What is a Bitcoin fork?

Until it's on again. Didn't they fork a few months ago too (Bitcoin Cash)?

Jackson Palmer (Dogecoin founder) talks all about the Bitcoin fork at the last local Hack Days meetup[0]. It's actually a really great talk.

[0](Skip to 30m) https://www.facebook.com/hackdays4all/videos/549774142034920...

Someone claiming to be a group of miners have said that they are going to go through with the fork.

https://lists.linuxfoundation.org/pipermail/bitcoin-segwit2x...

https://bitcoin2x.org/

Of course it's entirely possible that this person or group of people is just someone who bought B2X futures and is trying to push the price back up to minimize their losses.

Nice infographic! oh I just got an email from the Bitcoin Gold peeps saying they were going live in 2 days

I like your graphic. A cool metric to have on it would be transactions per second for each new fork.

Yes, if you hold during the fork you get coins on both forks. Yes you can cash out before the fork.

Realistically, the value of the chain pre-fork should equal the value of the two chains post fork.

However, this is not always the case - due to people thinking they can get 'free coins' from the other chain (price goes up), people being afraid of a fork (price goes down), etc

"The only winning move is not to play" is always great advice.

I don't either. Fiat currencies don't fork - you can simply exchange one for another. Another close comparison is a traded equity having a 2:1 split, except shareholders technically lose nothing. Another case would be stock dilution - though, I have never heard of a public stock diluting to 50% value... that seems unlikely. If a specific commodity were to suddenly decide it had an unreported surplus on the order of 100% of current market estimates, the consequences on valuation would be pretty significant (maybe not a 2x loss...).

I guess the closest comparison to bitcoin is; oil price is at $60 / barrel today and speculators believe there is a 30% chance that they mis-estimated the number of barrels by 100% - but you won't know for sure for another 3 months. What's should the price of oil be tomorrow?

You get coins for each of the forks. It's literally a fork in the timeline of the currency, as if you're exploring 2 simultaneous future timelines.

You can "cash out" whenever you like, obviously.

When a chain splits, your full previous balance exists now on both child chains. The price of each chain's coins is set by supply and demand.

Typically people prefer to hold on to both coins after a split. So there's not actually that much sell pressure, meaning both coins can tend to exist together.

A fork is just a protocol upgrade that is non-backward-compatible and where both the old and new protocols have significant amount of validators (in PoW, this means miners) operating with that protocol. Since the protocols are not compatible, they have a different transaction history after the fork. Since they used to be compatible, if you had 1 BTC before the fork, after the fork, all validators still agree that you have 1 BTC, but 1 BTC on one chain is not the same as 1 BTC on the other chain, so it's equivalent to having (say) 1 BTC and 1 BCH.

Everything else is just supply and demand, ie what's the market-clearing price for 1 BTC and for 1 BCH and how does it compare to before.

-Sees the flaws in bitcoin

--Wants to fix it with a hardfork

--Wants to fix it with a new coin

I think the reason for your observation is pretty obvious

Both Brian & Jeff are still both heavily invested in businesses that rely on Bitcoin, they are not just speculators who simply buy and hold.

Their business plans are ruined if Bitcoin fees get too high. Note that 'extremely low fees' was the original selling point of Bitcoin which now has been ruined. So they were simply defending their businesses.

Yes, anyone can start a fork. It's hard to get momentum on it though, as it'll likely just be a shitcoin that no one cares about. Witness what happened with Bitcoin Gold.

So far there's only been one successful hardfork of Bitcoin (Bitcoin Cash) in all its history. Anyone can try, but few succeed.

> the value of my original coins drops by the difference in value compared to the new coins (or around that).

Prices of cryptocurrencies are very unstable even without any forks, so what you are describing doesn't make any sense.

Yes its coming.

When this goldrush started exchanges were the ones who made money so everyone wanted one.

Then came altcoins ...

Then ERC20 /ICOs...

Next up in 2018 - forks...

> That sounds like in the world of stocks, a competitor could come along and decide to split the stocks of MY company from the outside

That's not really a good analogy. Suppose someone decided to offer one of their securities (or pay a dividend, or give some 'thing') to everyone who has one of your company's shares. All investors have to do is show a share certificate, and get a one-off gift proportional to how many they own.

If the new thing has value, your company's shares should all go up in value by roughly its value. Then shares which have already had the thing claimed, should go down by the same amount, leaving them roughly where they were before. If you decide not to claim the thing, you lose out by its value, but your original shares are still the same and you shouldn't have made a loss on them, just as a result of this split.

Of course, if the new thing is something which competes with your company, your company's shares might go down in response. But this isn't directly related to the value of a share in the new thing.

> Here's another stupid question: Can anybody start a new fork?

Not a stupid question at all. The answer is: sure, anybody can start a new fork.

From a philosophical point of view, the alternative is that only a few designated somebodies can fork, which goes against the design goal of a having a fully decentralised network with no privileged nodes.

You can also see this as a distributed systems problem. A fork is just a divergence in the consensus layer. These happen all the time as short-lived forks when different miners produce different blocks with different sets of transactions. Typically, one of those forks gets abandoned immediately — only occasionally do you see a second block mined on the losing branch. In this sense, and from a technical perspective, the only thing that's special about the Segwit2X fork was planned for the coming weeks is that it would also change the consensus rules (by enabling larger blocks, up to 2MB from the current 1MB). Because the consensus rules change is a highly politicised issue, there's a distinct probability that whichever side ended up losing would decide to continue building on their own chain anyhow, thus effectively breaking the currency into two.

> That sounds like in the world of stocks, a competitor could come along and decide to split the stocks of MY company from the outside, driving down the price of my stocks (me as the company's owner or investor) and there's nothing I can do about it.

It's more like someone saying to all the shareholders of Apple "hey, you like companies that make mobile phones, and I've started a great mobile phone company, and I think it'd be great if you were a shareholder in my company too, so I've sent you some shares in my company too, I hope you like them!"

Is that a thing you could do? Yes.

Does it benefit you in any way? Probably not. There's certainly no reason to think it increases the value of your company.

Does it hurt Apple in any way? Almost certainly not. I mean, if everyone decided your startup was much cooler than Apple, then it might, but it's hard to see how you mailing strangers shares would bring that about.

A bitcoin fork is, in some ways, a little bit like a stock split or a dividend, but it's a lot more like someone randomly mailing strangers scraps of paper which are almost certainly worthless.

That's a hard question, based around the market sentiment of the new coin.

In theory, yes, the value is split. The value is only derived from speculation, and the speculative value of the coin 1ms pre-fork must be the same as the value of the two coins 1ms post-fork, since otherwise people would simply buy immediately before the fork, and then sell immediately after, driving the prices to an equilibrium.

In reality, this is what has happened with this fork hype, people were buying w/ the idea of getting a 'free' coin, like how last time the value of Bitcoin + Bitcoin Cash was far higher than the original pre-fork value of Bitcoin. However, this has driven the price up, causing there to be even MORE hype, which will likely see the price of Bitcoin stay high, since it is now "trending up".

No you wouldn't. The price is determined by the orders that people place on the exchange and those can be anything

You are attaching way too much logic to working out the bitcoin price.

That applies to stock split; before the bitcoin cash split, everyone was expecting that should be the case.

However in this market; market is irrational and it all depends on how the market is willing to price it pre/post fork. No, you won't wind up with the same dollar amount.

For all intents and purposes, from the point of view of each chain, the other does not exists but it merely turns out their past are the same. IOW BTC is B2X (the money, not the unit) before the fork, and each one considers that its own blockchain is the Truth†. So:

    - from the BTC point of view, there is 1 BTC both before and after the fork
    - from the B2X point of view, there is 1 B2X both before and after the fork
    - at any one time the value of 1 BTC is whatever people want to exchange it for
    - at any one time the value of 1 B2X is whatever people want to exchange it for
    - it just turns out that BTC == B2X before the fork

Therefore the value of each one merely depends on how much people care to trade them for, and the fork may affect this value, both before and after. Both may crash, both may shoot through the roof, or anything in between independently. But yes indeed since they come from the same past, if T is the last common transaction on the blockchain, then in between T and T+1 your 1(BTC+B2X) == X$ just became 1BTC + 1B2X == Y$ + Z$ (which at that precise, immaterial, instant == X$ + X$) by virtue of the fact that they disagree about the validity of any transaction you may make on each chain, including ones that get $$ out of the system. Hence you can "double spend" the coin. But speculation may shortly thereafter make Y and Z stay == X$ + X$, or become X$ + 0$, or X/2$ + X/2$).

† Without replay protection, transactions may or may not be replayed, but the blockchains do differ.

Theoretically, this is true. The value, and hence the price, is splitted. But markets are not perfectly efficient, and Bitcoin markets in particular are very inefficient and totally driven by psychology, particularly speculation and greed.

This can make you end up with either a larger sum if you buy exactly before and sell shortly after the fork, or a smaller sum. Why should the sum be larger? Because there's people on both sides of the fence (the original coin and the forked coin) which think that their coin will "win the race", thus they include a certain additional, speculative value deducted from assumed future price increases into their estimates of the current value of their preferred coin. This drives up the speculative value of both coins simultaneously, and since either side focuses mostly on its preferred coin, driving up the perceived value of it, and neglects "driving down" the perceived value of the other sides' coin (because of disinterest or simply because driving down perceived value is much harder than driving it up, as humans are usually focused on positive things), this can result in a situation in which the mathematical sum of the speculative value added to both post-fork coins is quite a bit larger than the "combined" speculative value that was previously included in the original coin.

This is, in my opinion, exactly what happened with the Bitcoin Cash fork earlier this year. For this Segwit fork, people saw that the earlier fork "created value out of thin air" and thus began to incorporate some of this assumed future value into their value proposition of the coin pre-fork. This drove the price increase right before the fork (well, partly - there was also the CME news, which was a big driver, too). Funny enough, this time it probably won't work out as it did last time - the fork was "called off", and even if it would happen, it most likely will not result in a similar situation due to a) the "free money" having already been priced in during the time before the fork and b) the fork being a "colliding fork" this time, with both coins wanting to be "the real Bitcoin", having no replay protection or real separation of both networks. They wouldn't have coexisted for long - one of them would have "won" and captured the vast majority of value, while the other one would have diminished to the low 3-digit or even 2-digit price realm (effectively equaling a worthless coin, as in crypto, there is NEVER a really worthless coin in terms of having a price of zero - there is always someone wanting to pay some price, albeit very low, for anything that has "crypto" attached to it ;-) ).

> How is the price for a coin of a fork determined?

The same way the price of any coin is determined, the market-clearing price on exchanges.

> There are going to be a lot of forks in the future.

I tend to agree. The problem, then, is what happens after 3 forks? 4? 10? We're going to keep increasing the number of crypto currencies we own and then we figure to figure out who supports what version of the currency we have to figure out how to cash out...

The entire idea of a fork sounds like an absolute nightmare. This is why I'm not putting any serious amount of money in crypto currencies.

>and once set in motion the rules could not be changed.

This was not the case, nor has it ever been. There have been many consensus changes in the past, and bitcoin has had forks that were reverted by the bitcoin community previously. (See the bitcoin 0.8 fork).

There have been multiple revisions of bitcoin which would have changed the rules. They haven't yet resulted in a hard fork permanently (except for bitcoin cash) because people have updated before the new consensus rules were activated.

Saying the rules can be changed is like saying that your eyes changed color if you have a child with different color eyes. A fork is not the same chain as the original.

It is decentralized, therefore the rules can change. The core devs can try to push changes, but miners and users can choose whether they upgrade (e.g. adopt the new rules) or not. If people disagree about the rules, then you have an actual fork with diverging histories (e.g. Bitcoin Cash vs Bitcoin)

I'm sorry what was your answer??

This is flat out false. They have no plan to even support it at all, let alone default to it