“The nuclear arms race is like two sworn enemies standing waist deep in gasoline, one with three matches, the other with five.” – Carl Sagan
Cryptocurrencies are in a strategic inflection point. The big investors behind Bitcoin Cash have decided to take on BTC after their, in hindsight strategic, 2X retreat.
Will it Work?
Carl Sagan’s famous quote may serve as a reminder for everyone involved in the BTC / BCH fight.
This is not the first time this has happened. But this time will, certainly, be the noisiest ever attack on Bitcoin. The media will be all over this when American banks open on monday. Europe will have been trading for a few hours when the Bitcoin attack goes on the US morning news.
What’s going on?
We now know that there is a coordinated attack on Bitcoin. The hashrate has been dropping steadily and the Bitcoin backlog is growing proportionally. What is the technical culprit behind all this?
Short answer: the disproportional mining power of ASIC miners.
Longer answer: a major political fight between two groups : Bitcon Core and Bitcoin Cash. The cryptocurrency media is flooded with sponsored “news” stories. In fact, for as low as U$ 1200 you can purchase a front page article in some of these outlets. What do U$ 1200 mean if you are investing hundreds of millions of U$ into a rising cryptocurrency?
Centralization of Mining Power
It just so happens that some of the people behind BCH hold approximately 50% of the SHA256 mining power (hashrate). We all knew, from the beginning of time, that such a concentration of mining power could lead to problems. Well, the time for those problems has arrived.
How did this attack happen? It exploited the 2016-block time span in between Bitcoin mining difficulty adjustments. In short : throughout this weekend they knew there would be no difficulty adjustment in BTC. While Bitcoin does not lower mining difficulty due to the steep hashrate decrease and Bitcoin Cash does not increase difficulty, the miners are free to pump BCH hashrate to unreal levels and cause panic in BTC (while making record numbers of still-valuable BCH coins). Will this attack succeed or fail? We do not know yet at the time of this writing. The difficulty adjustment happens in approximately 8 hours from the time this article was published. We will probably know for certain then.
So what can be done right now?
Nothing at all. If you have tried to move Bitcoin, with standard fees, you will have had a negative surprise, the coins will not move unless you pay $10 to $20 fees.
Gone nuclear: is this attack good for anyone? It may be, temporarily, profitable for Bitcoin Cash investors. But it is extremely negative for cryptocurrencies in general. The monday mainstream media will be a tsunami of negative news for Bitcoin. Do the Bitcoin Cash people think the “Bitcoin” in their own name will not get hurt as well?
Lastly, if this attack was effective against Bitcoin Core, will it not be effective against Bitcoin Cash? Assume Cash wins this round, won’t the new crypto be vulnerable against the exact same attack whenever there is a political dispute within the new group?
Those involved in the BTC vs BCH war should rethink their strategy. Tactically the weekend attack was a success, but strategically it may have been a very bad move.
Who Benefits?
We think proof-of-stake coins could benefit from this mess. Our favorite crypto, Cardano ADA, is at the right place at the right time.