Bitcoin has been seeing an unprecedented situation lately when it comes to the community, leading to multiple hard forks of the coin’s blockchain. With this has come a lot of confusion to those who are just interested in getting involved with Bitcoin, as well as a lot of people buying in just to capitalize on the new hard forks coming out. Knowing why this is happening is paramount to following its future and understanding what’s actually going on.
Almost everything with the hard forks has been related to disagreements within the Bitcoin community. There are some obvious financial incentives behind some of the chains (like Bitcoin Gold), but for the most part, those behind each chain seem to be devoted to their cause of helping Bitcoin scale in a more efficient manner. While there is no real “centralized” party behind the Bitcoin mining software and blockchain, not everyone has the power to make changes to the protocol and/or block changes. It has become very political, despite the currency itself being decentralized. As a result, many developers and enthusiasts feel there’s no other path than to create a new currency, rather than fighting with the old developers. It’s worth noting that the disagreements are no small matter – there have been many meetings and a ton of discussion about how to handle everything. Even so, there are people on all sides of the equation with different ideas, and it’s not feasible to make all parties happy. As such, we’ve been seeing one fork after another to work towards that “perfect” blockchain, with the market dictating which ones are successful and how far they go.
Isn’t That What Altcoins are For?
This is a common question, and the answer is ABSOLUTELY. Altcoins are any that don’t operate on the main chain, with that currently being BTC. Some coins were created to completely alter the protocol (think Ethereum), while others were designed to help enhance existing features (think Litecoin). In the case of Bitcoin’s spawns (Bitcoin Gold, Bitcoin Diamond, Bitcoin Cash, etc.), each bring something different to the table, with the idea being that they all support their developers’ vision for the future. As said before, however, this makes them altcoins by their very nature. So far, it seems unlikely any will overtake Bitcoin, but you never know, and unless that happens, any other than BTC will remain as altcoins.
Why Hard Fork Instead of Make a New Coin?
Hard forks offer something that you really don’t see elsewhere. While coins like Stellar and Byteball had airdrops based on Bitcoin balances at specific points, they come with a fresh start in community support and code base. Bitcoin’s hard forks, however, bring a few benefits to the table:
- They share the Bitcoin name
- They have been getting a lot of press
- They reward people for holding Bitcoin, boosting its value
- They help show transparency in distribution (except for BTG), in that the balances are all tied to BTC itself at the time of the hard fork
While most people that have been getting the forked coins end up dumping them as soon as possible to buy back into BTC, the simple fact is that the dispersion absolutely helps, as does the massive amount of press. And for those that are pretty much copying BTC, the entire infrastructure is already prepared to handle the new coins.
Are Hard Forked Coins Worth Holding?
This is where things get really tricky. Much like a coin that hasn’t been market tested (like Ethereum when it went into its ICO phase), it’s truly impossible to tell where these will go. They could tank to oblivion, like BCH did (though it has bounced back wonderfully since then, seeing a low of 0.01 or so and a current price of 0.18), they could remain stable, or they could skyrocket. The crypto market is worldwide and isn’t always sane, so it’s something where you just have to research and decide your own risk tolerance between selling as soon as possible, holding, or trying to milk as much as you can. A great way to look at it, though, is that all forks lead to “free” coins – so while a wrong move may hurt, it hasn’t touched your core Bitcoin stash at all!