Buying Bitcoin: August 1st And Everything After

We’ve said previously how important August 1st is in the cryptocurrency world. August 1st is a signaled date in which decisions about Bitcoin—the largest and first cryptocurrency—will be made. The repercussions of this go far beyond Bitcoin and will be a sign of things to come. It’s also the first date in which the world beyond crypto first adopters will be watching, as new consortiums have joined into the burgeoning industry.

What happens on—and after—August 1st is crucial for any investor in Bitcoin.

The first crucial point is on the regulation (not financially, but in terms of stability) of the bitcoin protocol and problem-solving.

This is all born out of identified problems with Bitcoin, from both investors and miners (if you’re not within this world, you can think of miners as financial verifiers). Bitcoin was moving too slowly and too expensively, and the future scaling viability looked meek given these. Without a central presence propping up and/or regulating Bitcoin, these issues could go unsolved, plummeting the value for investors and scaring away miners, who earn the currency by doing work to verify transactions.

Because there’s no central authority, users will “signal” problem-solving methods, which is essentially like a vote.

So we see now that two things are going to happen within Bitcoin. The first is a hard-fork. Hard-forks create new coins, with new code, and potentially new use cases. So we expect that a new coin—called Bitcoin Cash—will be introduced. This article explains Bitcoin Cash for the curious. Essentially it’s implementing the things that Bitcoin will not be doing on August 1st. It will have its own investors who believe that August 1st BTC solutions are not viable enough. Exchanges are already preparing to support Bitcoin Cash for trading. Keep an eye out for its movement.

The second implementation is called SegWit (which stands for “segregated witness”). This is meant to increase blocksize (allow for more transactions to be tied into a block and to resolve a bit of troubled spot in the software. You can read more here. This is good news for most, and the value of Bitcoin is up 10% in the last 30 days, reflecting investor confidence.

The second crucial part of all of this, however, is what it means for the value of Bitcoin and your role as an investor.

There have been two camps lately on this aspect: one that points out that, while this implementation cycle has been steady in the last few weeks, it caused more panic and volatility than necessary over the last few months. It’s also likely to bring some ups and downs to Bitcoin Cash post August 1st. But I think it’s important to remember that this won’t be the last time there will be signaling needed for updates.