The Paradox of a Chain-Split Hash War

The Paradox of a Chain-Split Hash War

Bitcoin Cash is up by more than $100 in the past two days from circa $420 to now $545 on increased trading volumes of nearly one billion dollars.

That’s even while the second most prominent bitcoin may now be facing a hash-war between billionaire Calvin Ayre (pictured above) and billionaire Bitmain, ostensibly over technical disagreements.

It looks like Craig Wright affiliated pools are currently not that far off from 51%. Ayre’s Coingeek has dropped considerably to now 20%. BMG too has dropped to just 7%. Some of their hash has probably gone to the newly launched SVPool, which has gained 10%.

That makes it 37%, with 10% being unknown. Just as is a new pool called OKminer. You’d think they are related to OKCoin, or OKEx. Not clear when the two Chinese crypto exchanges started mining, but Huobi  is clearly there.

“I support Bitcoin SV,” says Jack Liu, a former Chief Strategy Officer at OKEx. He says he is not from OKminer, so his relevance is not very clear except to show the race is a bit tight as fas as the current composition is concerned.

OKEx has so far stayed out of crypto politics. Yet they haven’t really been mining until recently, so that may change, but it is difficult to see them lining with Craig Wright, a person Vitalik Buterin has called a fraud.

Making the dynamics interesting as far as any potential Bitcoin Core actor is concerned. The first question there: would a split weaken or strengthen BCH?

A chain-split was claimed to be a calamity prior to the first big chain-split of BTC. The truth turned out to be quite different. ETH was at $20 when it saw ETC split, now the latter is at $20 while ETH at one point roared to $1,400.

Likewise BTC was at about $2,500 when BCH split. The latter reached $5,000 or so at one point, while bitcoin roared to $20,000.

It turns out the free market loves chain-splits when there’s a reason behind them. That’s presumably because the market loves choice and competition.

Because people have different preferences and hate to be told they can’t be different. Punk wants ETC. Rock Star wants ETH. Cool kid is a Casher. Flipper is a bitcoiner. Little jimmy prefers Tron flavor.

Whatever you want. Freedom reigns here. And it turns out people love freedom, to the great surprise of commy SEC and to the now command economy of America’s monopolistic, global corporate driven, state sanctioned under the threat of Securities ACT 1933 prison, with it all so uniforming la people and their choices.

Not here. You want canonical ordering, you have canonical ordering. You don’t, then there will be BSV, standing for B******* Second Version.

In more concrete analysis, someone who is dissatisfied with a decision or roadmap, might no longer be as enthusiastic, thus might not invest as much or might even sell. With the alternative universe available, they can now keep their enthusiasm and go on rocking.

But logically you would think a split does weaken because resources that would have gone to one chain are now going to two chains. Yet those resources that leave may have been destructive, slowing down the chain or otherwise negatively affecting it. Them leaving, thus, may be a positive.

So if you did not like BCH, would you actually want to help BSV? That’s what Barry Silbert, Coindesk’s owner, tried with ETC to damage ETH.

He made well out of it, buying ETC at 50 cent or so, but the result was to strengthen ETH by strengthening community bonds.

Now Wright is many things, but if he did really fool ATO, then he clearly isn’t plain stupid. Likewise Ayre, who probably didn’t become a billionaire by being an idiot.

They may thus talk of attacking the BCH chain, and as a strategy they might even attempt it, but logically you would think that they would know it would be a money losing proposition, especially when they can get a lot more coins by mining the SV chain which others might not touch, at least initially.

One easy way for them to lose a lot of money would be to let them mine a lot of BCH blocks while a dual-bitcoin miner is mining an unpublished longer chain. They then publish that longer chain and all the Ayre BCH coins, mined during that period, have gone.

There wouldn’t be any considerations here as far as the public is concerned because they should not be transacting between November 14th and at least November 16th. Exchanges certainly won’t.

So all this hash-war claim is probably empty talk, unless they are actually stupid, which can’t be discounted. Wright has a way with emotions, so if he could fool ATO he might have fooled Ayre. Yet, Wright would presumably fool for gain rather than to burn someone else’s money for no gain.

One gain here might be shorting BCH while attempting the 51% attack, but that can easily backfire. The price might rise in anticipation of others margin calling the shorter, especially if the attacker is tricked with a hidden longest chain.

Meaning there is far too much risk, which is squared when considering the opportunity loss of “valid” mining on BitcoinSV where they might dominate unless BCH miners want to play. Something perhaps guaranteed because they usually just follow fiat profit calculations.

What may happen, therefore, is an ordinary chain-split with the attention more on trading than network calculations. Not least because few would care about the latter, except that the BitcoinSV client has been rushed, so bugs, perhaps even money losing bugs, aren’t out of the question.


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