The Real Bitcoin: which Bitcoin fork will win?

The self-proclaimed DAO attacker and “million BTC” (aka (sic) “million buttcoins”)^* whale Mircea Popescu along with his The Most Serene Republic (TMSR), claim they will only accept^† “Real Bitcoin”:

^* _{Valued at 0.5 million BTC in 2016.}

^† _{Tangentially 20% of the total network hashrate was of unknown origin at that time, and Craig Wright recently boasted they will have 20% of the network hashrate.}

Bitcoin Clones Are Worthless Than Real Bitcoin

_{Mircea Popescu wrote:}

^{…so the holdings on the two chains aren't notionally equivalent. Instead, all the holdings on the Bitcoin chain are accepted as valid on both [real] Bitcoin and [the fork], but holdings on [the fork] are rejected by [real] Bitcoin. Consequently, everyone involved with the fork is writing options to everyone in [real] Bitcoin, free of charge. That they have no ready way to finance these should be obvious, and consequently the grim prospects of … the fork should be just as obvious…}

If every person could create a clone at any point in time and fund it simply by stealing from the immutability of the real Bitcoin, then Bitcoin would not have any value because forks could proliferate. A fork of Bitcoin could only have value if it created more stake-weight consensus than the legacy Bitcoin. In other words, the consensus around a fork is proof-of-stake (without the nothing-at-stake problem), not proof-of-work.

For a Bitcoin fork to gain stake-weighted consensus requires that it be able to establish itself as far superior to every other possible fork, from the perspectives of those who hold the majority of the stake. Additionally the small stake holders which typically compromise 50% of the stake in a power-law distribution of wealth, will follow the other larger stake holders as a herd. The whales have an incentive to force the dolphins to pay all the transaction fees for the whales which the math says they can do, and kick the minnows off chain.

Problem is that there is no one block size or one scaling technology which is agreeable to everyone. There are various factions and innumerable choices for example for future possible block sizes. Who decides? Thus the only Schelling point is to stay in the real legacy Bitcoin and sell the free options on the clones. Any smaller orcas (e.g. Roger Ver) who defect will end up losing (although they are probably just fooling the masses to take real BTC from them), because of the game theory of it.

That is not to say the clones will go to zero if they can offer something that some speculators think is worth it at some “buy low, sell high” price. The price of the cloned Bitcoin will eventually fall low enough that some speculators are interested, but that doesn’t necessarily prevent them from going to zero long-term after the greater-fool burger been flipped a few times and is overcooked.

V. The fork is needed because otherwise some people won't be able to use Bitcoin.

Bitcoin isn't for everybody. Creating something useful that everyone can use is an exercise in trying to create something that's useful but worthless. Such a thing may exist, in the sense perpetuum mobile may exist. As far as the science of physics goes, they do not.

Should blocks ever become full, older coinbases will be prioritized over newer coinbases, and larger mining fees and transactions prioritized over smaller mining fees and smaller transactions. This means that someone who wishes to pay for very little with Bitcoin will be forced to use something else, so to speak is forced to "give his seat" to someone richer. This is exactly the point and the intent of Bitcoin : to force the poor to yield to the rich, unversally, as a matter of course.

…

For the reasons noted and for many other reasons I am pretty much satisfied that Bitcoin is not nor will it ever be a direct means of payment for retail anything. You may end up paying for a month's worth of coffee vouchers at your favourite coffee shop via Bitcoin (so shop scrip built on top of Bitcoin), you may end up settling your accounts monthly at the restaurant in Bitcoin (so store credit built on top of Bitcoin), you will probably cash into whatever local currency from Bitcoin (be it Unified Standard Dubaloos or Universally Simplified Dosidoes or whatever else) but all that is entirely different a story.

He is explaining the Bitcoin is reserve currency of the TMSR, not a medium-of-exchange. See my prior blog Get Ready for a World Currency for more about that.

Note that I had explained in detail that Bitcoin was designed such that it can’be modified to scale transaction volume (without an oligarchy but in that case the oligarchy would extract maximum fees any way). And Bitcoin can never support real-time transactions. In addition to the other criticisms made against SegWit by others, Lightning Networks must become dominated by Mt. Box nodes and thus it will become a fractional reserve system with loss of value analogous to centralized exchanges.

In the comment section of my prior blog post, I outlined my expectations and many other details, then @finitemaz asked:

^{Do you think BCC is going to be the real BTC then, even though it is forking? Is Craig Wright going to support Bitcoin Cash or another fork down the line?}

Neither BCC nor any clone of Bitcoin can be the “Real Bitcoin” as so defined. Craig Wright in his desire to reject SegWit is a supporter of the real Bitcoin, but if he tries to fork the block size then he is writing free options as explained above.

I wrote in a comment on my prior blog:

Bitcoin probably already has a lock on the intrinsic value of a reserve currency for cryptocurrencies, and the medium-of-exchange to/from fiat. Thus I argue the worst outcome is to fork Bitcoin in August destroying the immutability which insures a 21 million coin limit (and I think all Bitcoin forks will fail because whales will protect the intrinsic value of Bitcoin).

I realize it is unsatisfying to Bitcoin fans if Bitcoin will not scale, but Bitcoin does not need to scale as it can be the on/off ramp to fiat and BTC saving for the altcoin that provides scaling,. Since there will likely be many such competing altcoins, then BTC remains the common denominator for investing in the crypto sector, i.e. the reserve currency of cryptocurrency.

Even if Bitcoin was forked to add some weak ass non-scaling lie, it will still never be that cryptocurrency that provides the breakthrough I am alluding to above. For that, we need competition and experimentation amongst altcoins (not forking the BTC unit into chaotic confusion). Thus we need a stable reserve cryptocurrency and that is Bitcoin. We have it, so no benefit in destroying it whilst trying to make it be something it can not be. Transaction fees will go up on-chain, so eventually those who can not afford have to move to an exchange or an altcoin. That drives a market need for altcoins to compete for the best solution.

What To Do

Move your BTC into a wallet you control (e.g. Electrum) immediately, else trade your BTC for altcoins.

SegWit (BIP 141) could begin forking any time because afaik BIP 91 has activated and this requires miners who signaled BIP 91 to orphan blocks which do not signal SegWit. And BIP 148 UASF requires this starting August 1. But spending to yourself is not at risk (presuming we do not get massive change reorganizations so moving your coins to private wallet or exchanging for an altcoin asap is urgent, also because a backlog of transactions could possibly ensue nearer to August 1).

You will not likely be able to accomplish all of this via Localbitcoins or other exchanges.

Afaik, to spend your BTC on the SegWit fork so that it can not be replayed on the legacy Bitcoin will require either mixing with some transactions from blocks that derived from a block containing a SegWit transaction, but (this probably does not scale well and) these can not begin until August 23. Before then, the other way is to attempt to double-spend to yourself on the SegWit fork and legacy Bitcoin over and over until it happens. You’ll need to import your private keys into separate wallets for each fork.

Replay protection is built into the Bitcoin Cash (BCC) fork that starts on August 1, so just import your private keys into a BCC wallet. Btw, not too encouraging that the specification for BCC doesn’t know that 100,000 bytes ≠ 100KB.

Looks like initially we are going to get a lot of excitement and derps rushing into the SegWit fork. So this might be a great opportunity to amass more real Bitcoin by selling one and buying the other. Also looks like Bitmain is confused.

Disclaimer: I am not providing speculation nor investment advice. This is provided for your entertainment and anyone can be wrong about the future.

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P.S. My (TPTB_need_war and iamnotback) warnings about ICOs and SEC securities law have been vindicated.