On November 15th at block 556767, the Bitcoin Cash network splintered into two competing factions: Bitcoin ABC and Bitcoin SV. Regular readers of The Block know we’ve been on the forefront of Bitcoin Cash debate — covering all the major events leading up the hard fork. The Block summed up the reasons for the debate, interviewed major participants, mapped out the key companies involved, and covered institutional investors’ views on the split.
With the chain split completed and both sides adamantly asserting they deserve the Bitcoin Cash brand, the following examines the different scenarios that might come to fruition in the days and weeks ahead.
Scenario 1: Bitcoin ABC and Bitcoin SV remain independent chains, and the Bitcoin Cash brand is retired
Bitcoin ABC and Bitcoin SV could grow to become independent chains. These chains can develop their own ecosystems and trade under their own tickers (it’s happened before). While this scenario is possible, it is becoming increasingly unlikely. Well-established firms like BitGo, Kraken, and CoinMarketCap have recently confirmed that they are applying the Bitcoin Cash brand to ABC. Additionally, the lack of replay protection between the ABC and SV chains and the persistent threat by SV’s strongest supporters, CoinGeek, and nChain, almost ensures that there will be an ongoing hash war over the Bitcoin Cash brand.
Scenario 2: Losses incurred during the hash war will force one side to give up
Five days after the chain split, miners on both chains have incurred losses adding up the millions. Recent estimates by BitMEX Research show that miners on ABC and SV have spent an estimated ~$5.1M on mining their respective chains. Assuming miners are leasing all this hashing power, BitMEX Research estimates that the total losses suffered by miners is ~$6.1M. Also worth noting: By mining on these two unprofitable chains, miners are also facing the opportunity cost of not mining a profitable chain like Bitcoin.
A hash war is like a game of chicken — whichever side blinks, loses. If ABC miners move their hashes back to a more profitable chain like Bitcoin, its leaves room for SV miners to attempt an attack on the ABC chain. If instead, SV miners make the move, the opposite can happen.
With the accumulated proof of work on the SV chain appearing to flatten out, SV miners could potentially be running out of resources to sustain the hash war. However, at current rates, ABC miners are sustaining much larger losses than SV miners. At this point, it is difficult to tell which side will capitulate first: the side that’s less well equipped or the side spending more ruinously to win?
Scenario 3: ABC changes proof-of-work to prevent a potential attack by SV.
Prior to the Bitcoin Cash hard fork, a community member proposed an option to Amaury Séchet, lead developer of Bitcoin ABC. The option is to change the proof-of-work (POW) algorithm used by the Bitcoin Cash network — SHA-256. A change in the network’s POW would immediately invalidate ASIC miners on the Bitcoin Cash network. This option would end the hash war but at the cost of losing the security provided by ASIC miners. This option will also threaten the ethos of a decentralized network, as it essentially centralizes control in the hands of the ABC developers.
Scenario 4: One side begins to attack the other.
If the hash war continues and neither side gives in, one side may begin to initiate an attack on the other. Here’s how it could look, depending on who moves first:
ABC attacks SV
ABC supporters can initiate two primary attacks on SV (1) Forcing a sell-off of SV coin and (2) Starting a 51% attack on the SV network. Bitmain’s founder and ABC supporter Jihan Wu has hinted that he will start selling his Bitcoin SV (BSV) coins. While it is unclear just how much bitcoin cash Jihan owns, considering that the BSV market is relatively illiquid, a public sell-off by a major player and other large BSV holders could augur a large price drop for BSV.
Yesterday, The Block reported that SV appeared to be facing a block reorganization (reorg) attack, which could have potentially delayed or reversed transactions on SV’s blockchain. It was later discovered that the reorg was unintentional and not an attack, with possible causes including poor network connectivity or block propagation. However, this accidental reorg does prove one point: The SV network is unstable and has broad attack vectors. While ABC has added a controversial checkpoint to their network, which deters a reorg attack, SV developers have not done the same. A reorg attack on the SV chain could completely kill off any support for SV, as both miners and exchanges will be impacted. If ABC miners accumulate enough hash power, that could also begin to reject any blocks mined by SV miners on the SV chain—making the chain unusable.
SV attacks ABC
As it currently stands, SV does not appear to have the hash rates to attack ABC. SV’s total accumulated POW is ~65% of ABC’s, and their hash rate is ~67% of ABC’s. The current threat SV poses is the lack of replay protection between the two chains. A lack of replay protection could cause users to accidentally double spend — causing unintentional losses of those coins. This could damage the overall brand of Bitcoin Cash as a safe and reliable cryptocurrency.
One potential advantage SV has over ABC is the cult-like belief in their chain and the persona behind it: Craig S. Wright. Many members of the SV community truly believe Wright is Satoshi Nakamoto. They’ve made their intentions clear: They will continue to support SV despite ongoing losses. ABC and SV appears to be a battle between businesses and idealists. While businesses might soon be forced to follow economic rationality and cut their losses, the idealists will gladly trade rationality for belief. In the end, this irrationality may help them maintain their hash rates while the ABC side capitulates.
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The possible scenarios following the Bitcoin Cash hard fork written by Steven Zheng @ https://www.theblockcrypto.com/2018/11/20/the-possible-scenarios-following-the-bitcoin-cash-hard-fork/ November 20, 2018 Steven Zheng