Put a Fork in it. Contentious Hard Fork is  Dead

The blog post this morning by a group calling itself the Bitcoin Roundtable composed of some prominent bitcoin businesses, exchanges, wallets, miners, and mining pools, is a powerful statement that Bitcoin will impose decentralization.

This statement almost all but eliminates the likelihood of Bitcoin Hard Fork for 2016 and perhaps beyond.

Below the most crucial points of the statement;

We think any contentious hard-fork contains additional risks and potentially may result in two incompatible blockchain versions, if improperly implemented. To avoid potential losses for all bitcoin users, we need to minimize the risks. It is our firm belief that a contentious hard-fork right now would be extremely detrimental to the bitcoin ecosystem.

We must ensure that future changes to code relating to consensus rules are done in a safe and balanced way. We also believe that hard-forks should only be activated if they have widespread consensus and long enough deployment timelines. The deployment of hard-forks without widespread consensus is dangerous and has the potential to cause trust and monetary losses.

Rational actors are realizing that a Hard Fork implies leaving the protocol for a new one, and you cannot attempt this without a high level of certainty that you are bring along the entire network with you or you run enormous economic risk.

The continued failure of so many to attempt to fork the protocol is a positive event.  Bitcoin today is almost impervious to internal or external political theft. There are few assets in the world today that can make such a claim.

I will make a note however that you cannot call for consensus, when it comes to a hard rule change.  While this maybe a highly abstract point, even calling for someone to “come to consensus” implies that they must agree with your point of view.

In Bitcoin the only agreement all participants make is a self evident one, they agree to use the protocol and its rules today.

Consensus in a decentralized political system is something that arises, it cannot be imposed or coordinated. Either there is consensus or there is not. This is why hard rules changes are almost impossible to implement in the manner which many have been attempting, by trying to coordinate a sudden network change, or trying even to using the threat of majority hashing to do it.

No matter how benevolent or innovative this change is Bitcoin is anti-change, anti-political because that is what makes Bitcoin and this is what truly secures Bitcoin.

As such the approach to future changes to Bitcoin must one that focuses on working within the existing rules and  one where a hard rule change if it ever comes will be the result of organic deprecation over an extremely long time horizon.

 

For the full statement  A Call for Consensus — Medium

 

If you are still under the impression that Bitcoin “refuses” to innovate or some participants seem to be dragging their feet, it is because you are viewing Bitcoin through the lens of the existing world paradigm, and Bitcoin requires a new approach.

Please read:

Why a Hard Fork should be fought, and It’s Not Evil To Discuss

Hard Fork risks and why 95% should be the standard

Is the contentious fork debate impacting Bitcoin’s price?

Image Source: banksworstfear.com

Watching current events with negative interest rates, gold rising, and world economies on the brink, one can’t help but wonder, where is Bitcoin?

It would seem that 2016 is offering the perfect confluence of events for Bitcoin to take its place on the world stage of global assets.

The Bitcoin network has been in continuous operation for 7 years, a Bitcoin mined in 2009 can be perfectly traded in 2016.  Bitcoin’s issuance rate, its block reward of 25 coins to miners, will be cut in half some time during the year.  Gemini a Licensed Bitcoin exchange has come online with expectation of offering institutional investors access to Bitcoins. China’s collapsing economy and collapsing currency would seem to provide a ready audience desperate to secure part of their wealth with an alternative asset like bitcoin.  It seemed that Bitcoin was showing signs of exiting its long bear market briefly touching $500 last year in the early days of November. Yet since that brief rally bitcoins performance has been ambivalent to say the least.  Despite the fact that worldwide trends are conducive to a rising bitcoin price.

There have been a series of events however that could be viewed as diminishing Bitcoin’s claims of being a immutable and secure store of value safe from the prying hands of desperate governments.  Primarily Bitcoin’s current debate which has flared into a civil war.  A war over which direction it should take, the current development process offered by Bitcoin Core developers or an alternative process offered by Bitcoin Classic that is based on a hard fork of the protocol.

Below is our subjective assessment of key events in the Bitcoin Forking process with the closing price of Bitcoin on Bitfinex

  1. December 7th Bitcoin Scalability Road Map Posted
    Bitcoin Price $422.00
  2. December 19th Bitcoin Road Map support is posted 
    Bitcoin Price $437.52
  3. January 7th Bitcoin Core Segrated Witness testnet live
    Bitcoin Price $454.00
  4. January 9th Bitcoin Classic announced
    Bitcoin Price  $449.59
  5. January 13th Gavin Andresen posts support for Bitcoin Classic
    Bitcoin Price $429.25
  6. January 14th Mike Hearn infamous quit post
    Bitcoin  Price $359.16
  7. January 22nd Bitcoin article is published showing that some miners are concerned about a PoW fork of Bitcoin and may not support Bitcoin Classic.
    Bitcoin Price $385.57
  8. February 5th Bitcoin Classic Beta 2 Binaries released   and Gavin Adresen posts on why classic will use a fork of 75%
    Bitcoin Price  $373.75

Now it is a dangerous path to select events and try a determine some causation to the price of an asset.  However it appears that the fork debate because it introduces uncertainty to bitcoin’s future is having a suppressing effect on the price.  Particularly when one considers that almost 3 years ago a far smaller Bitcoin economy had a market cap that was double the current market cap.

Proponents of a hard fork now approach will contend that Bitcoin’s price is representative of a market that does not believe Bitcoin can scale. They believe that continuous delay in increasing the blocksize is preventing Bitcoin from growing and attracting new users that will drive an increase in price.

However if that was the case the price should be responding to each future development that supports a fork bitcoin and in fact the opposite is happening. It appears that Bitcoin price was in a more positive trend just after the Bitcoin core road map was presented.

Additionally Ethereum which is considered to be the only true credible alternative to bitcoin has risen from a price of just 90 cents at the start of the year to almost $3.20, while Bitcoin debates a hard fork.

EtherPrice

As discussed in Hard Fork Risks as Bitcoin gets closer to a contentious fork the price of bitcoin will continue to decline as investors flee all the potential risks both short term and long term that will be introduced to Bitcoin. So far the continued poor performance of the price of Bitcoin continues to reinforce this thesis.  Like a corporation fending of a hostile takeover the Bitcoin economy will be fractured and damaged by a contentious hard fork.  With the real possibility of triggering a full fork into two competing protocols.