Much will be written today and beyond about the Bitcoin split, an event that has been a long time coming in an industry whose speed of advancement is faster even than dog years. It is a birthday. The creation of a new currency with the unfortunate name of Bitcoin Cash. Branding is an important part of any business, and spinoffs from a successful initial product must fight hard to win customer loyalty, since they compete on two fronts – against rival products, and also against the established goodwill of the mother ship.
Look at Coca Cola’s New Coke, Coke II, and Coke Classic debacle of 1985, a twisted saga of a marketing and financial move gone terribly wrong, when Coke sought to revitalize its century-old formula in an attempt to appeal to the growing youth market, or simply to save manufacturing costs. Regardless of its true intentions, the move was seen as the day Coke lost the cola wars, and to celebrate, Pepsi gave all its employees the day off.
Look too at Ethereum Classic (ETC), another split from an established brand, with an equally unfortunate name. Defenders of ETC will state, quite rightly, that it adheres more closely to the ideals of blockchain-based “currency,” being that the chain is immutable and pure. In that sense Ethereum Classic is classically- Ethereum-but-better, but to those still catching up to the whole idea of cryptocurrency, such second-generation arguments are as tough a sell as de-alcoholized beer.
Bitcoin Cash has been born to famous parents and barely hours old, it is already in trouble. Major trading houses like Coinbase have publicly stated they do not intend to support it. Others are now struggling with the challenge of providing duplicate accounts for their customers, containing an equal amount of Bitcoin Cash and regular Bitcoin. This does not mean it is dead in the water. There is a strong chance that both Bitcoin Cash and Ethereum Classic will do great things in strengthening the validity and reliability of blockchain based transactions.
What is good about the bitcoin split? Primarily, it puts even greater pressure on the Bitcoin community to address crucial issues around scalability, processing speed, and viability as a currency. The unprecedented growth of Bitcoin usage has pushed the limits of its transactional capacities to the point that traders and customers have become exasperated over long approval times and excessive service fees, to a point that traditional banking technologies like credit and debit cards look better by comparison.
Having a new kid on the block(chain) ensures greater focus is given to establishing and accepting a workable and singular approach to processing the transactions within blocks. Obviously, many protocols, like SegWit and others attempt to iron out the challenge, but the challenge itself is reminiscent of the early years of the World Wide Web, in which the demand for better and faster browsers largely outpaced any on company’s ability to provide.
What is bad about the bitcoin split is that this new Bitcoin Cash imposes its own demands on the system, requiring processing resources that are essentially available to a few organizations that possess the triptych: monstrous CPU farms fed by cheap electricity and maintained by an inexpensive but highly-skilled workforce. It has long been a concern that consolidation of processing power in this way will remove the neutrality of Bitcoin and other blockchain transactions, giving certain parties authority and decision-making power over which transactions get processed and when.
Also bad is the marketplace confusion. Currently there are more stories in the mainstream media about blockchain-based failures than there are of successes. The robberies, hackings and acrimonious splits get more headline space than do the major achievements and developments. For example, the very recent announcement by Bank of America of its successful filing of patents for distributed ledger technology will be noticed only by industry insiders. This is just one of hundreds of actions being taken by banks, governments and organizations around the world who are literally walking the walk and putting blockchain to work.
Every revolutionary technology must go through these phases. To borrow Bruce Tuckman’s famous team-dynamics terminology, it’s about “forming, storming, norming, and performing.” We are currently in the storming phase here in Team Blockchain.
But for average consumers, including the majority who have a hard time distinguishing Bitcoin from Apple Pay, the divisiveness and uncertainty of this storming phase, fueled this moment by the bitcoin split, will only serve to slow down public acceptance, which in turn has the potential to drag adoption momentum in both retail and B2B spheres.
It is unlikely that Bitcoin Cash will die away, any more so than Ethereum Classic. Both currencies have merits that make them entirely capable of overtaking their predecessors in the way that Netflix beat its own mail-delivered DVDs, which themselves beat VHS which had already beaten BetaMax tapes. Or how Spotify ate everything that occurred since the phonograph record. But for Spotify to thrive, we had to have Napster. SnapChat needed MySpace. And virtual currencies are currently hashing this out (pun intended).
The days and weeks ahead will obviously be the sole judges of the success of any of these evolving technologies, as well as their rivals and progeny. They have already spawned a fast-moving marketplace for token-based ICOs, but what is most interesting is how fast the established governing bodies are striving to keep up and adopt, rather than resist this change. The SEC, for example, recently ruled tokens to be securities in the context of ICOs – a fast and prescient move for a branch of government. And similarly, banks around the world are watching with interest as the bitcoin split happens before their eyes. This type of heavy presence from the established financial world will ironically go a long way towards legitimizing the ultimate winner of the cryptocurrency evolutionary struggle.