Bitcoin May Split Many Times in 2018

https://www.bloomberg.com/news/articles/2018-01-23/bitcoin-may-split-50-times-in-2018-as-forking-craze-accelerates

by SirLJ • 9 years ago

82 77 9 years ago

bsbechtel• 9 years ago

Stocks do the same thing, and after the split, the stock's price is determined by the market based on how much the new shares diluted the market. Seems like something very similar will happen here, with the difference being each fork will have a differing value determined by the market's exchange rate between forks?

Edit: I think many are missing the point that a fork and the original BTC blockchain are not of equal value. Maybe a more apt analogy would have been countries in the EU leaving and issuing their own currency.

sct202• 9 years ago

I think the big difference is that companies can choose to split their stock or spin out new companies, but bitcoin forks can be done by basically anyone.

dmm4• 9 years ago

Some argue thinking of forks as a stock split is incorrect.

""" Should it be treated as a split of BTC?

That seems incorrect and complicated. If you half the value of your BTC holdings and sell them, you will incur more gains. However, could you determine how much were short-term and long-term? The BCH would also be classed as income at this point, since it now has a value, and so will incur income taxes. Unlike stocks that split, BCH and BTC are separate digital assets that have no common markets, and will have different values going forward. """

https://bitcoin.tax/blog/how-to-tax-bitcoin-cash-bch/

ThirdFoundation• 9 years ago

It's funny, that's how things should work, but the crypto space has been so irrational it is not how things have effectively been priced in other splits. For example, Bitcoin Cash's split ended up being free money for consumers, which doesn't make sense in a rational market. Bitcoin Cash split from Bitcoin, but Bitcoin actually maintained value (and went up soon after). I'll wager most of these will have little affect on the price of Bitcoin. Often, the bigger issue is that no exchanges offer pairs for the new Bitcoin forks, so they're basically useless.

qsucvatz• 9 years ago

Bitcoin Cash added new utility that SegWit lacked: 8 MB blocks, higher capacity, lower on-chain fees. That new utility is new value for Bitcoin holders.

Another fork will add ZKP privacy, new utility and new value.

smaili• 9 years ago

To be fair, stock splitting does not result in another entity being spawned (e.g., Apple didn't split into say, Apple and Apple "Cash" like Bitcoin and Bitcoin Cash). So in that sense, it is a bit different.

planteen• 9 years ago

Companies spin-off like you are describing too. Except the market there is rational, as in, the market cap of the two split companies is equal to the previous market cap of the unsplit company. Look, for example, at Hewlett-Packard over the last 20 years: they spun off Agilent, which itself later spun off Verigy and Keysight, and the HP computer business is split into many parts now: HP, HPE, and DXC.

https://en.wikipedia.org/wiki/Corporate_spin-off

wz1000• 9 years ago

Bitcoins are not stocks. Stocks represent claims on actual stuff. Bitcoins represent... nothing.

45h34jh53k4j2• 9 years ago

Except the energy that has been burned in the last 9 years used to create them. The security comes from the need to spend as much energy to 'undo' them.

Where do alts (esp non POW alts) get their value? Because people want to trade them to get more bitcoin, which has value as per above.

You can keep repeating this circa 2014 argument 'not backed blah blah', but as yet it has not gone to 0, and likely never will.

aussie1233• 9 years ago

Minimum value would be the work/energy needwd to create blocks that enable safe storage and avoid double spending. So there is that.

chaseha• 9 years ago

Most of these forks add nothing of value. I don't see forks replacing ICOs at all, as the article suggests - they serve different purposes (besides the fact that both may serve as a pure money grab by unscrupulous parties)

ojr2• 9 years ago

I saw one exchange charge 0.5 btc to list and support new forks but charge 0.1 btc, if it was an ERC-20 Ethereum token

tlrobinson2• 9 years ago

Presumably because it’s less work to support ERC-20 tokens. I don’t think you’d need to run a separate full node for each token.

alex_duf• 9 years ago

Is there a list somewhere of all the bitcoin forks? The wikipedia one doesn't seem to be up to date...

akerro• 9 years ago

I use this list https://btcdiv.com/

dmm4• 9 years ago

The tax situation is interesting. Many believe that you owe taxes as soon as the funds for a bitcon fork are available to you. For someone with bitcoin in a private wallet that's instantly. For someone with bitcoin in an exchange that's whenever the exchange implements the coin or you withdraw to a private wallet.

For example bitcoin cash was forked August 1, 2017 but coinbase didn't implement it until December 19, 2017.

https://bitcoin.tax/blog/how-to-tax-bitcoin-cash-bch/

pjc50• 9 years ago

Isn't it treated as an unrealised capital gain?

twohlix_• 9 years ago

And if you realize it I imagine your strike price was $0, so its full profit. IANAL tho.

dmm4• 9 years ago

The site I linked argues not because unrealized gains occur when something you own goes up in value. But during a fork you are given (access to) something new.

bpicolo• 9 years ago

New tax bill specifies that currency-to-currency transfers are now taxable events, I assume this falls in line. It's not only about turning things into fiat.

Really the law's going to have to adapt here if people are ever going to use crypto as an actual currency. Owing capital gains every time you order a latte is nuts.

Cyberdog3• 9 years ago

It illustrates how ludicrous the idea of being taxed for a fork is (along with taxes on crypto not exchanged for fiat in general). I had never even heard of most of the forks discussed in this article. Were I a holder of BTC, how am I supposed to pay taxes on the "wealth" "generated" from forks I didn't even know existed?

tehlike6• 9 years ago

The idea of crypto taxation (besides forks) is same as stocks. Thus, selling crypto for fiat is same as selling crypto to buy another crypto tax wise.

Taxation in general is not a happy event, but it is consistent in this case.

yock• 9 years ago

This seems to be a greater indictment of taxation in general rather than the notion of an asset created to represent something of value in the market. An unscrupulous state actor could manipulate this system to their advantage.

nokcha• 9 years ago

Many believe that you owe taxes as soon as the funds for a bitcon fork are available to you.

I think that belief is mistaken. (1) Suppose Bitcoin has a contentious fork into two chains, say BitcoinA and BitcoinB. The supporters of each chain claim that their chain is the "true" Bitcoin. Before the split, you had 1 btc worth $10k, and after the fork, you have 1 btcA worth $5k and 1 btcB worth $5k. Which of the two chains do you owe taxes on? (2) Even if a hard-forked chain is treated as a new asset instead of a split of an old asset, it shouldn't be taxed until the user actually exercises control over it. In order to control funds on a new hard fork, generally the user must take the risky action of installing new (potentially malicious) software and importing their private keys --- this would seem to be a "substantial limitation or restriction" under 26 CFR 1.451-2(a).

dmm4• 9 years ago

That's an interesting position. This is definitely an area that needs more clarification. I do think that treating forks like income is the most conservative interpretation and the one least likely to result in trouble from the IRS.

cs702• 9 years ago

Anyone possessing the private keys to a Bitcoin balance in the blockchain before each fork automatically owns an equal balance in each forked blockchain.

invalidusernam3• 9 years ago

Which in most cases doesn't really matter since the forked value is pretty much zero (except for the occasional rare ones like BCH)

kakarot• 9 years ago

BCH retained value because it represented a large portion of the community, and the goal was a soft fork rather than a hard fork so quite a few people participated in the switch.

That kind of thing will happen less and less each time a large, informed group of people leave BTC, till all you are left with is a fool's market.

Nursie• 9 years ago

This seems bad.

I understand the idealogical reasons for, say, Bitcoin Cash arising as an attempt to bring transaction times and fees crashing down while increasing network capacity to the existing 'currency'. But when it cpmes to creating new currencoes on general, forking the existing blockchain just seems let yet more reward for existing holders, and further disincentive for the new coin to actually be used for anything.

I mean hell, here's another way for your rapidly inflating asset to maybe gain another 10% overnight! Why on earth would you ever spend any of it?

thisisit5• 9 years ago

How many of the 19 forks have value now? Other than the famous ones - BCH and Bitcoin Gold - other 17 are not even in the top 100 of coinmarketcap. So the article and the expert are just inflating their claims.

Additionally, there is no need for forks to create value in coins. Coin developers also have tried something called "airdrops" where they assign some coins on a particular criteria. And using bitcoin's blockchain has been one of the favorite criteria.

aaron-lebo• 9 years ago

While forking as you stated isn't really an issue (if my dog forks Bitcoin, does it really matter?), but it does suggest that people are willing to do it. If we drag out further and further into the year and some of the problems with core Bitcoin aren't resolved, we'll probably see more attempts at forking, and you only need one to cause some chaos.

Each sizable fork adds confusion, though. It might be obvious to you that Bitcoin Cash is not Bitcoin, but new adopters not so much. IN some sense the Bitcoin brand is becoming very diluted.

thisisit5• 9 years ago

Again the issue is whether the fork actually gains any credence at all. If your dog can create a fork which has the same amount of influence behind it as Bitcoin Cash, then it will gain credence. Otherwise it doesn't matter if there is a fork.

That said, surely we will see more forks. The Segwit2x was called off but it will be back with additional force. We might see additional 1-2 more forks with credence and re-using the name "Bitcoin" but 50? is just making up numbers.

philipodonnell6• 9 years ago

I think this article is making a serious mistake in confusing different kinds of forks.

We use the word fork to describe the act of commandeering the head of the existing BTC blockchain and using your own miners to continue it in a way that diverges from the original chain. This can have a negative effect on the value of both chains due to inverse network effects.

We also use the word fork to describe the act of cloning a branch of code and than adding new commits on top of it to create new software. This is good since more coins increase experimentation and drive innovation and does not in any way effect the existing BTC network or its value (unless you believe we are already in a zero-sum game with cryptos where every new coin reduces BTC).

This article leads with "Some 19 Bitcoin forks came out last year -- but up to 50 more could happen this year" and then completely conflates the two by talking about Litecoin et. al. and Bitcoin Cash interchangeably.

To my knowledge, Bitcoin Cash is the only 'true' fork that survived beyond the splitting of the BTC chain, but please correct me if I'm wrong on that.

It would be scaremongering if I thought it was intentional.

thisisit5• 9 years ago

Well, the correct word is "hard" fork. Bitcoin gold is another hard fork of Bitcoin which survived.

Though there are several software forks based on bitcoin client implementation like Bitcoin XT and Bitcoin Unlimited.

philipodonnell6• 9 years ago

Are you aware of anywhere that keeps data like that as a reference? CoinMarketCap groups into coins and tokens, but not into soft/hard forks of which codebases.

Although I suppose at a certain point you'd get into the argument about how many changes are required to make it a new codebase even though it originally forked... but a question for another time perhaps.

olfactory3• 9 years ago

I think the main difference between the two kinds of forks is that in one case existing holders of Bitcoin get to own both the original and the fork, and in the other case the fork must bootstrap itself from scratch without the added benefit of a bunch of biased people who are happy to see any new speculative endeavor grow (as long as they own some).

Hence, hard forks are actually much more likely to occur, at least until the inverse network effects you describe actually exist in reality. In a highly speculative market they really don't exist, or at least don't exist enough to discourage a fair bit of aggressive forking. I predict at least two hard forks in 2018.

philipodonnell6• 9 years ago

hard forks are actually much more likely to occur, at least until the inverse network effects you describe actually exist in reality.

I am working on an article that talks about the opposing incentives behind hard forks as a form of artificial scarcity. This seems to be the main objection from classical financial types, that its all virtual and you can make more at any time by forking so its worthless.

Your comment implies thoughtfulness on this topic. Do you have any good references on this from an economic theory standpoint?

I could argue that there are actually two kinds of hard forks, one where there is some change to the underlying protocol (Bitcoin Cash) or reallocation of funds (undoing the DAO hack) that, at least in the eyes of the authors, increases the utility of the new network more than the negative effect of the split. If the total network value rises then, in a rational market, it means that the utility did increase.

A second kind of fork is just a cash-grab fork. Split the bitcoin chain but don't do anything to the protocol, ala https://forkgen.tech. This is (I think) what concerns finance professionals more than forks which increase utility.

shawabawa3• 9 years ago

Bitcoin Cash is the only 'true' fork that survived beyond the splitting of the BTC chain, but please correct me if I'm wrong on that.

There's at least a few more. "Bitcoin Gold" and "Bitcoin Diamond" come to mind, there's also something called "Super Bitcoin". They all seems like complete trash to me but somehow they seem to have a market value

philipodonnell6• 9 years ago

They all seems like complete trash to me but somehow they seem to have a market value

This is probably the defining comment of this age of blockchain. :-)

xPhobophobia• 9 years ago

If you had bitcoin before the fork, you'd have some of the fork, right? How do you access something like that?

vm• 9 years ago

How do Bitcoin holders "receive" or trade on these forks?

Coinbase eventually distributed Bitcoin Cash but I haven't heard anything about Bitcoin Gold or Diamond.

thephyber• 9 years ago

Bitcoin Cash is the only 'true' fork that survived beyond the splitting of the BTC chain

This seems like a "No True Scotsman" fallacy and isn't correct unless you take liberties with the concept of "true fork" or you are making an observation about the lack of mass-scale adoption of the smaller forks.

Every protocol change in Bitcoin is in the most literal sense a "fork". There was a time at which the proposed protocol change might or might not survive the fork attempt. The community (developers, miners, holders, transactors, etc) all vote with their feet.

philipodonnell6• 8 years ago

lack of mass-scale adoption of the smaller forks.

Yeah, this was the context I was using it in. 'True' meaning like 'survived' in any real sense.

magnat2• 9 years ago

Take care when claiming coins from those forks - even if only for transferring them to an exchange. Wallet software for those altcoins usually come as an unsigned, unverifiable binary and ask you to import your existing mainchain private keys (explicitly or as wallet.dat). Doing so is a best way to lose your BTC should authors get hold of those keys.

Much safer solution is to craft transaction offline on a separate VM (using BCCSplitter [1] or altcoin wallet) and then posting raw transaction using altcoin's blockexplorer or yet another instance of altcoin wallet software (not containing any private keys).

[1] https://github.com/NicolasDorier/BCCSpliter

gondo• 9 years ago

or transfer BTC to different wallet before claiming forked coins

magnat2• 9 years ago

It depends. If you import whole wallet.dat into altcoin wallet, you share both present and future (next 100 or so) private keys with the software.

If you transfer your bitcoins to new address provided by existing bitcoin wallet, chances are the altcoin wallet also has a private key to those addresses.

To be safe, you'd have to transfer existing bitcoin funds to completely new wallet. Also, for privacy reasons you would need to make as many transactions as UTXO you have, which means paying a hefty fee tens or hundreds of time depending how much you use your wallet.

45h34jh53k4j2• 9 years ago

Its cool -- the only coins that will survive 2018 will be the ones with segwit, and thus, lightning network support.

Instant, near zero cost bitcoin lightning transactions on the bitcoin network makes all other coins look lame.

This is not science fiction, it is here today. $2 segwit tx to fund the channel, as many tx's for 1 satoshi after that until I exhaust the channel.

aminorex• 9 years ago

That being the case, then the present value of Bitcoin is much higher than it would be with no expectation of future forks. It is like holding shares in a company which spins-off a division to increase shareholder value.

Bitcoin May Split Many Times in 2018

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