miners don’t want to move stuff off the ledger (because, of course, that’s how they make money.) \u00a0Likewise, the other side doesn’t want to undermine the security of the model to preserve the business model for miners.<\/p>\n

What do I mean by “keep transactions of the ledger”? \u00a0Think about a stock trade. \u00a0Say I buy 100 shares of IBM from a broker dealer like the big dumb bull (i.e. Merrill). \u00a0For the record, I’m allowed to call it “big and dumb” because I worked there — so I say it with love. \u00a0Anyway, where do the actual securities come from to fill an order like that? \u00a0Some dude buying or selling them on a trading floor in lower Manhattan? \u00a0Not likely. In reality, 9 times out of 10 a transaction like this comes from inventory the broker dealer maintains in house. \u00a0They have a pool of inventory, and they buy and sell from that pool meaning that not every trade some yahoo like me might want to buy has to go to the floor and cost them money and resources every time I want to rebalance my portfolio or because I decide pork futures are the hot new thing.<\/p>\n

This is analogous to an off-ledger BTC transaction. \u00a0It’s efficient because coins can be exchanged without having to record each and every fractional coin transaction that somebody happens to want to make. \u00a0The downside? \u00a0It decreases the need for mining – and thereby reduces the amount of money miners can make from transaction fees and so on.<\/p>\n

I don’t think this debate is over. \u00a0Yes, the problem may be solved (sort of) for now, but what I really think is that cryptocurrencies need a market-maker. \u00a0I’ve said this before, but we need someone to add liquidity. \u00a0 How do you do that? \u00a0Have someone (ideally more than one someone) day-trade it on an institutional scale. Like a bajillion transactions a day. \u00a0To get there, we need a way for someone to actually make a bajillion trades and not crush the ledger in the process — and not spend an equivalent bijillion dollars on transaction fees to do so.<\/p>\n

If a market-making’s worth of transactions hit the ledger as a matter of course, transaction processing would be jacked on a scale we haven’t even imagined. \u00a0So clearly we need some method – honestly, I don’t really care what – to normatively allow market making… \u00a0allowing someone (coinbase, bitfinex, the ghost of Mt. Gox, whomever) to keep an inventory and escrow. \u00a0For example this<\/a>.<\/p>\n

Does this fork get us closer to that? \u00a0Maybe. \u00a0So I’m cautiously optimistic. \u00a0Time will tell which side wins… \u00a0or maybe both do. \u00a0Either way a money making opportunity in the short term and a potential path to marketing making in the future. \u00a0So yay… I guess.<\/p>\n","protected":false},"excerpt":{"rendered":"

So Bitcoin hard forked the other day, resulting in there now being two flavors of Bitcoin:\u00a0regular and extra crispy\u00a0leaded and unleaded\u00a0vanilla and chocolate chip Bitcoin and Bitcoin Cash. \u00a0The result? \u00a0Well, Bitcoin Cash is up 200% so that’s something. I have to confess that I was semi-interested in mining Bitcoin Cash for all of about […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[4],"tags":[16],"class_list":["post-340","post","type-post","status-publish","format-standard","hentry","category-security","tag-bitcoin"],"_links":{"self":[{"href":"https:\/\/securitycurve.com\/index.php?rest_route=\/wp\/v2\/posts\/340","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/securitycurve.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/securitycurve.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/securitycurve.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/securitycurve.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=340"}],"version-history":[{"count":0,"href":"https:\/\/securitycurve.com\/index.php?rest_route=\/wp\/v2\/posts\/340\/revisions"}],"wp:attachment":[{"href":"https:\/\/securitycurve.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=340"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/securitycurve.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=340"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/securitycurve.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=340"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}