One of the many reverberations of the August 1 Bitcoin Fork is a harsh lesson to investors everywhere. This is not a game. There is real money and a lot of risk involved, and not everyone is willing to jump on the bandwagon just for the thrill of the ride. Coinbase, one of the world’s largest cryptocurrency exchanges, and its customers, are finding this out the hard way.
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For many days prior to the Fork, Coinbase announced, via email, through social media, and on its site, that it would not be dealing with Bitcoin Cash (BCC, also known as BCH). It gave account holders clear notice to shift their bitcoins to a different wallet if they wished. This is important, given that all holders of Bitcoin were entitled to receipt of an equal amount of BCC, a move that some saw as essentially doubling their money.
This type of thing doesn’t happen in the fiat currency world, and given the speed by which Bitcoin Cash tripled in price – immediately creating a market cap that made it the third biggest of all digital currencies – there was a lot to be gained, if only temporarily.
Nevertheless, this did not sit well with Coinbase customers, many of whom have expressed outrage for the following reasons:
1.) that as Bitcoin holders, they have lost out on getting their share of Bitcoin Cash
2.) that as a cryptocurrency exchange, Coinbase had an obligation to participate and accept BCC from the start
3.) that perhaps Coinbase is keeping its customers’ Bitcoin Cash for itself
These allegations and others may become part of a class action lawsuit very soon.
Coinbase has stated through its Twitter account that the company is not taking customers’ Bitcoin Cash for itself, but it begs the question, where will these stacks of BCC go?
Coinbase is not the only exchange having difficulties with the post-Fork reverberations, but it is certainly one of the most famous.
Delays, Delays Delays
The hours leading up to August 1 were frustrating for Bitcoin holders who discovered, possibly for the first time, that the mining process is indeed very labor intensive and not at all suited for a massive wave of simultaneous transactions. Account holders were told to expect wait times of 6 to 12 hours for confirmations of their transactions. Ironically, this is one of the very problems that caused the Fork in the first place – the capacity for blockchain miners to process transactions more quickly and in greater number. The resulting disagreement over procedure led to the split.
Similarly, online wallets that host Bitcoin and which now host Bitcoin Cash are advising their clients to be patient. Breadwallet, for example, has confirmed to its account holders that their BCC exists, but they will have to wait a little longer to get their hands on it and trade it. According to an official statement posted to their blog, once the access happens, they will require users to wait for 20 confirmations, rather than the normal, acceptable six. This will result in wait times of up to five days or more before funds would be available to trade.
This puts a great many investors and account holders out to pasture during these crucial first 48 hours after the birth of BCC. Market history is full of stories of IPOs that saw prices surge on the first day of trading, only to fall back and normalize with the passing of time. Investors are used to real-time access to trades, and expect to be able to partake in such surges. The consequent Bitcoin backlog will not site well.
Thieves Prosper in Times of Confusion
Breadwallet and others have also warned investors and account holders to be wary of scams. This is a period of great confusion and uncertainty. People do not like being separated from their money. As such it will be extremely easy for scam artists and organized criminals to establish websites, email blasts and social media posts in which they pose as organizations working to repossess the held BCC, or “spoof” as the organizations themselves.
Investors should be triple-vigilant given that no one has really gone down this path before, and there is no insurance organization backing up the assets.
Will This be Bitcoin’s Shining Moment? Or Maybe November?
As for the future of both currencies, BTC and BCC/BCH, opinions vary wildly. Some see Bitcoin Cash as the better option in terms of how transactions are approved. This puts it in league with Ethereum Classic, whose origins are similar in nature. But as many market watchers point out, these currencies have no intrinsic value at all, save the faith commonly held among those who buy them.
Bitcoin has established brand acceptance, which goes a long way towards winning a multi-horse race.
For Bitcoin, expectations are that the desired block size limit will take place in November, increasing from 1 megabyte to 2, and boosting transaction speeds in the process. This is dependent on the mining community banding together, agreeing on protocols, and upgrading its equipment to handle the increased flow.
If this fails, then Bitcoin Cash stands to win a boost in confidence and value.
In an email to CNBC, Aurelien Menant, founder and CEO of cryptocurrency exchange Gatecoin, stated, “If most miners decide that for economic reasons they prefer to mine larger blocks and commit more hashing power to BCC, then it’s likely more development work and user adoption would follow, and those conducting business with Bitcoin may decide to adopt BCC instead…for this to happen Bitcoin Cash would need to prove that its technology can match the security features and reliability of Bitcoin’s software.”