Why Two Blockchains End Up Being Worth More Than One
There is a theory I have been thinking about recently which really shouldn’t hold true, but I ultimately think it does, which is two blockchains most of the time end up being worth more than one. The reason this shouldn’t be true is because basic economic theory says a second chain will pull direct investment from the primary chain when a fork occurs, but in almost every case we have seen a hard fork, the combined chains end up being worth more almost immediately. The way that we usually explain a fork is like a stock split, but I don’t think that is a fair comparison. In a stock split there aren’t sides that believe in one ideology versus the other.
Many will shrug this off and just say that the chain would have been worth the combined value if the fork didn’t occur, but I have an idea why I think this is wrong. The primary reason I think that the idea that two chains end up being worth more than one is because of money’s value as speech. Money itself has pretty much been shown it can be used as a form of speech. Whether or not it is buying votes, lobbying, ect. it happens. Should money be a form of speech is a topic for another day but I believe that it is regardless.
So if we look at what ends up happening when big forks such as the eth/etc fork and the btc/bch fork, is you have two sides that vehemently fight for what they believe is the future. In the ETC case it was the idea that the blockchain should be immutable and not able to be rolled back and in the BCH camp it was that the block size should be increased. In either camps, people want to persuade those who can be persuaded to one side or another so the way they do this is through an influx of outside money.
Big players like Roger Ver pumped money into BCH in order to sustain a price when people sold off initially. While sustaining the price, he was also increasing the investment into one side which pumped up the price. People are so involved in their factions and wanting one side to succeed that their outside investment is what I believe ultimately makes the combined chains worth more in the short term at least. In the long term anything could happen. Ultimately I would say if there is going to be a fork and there is a large enough side that is willing to bring in outside investment as a form of speech, I would say there is a good chance the combined chains will be worth more. Keep this in mind with bitcoin if something happens in November.
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Funny thing is they are both only worth what the last guy paid. The application of this exchange to value the complete chain is where the magic is made. Both chains are just a database with potential to perform some action. This is why I prefer steem it is backed by the people using it doing something useful creativity shared in the human experience fueling a free and open platform. The other coin that is only based on fiat has less value to me.
To each his own. The fiat is worse than worthless it is debt based so you can assign any number to it in the end it is how much function of value does the coin give you. I got tired of watching the bobbing up and down of the balance of my bitcoin wallet as it rose with the tide. I realized that holding bitcoin only helped me and holding steem power allows me to grow it at the same time I can reward others and that is way more valuable to me than. Some old guys debt papers
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I agree with 2, but with point 1, it wouldnt address why almost immediately after, a both chains are worth more than one because at the point of growth the coins have already split. Also it should probably be a negative because many move into the coin for the for and sell both immediately after and move back into what they were holding before.
Point one was more addressed to before the split, number 2 comes in places right after the split. Another point in case of something like BTC is that there is a huge hype during those times boosting both coins up as well.
Hold it
Makes sense nice unpacking of this. Cheers ;)
that is probably the best plan for the short term anyway. The long term, things could end up differently.
It makes sense to me because it's like stock spin offs. Generally when stocks spin off smaller business both companies go up. A management team free to pursue a vision optimized for it and it alone often does better than an org trying to juggle multiple goals. I think this is why forks create value. They allow competing Devs to each go their own way.
I want to understand fully but I don't think I do.
Are you saying a shift in buying of one cryptocurrency ultimately causes a decrease in another cryptocurrency/all of the cryptocurrencies, unless there's say some large investment going into one of the currencies to float the price?
I think ultimately it is people pumping outside money into one side after the fork as a form of speech.
Ok, I get you, it's definitely an interesting/likely theory...
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wooow this is an impressive theory, thanks for sharing
thanks :) its just a theory I have been thinking about, I could be totally wrong.
Excellent @calaber24p
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