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Ok, stupid question: in real dollars, if I sell my ONE coin just before a fork or my then TWO coins right after the fork, will I end up with the same dollar amount? For that to happen the old coin type would have to lose in price at which the fork starts. How is the price for a coin of a fork determined?
That helped but I do not understand the economic compatibility of a fork. How do they not wreak havoc and chaos on that coin's economy? Do I get coins for each of the new coins or do I have to pick? It all feels really risky and that risk feels foisted upon me. Can I cash out before the fork?
A fork is just a protocol upgrade that is non-backward-compatible and where both the old and new protocols have significant amount of validators (in PoW, this means miners) operating with that protocol. Since the protocols are not compatible, they have a different transaction history after the fork. Since they used to be compatible, if you had 1 BTC before the fork, after the fork, all validators still agree that you…
Earlier quoted context omitted.
A fork is just a protocol upgrade that is non-backward-compatible and where both the old and new protocols have significant amount of validators (in PoW, this means miners) operating with that protocol. Since the protocols are not compatible, they have a different transaction history after the fork. Since they used to be compatible, if you had 1 BTC before the fork, after the fork, all validators still agree that you…
Could I trade with that btc on both forks at the same time?
Ok, stupid question: in real dollars, if I sell my ONE coin just before a fork or my then TWO coins right after the fork, will I end up with the same dollar amount? For that to happen the old coin type would have to lose in price at which the fork starts. How is the price for a coin of a fork determined?
However in this market; market is irrational and it all depends on how the market is willing to price it pre/post fork. No, you won't wind up with the same dollar amount.
Earlier quoted context omitted.
A fork is just a protocol upgrade that is non-backward-compatible and where both the old and new protocols have significant amount of validators (in PoW, this means miners) operating with that protocol. Since the protocols are not compatible, they have a different transaction history after the fork. Since they used to be compatible, if you had 1 BTC before the fork, after the fork, all validators still agree that you…
Could I trade with that btc on both forks at the same time?
Ok, stupid question: in real dollars, if I sell my ONE coin just before a fork or my then TWO coins right after the fork, will I end up with the same dollar amount? For that to happen the old coin type would have to lose in price at which the fork starts. How is the price for a coin of a fork determined?
- from the BTC point of view, there is 1 BTC both before and after the fork
- from the B2X point of view, there is 1 B2X both before and after the fork
- at any one time the value of 1 BTC is whatever people want to exchange it for
- at any one time the value of 1 B2X is whatever people want to exchange it for
- it just turns out that BTC == B2X before the fork
† Without replay protection, transactions may or may not be replayed, but the blockchains do differ.
Ok, stupid question: in real dollars, if I sell my ONE coin just before a fork or my then TWO coins right after the fork, will I end up with the same dollar amount? For that to happen the old coin type would have to lose in price at which the fork starts. How is the price for a coin of a fork determined?
This can make you end up with either a larger sum if you buy exactly before and sell shortly after the fork, or a smaller sum. Why should the sum be larger? Because there's people on both sides of the fence (the original coin and the forked coin) which think that their coin will "win the race", thus they include a certain additional, speculative value deducted from assumed future price increases into their estimates of the current value of their preferred coin. This drives up the speculative value of both coins simultaneously, and since either side focuses mostly on its preferred coin, driving up the perceived value of it, and neglects "driving down" the perceived value of the other sides' coin (because of disinterest or simply because driving down perceived value is much harder than driving it up, as humans are usually focused on positive things), this can result in a situation in which the mathematical sum of the speculative value added to both post-fork coins is quite a bit larger than the "combined" speculative value that was previously included in the original coin.
This is, in my opinion, exactly what happened with the Bitcoin Cash fork earlier this year. For this Segwit fork, people saw that the earlier fork "created value out of thin air" and thus began to incorporate some of this assumed future value into their value proposition of the coin pre-fork. This drove the price increase right before the fork (well, partly - there was also the CME news, which was a big driver, too). Funny enough, this time it probably won't work out as it did last time - the fork was "called off", and even if it would happen, it most likely will not result in a similar situation due to a) the "free money" having already been priced in during the time before the fork and b) the fork being a "colliding fork" this time, with both coins wanting to be "the real Bitcoin", having no replay protection or real separation of both networks. They wouldn't have coexisted for long - one of them would have "won" and captured the vast majority of value, while the other one would have diminished to the low 3-digit or even 2-digit price realm (effectively equaling a worthless coin, as in crypto, there is NEVER a really worthless coin in terms of having a price of zero - there is always someone wanting to pay some price, albeit very low, for anything that has "crypto" attached to it ;-) ).
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Jackson Palmer (Dogecoin founder) talks all about the Bitcoin fork at the last local Hack Days meetup[0]. It's actually a really great talk. [0](Skip to 30m) https://www.facebook.com/hackdays4all/videos/549774142034920...
Do you have a non-fb link?
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Saying the rules can be changed is like saying that your eyes changed color if you have a child with different color eyes. A fork is not the same chain as the original.
All of the comments above lead me to understand that basically anything can happen with BTC and this kind of undermines it's value as a 'hard currency'. The whole point of decentralization was that nobody could control it, and devaluation was based on some algorithm, limited by tech. If these rules can change, then the intrinsic value of BTC is truly up in the air. What business would invest in using BTC as a currenc…
The only reason people are investing in BTC is that the price is going up because demand is going up faster than supply is increasing. It's not really any different than if Confederate paper money became the hot thing, and stores started accepting it for payment, despite it not being legally currency. Since they only discover new sources of Confederate money every so often, if everyone wants to buy the stuff, the price is going to go up. If this keeps on happening year after year, people are going to start thinking it always goes up and buy it expecting it to go up.