Boaz Shoshan – Capital and Conflict (United Kingdom) –
Earlier this week, a currency ruptured. To fanfare and criticism, applause and horror, the biggest cryptocurrency in the world splintered. In a “user activated hard fork”, a group of bitcoin miners turned on their peers and began mining a new, bolder version of the bitcoin protocol. They were acolytes of “Bitcoin Cash”, aiming to fill the bullet hole that has been bleeding the currency in a radical new way.
The problem of “scaling” has dogged bitcoin ever since it began gaining popularity. As more and more people began using bitcoin, bitcoin transactions began to multiply. While popularity and mainstream adoption of bitcoin might seem great for bitcoin, it is actually a curse.
Bitcoin transactions are held in batches, or “blocks”, which bitcoin miners compete to verify. If they can prove to the network that a batch of transactions has occurred, they are rewarded with freshly created bitcoin.
By publicly proving the location and history of every bitcoin in existence, miners secure the currency without needing a centralised authority like a bank to prevent fraud and manipulation. Subsequently, this also frees the currency from fraud and manipulation by a centralised authority.
Sounds great – no middleman required to ensure security
But there’s an issue. There is a limit on the size of the blocks, and you can only fit so many transactions inside. And as bitcoin transactions multiply, when the everyman starts using bitcoin to pay for their shopping, the block size becomes inadequate. When there is a limit on the size of the blocks, and more and more transactions swamp on to the blockchain, the network slows down and becomes sluggish.
Transaction times drag on and cost more, making traditional payment systems like wire transfers and visa payments seem superior.
The issue has been tackled in the short term by miners adopting a software patch called “SegWit”, which effectively allows the miners to stuff more transactions into a block. This is what the majority of miners have adopted. But this is not enough for some miners, who have decided to make the blocks bigger. They cannot do this without the support of all the other miners, and so split from them to create a new currency on their own – Bitcoin Cash.
The scaling issue is like a bullet wound
The faster bitcoin runs – gaining popularity and usage – the more it bleeds. Running faster means more transactions and more users, which is taxing on the network. If bitcoin ceases to run, and people stop using it, the bleeding decreases also – low transactions numbers are easy to accommodate, and can be verified quickly and efficiently.
But no miner wants bitcoin to stop running. They want it to accelerate past the sound barrier. And so they must fix the block size.
SegWit is a plaster on this bullet wound. It’ll stem the bleeding a little, but doesn’t solve the problem. As the currency continues to sprint forwards, it will need to be replaced – a new method of squeezing transactions into blocks will need to be devised.
Bitcoin Cash means pouring concrete into the wound to seal it shut. It’ll stop the bleeding, but the currency will face issues down the line – consequences of this decision are impossible to predict, but the risk of a deadly infection is certainly on the cards.
I predict that when regular bitcoin starts bleeding again – which is inevitable if it continues to run – Bitcoin Cash will perform well. But maybe a bigger, cleaner SegWit plaster will be applied to the wound, stemming the bleeding again… for a while. And maybe the concrete will kill Bitcoin Cash.
It’s a fascinating space, and definitely one to watch over the coming months.
One interesting part of the Bitcoin Cash saga was that when the currency was created, every bitcoin that had been created up until that point was cloned. If you had three bitcoins on Monday, you had three bitcoins and three Bitcoin Cash on Tuesday.
Out of the ether, came free money.
My colleague Sam Volkering who specialises in cryptocurrencies was overloaded with questions over this new development. He’s very pleased with it.
He’s written a response addressing the situation below, which I’ll leave you with today.
Have a great weekend!
Until next time,
Capital & Conflict
I’m going to tell you a story. A true story. No exaggeration. No creative licence. Just the truth. The problem is you might not believe it. It’s almost so out-of-this-world that you might simply think I’m lying.
But I’m not.
Have you ever had a chance to get free money? I mean money that magically appears in front of you that previously didn’t exist. I’m not talking about finding a tenner on the street and taking it (technically that’s theft anyway).
And I’m not talking about getting a scratch card from nanna where you win £20. Nope. That’s not really free money. Somewhere along the line someone had to pay for it.
What I’m talking about is an all-new financial asset class that has the ability to generate free money in an instant. It doesn’t always happen. In fact it’s pretty rare. But if you’re switched on and a part of the biggest revolution in banking and finance the world has ever seen… well you can profit with ease. You can get your hands on free money.
Unfortunately if you’re reading this story and it’s all new to you, then you’ve missed this chance at free money. But there will be more. In fact if you play your cards right this could happen several more times over the coming five to ten years.
But the chance for free money is really just a bonus. What you really want to be clued up on is how to play this all-new financial system the right way.
It’s easy to get taken for a ride, lost, confused and downright frustrated with it all. But if you get the right advice, the right guidance, the right person to hold your hand as you enter this wild and exciting world you could change your life for the better.
So let’s dig into this story about how thousands of people just like you got a windfall and some free money… and then consider how you might be able to join them and get your own slice of the action…
16,081% gain in 18 hours
Imagine having $8.25. And then within a day that $8.25 magically turns into $1,335.
You wake up with $8.25. You to sleep that night with $1,335. A 16,081% gain in the space of 18 hours. That’s right. Just 18 hours.
On the 1 August people that held bitcoin went about their daily business with the knowledge that later that day they would have the same number of bitcoin as they went to bed.
If they went to work with one bitcoin, they would have dinner still with one bitcoin. If they went to work with 100 bitcoin, they would have dinner still with 100 bitcoin.
What wasn’t so certain was whether or not they’d get access to “Bitcoin Cash”. Most bitcoin holders would have known that Bitcoin Cash was (probably) coming.
But no one was certain. At least not until the Bitcoin Cash blockchain officially started. That was the key, as it is for any new crypto – the blockchain must be “mined” and the blocks must be generated in order to continue the blockchain. No blocks = no blockchain.
And on 1 August at 1:20pm British Summer Time it happened. Bitcoin split into two.
Bitcoin continued to go on about its business with some nifty upgrades to its core.
But the split also left behind Bitcoin Cash. There it was in all its glory. Bitcoin Cash had split from the Bitcoin blockchain. This process is known as a “hard fork”.
Except when it split nothing happened. Nothing for hours. While the split was done, no blocks had been mined. There was still doubt as to whether or not it would survive.
To get going, “miners” had to start mining the Bitcoin Cash blocks. The difficulty however was hard, really hard. And the difficulty meant that it took a painful number of hours.
But eventually the blocks began to flow. Bitcoin Cash could be traded on exchanges. And then it could be correlated to an equivalent fiat money value. Only now was it a legitimate standalone cryptocurrency.
At the start of Bitcoin Cash trading on one of the world’s biggest cryptocurrency exchanges Bitcoin Cash was trading for bitcoin at a price of 0.003BTC.
That means that if you held just one Bitcoin Cash “token” you could exchange it for 0.003 bitcoin. Or vice versa. You could exchange one Bitcoin Cash token for just 0.003 bitcoin. Or if you had one bitcoin, you could have bought 333.33 Bitcoin Cash.
At the time, the price of bitcoin in US dollars was around $2,750. That meant that one single Bitcoin Cash token was worth the equivalent of US$8.25.
Now I will add that in order to even get Bitcoin Cash you needed to hold some bitcoin. It didn’t have to be much. It could have been 0.01 bitcoin or one bitcoin or 100 bitcoin.
Whatever the number you held before the split was the equivalent number of Bitcoin Cash you would end up with.
But let’s say you had one bitcoin.
Then at the time of the fork, you magically ended up with your existing one bitcoin plus one brand new Bitcoin Cash. One minute you had 0 Bitcoin Cash, the next you would have one. That, my friends, is called free money.
And at the first instance of trading (a bit like when a new stock trades on a market for the first ever time) one Bitcoin Cash, as I said, was worth about $8.25.
But then the most amazing thing began to unfold. The price began to rise. And rise. And rise… and rise.
About 18 hours later you could exchange Bitcoin Cash for 0.48578900BTC.
The price of bitcoin itself hadn’t changed all that much and was still around US$2,750. Therefore Bitcoin Cash had a US dollar price of $1,335.91.
$8.25 to $1,335 in 18 hours. That’s a 16,081% return in 18 hours.
Now I will add there was barely any volume at this stage. So not many really could cash in on that crazy gain. And the price quickly jumped to 0.01 bitcoin and then 0.06 bitcoin and within the first hour 0.1 bitcoin.
But even if you were able to exchange and get some extra Bitcoin Cash at 0.1 bitcoin (and some people did) you would have still been sitting on a 385% gain – in a matter of hours.
Don’t be sceptical, understand what’s really going on
Of course if you already had bitcoin, you wouldn’t have to trade to get your Bitcoin Cash. Remember you only needed to hold bitcoin to automatically get Bitcoin Cash.
Overnight people who were smart enough to already own bitcoin got themselves free money in the way of Bitcoin Cash. This is the incredible world of cryptocurrency at play.
Now I know there will be hordes of people screaming out about “bubbles” and “tulip mania” and it all being “a Ponzi scheme”. But I can guarantee those people don’t own a bitcoin and didn’t just get free money out of nowhere on 1 August.
Hate it or love it. Last night people all over the world just cashed in. The question is, are you one of them?
If you held bitcoin and you held it in a wallet with private keys then you’ll be able to get access to your Bitcoin Cash. You should check with your wallet provider exactly how. For example if you hold bitcoin in a Ledger Wallet (which I’ve advised to do from the beginning) then you simply just download a Bitcoin Cash add-on, and get your funds.
Easy. Some third-party wallet providers, like Coinbase, have said they won’t provide access to Bitcoin Cash. That doesn’t mean it’s not there. Every person with bitcoin in a wallet has a corresponding amount of Bitcoin Cash – it’s just a matter of which kind of wallet you hold and who controls the private keys.
This brings me to a very important point and one I’ve tried to reinforce for some time. Store your crypto in a wallet where you control the private keys. That makes you the bank – no one else. That’s important because it give you the power and control over your crypto – no one else.
Now all this talk of free money, forks, exchanges, wallets and thousands of per cent gains might be a little overwhelming. But that’s okay. This whole Bitcoin Cash episode and any others that might come down the track can be managed.
But as I say, you need the right advice and guidance
And that’s where I come into play. I have been involved in crypto going on seven years now. I know the ins and outs, the opportunities and the traps.
You must be aware this is high-risk speculation but that the opportunities in play are some that I think the world will never see again.
Which leaves me with one question for you.
Are you at all interested in all this? Do you want to know more about this crazy, once-in-a-lifetime revolution in global finance?
I think you might be. Heck, how can you not be? Thousands of people that I already advise just got FREE MONEY. Are you ready to get your slice of the action?
I want you to get you involved. I want you to join us. I want you to be one of the thousands of everyday investors I’m already providing crypto advice to.
Now is the time to understand, start and join the Crypto Revolution.
Southbank Investment Research