On August 1st, the Bitcoin community witnessed the very first hard fork of the Bitcoin blockchain. What this means is users who owned Bitcoin prior to the hard fork now have Bitcoin, as well as, Bitcoin Cash. Whatever side you take in the Bitcoin scalability debate, it is far from a perfect solution. After the Bitcoin community made the decision to implement Segwit2X, Bitcoin Cash immediately reacted to the news in protest by announcing they would hard fork Bitcoin in order to keep the intentions of the creator Satoshi Nakamoto intact.
On August 1st, the Bitcoin community witnessed the very first blockchain split of the Bitcoin network. What this means is users who owned Bitcoin prior to the hard fork now have Bitcoin, as well as, Bitcoin Cash. Whatever side you take in the Bitcoin scalability debate, it may be far from a perfect solution. After the Bitcoin community made the decision to implement Segwit2X, Bitcoin Cash immediately reacted to the news in protest by announcing they would hard fork Bitcoin in order to keep the intentions of the creator Satoshi Nakamoto intact.
Does Bitcoin Cash Have The Right To Exist?
Whatever your beliefs on Bitcoin; whether you think Segwit2X should be implemented or not, it should be important to note that there is nothing wrong with competing cryptocurrencies. While it is true, the Bitcoin hard fork is far from a perfect solution, what conspired was inevitable in that Bitcoin holders were split from the get go on Bitcoin’s future. The only solution to this matter is to give Bitcoin holders a choice; the choice to hold or sell Bitcoin or Bitcoin Cash.
Will Bitcoin Lose Value?
Theoretically, Bitcoin should decrease by the value of Bitcoin Cash as that value has been transferred to Bitcoin Cash (keeping in mind traders may have foreseen the drop in advance). However, Bitcoin prior to the split was already on an uphill trend and it was only the continuous usage of the Bitcoin blockchain that prompted a scaling solution. If Segwit2X is implemented, there is no reason why Bitcoin won’t continue that uphill trend. Furthermore, those with access to their private keys who receive Bitcoin Cash shouldn’t lose any money for the value lost in Bitcoin is counteracted by the value backing Bitcoin Cash.
Does This Undermine Bitcoin?
Initially, most likely. The current debate is similar to a debate on Gold and Silver. Imagine a society that is solely run on currency backed by Gold. Suddenly, the government decides that Silver is now a legitimate medium of exchange along side Gold. Because there are individuals that prefer to use Silver over Gold, this may cause a drop in the value of Gold. In the end, society will choose whether they prefer Gold or Silver through the market. Now think of Gold as Bitcoin and Silver as Bitcoin Cash.
What Does Mises Say?
According to Ludwig von Mises in his famous Theory of Money and Credit treatise, the common medium of exchange is determined via the free market. What this means is that society, with all it’s options available, will decide amongst themselves on what commodity is the best medium of change. Mises states the commodity must be liquid and stable. Liquidity refers to a coins marketability. The infrastructure sounding Bitcoin, along with the huge market cap and volume, gives Bitcoin a legitimate case to maintain its spot as the common medium of exchange. Stability, on the other hand, refers to a commodity that remains consistent. Unfortunately, it is this point alone that makes the Segwit2X implementation worrying for Bitcoin holders as the original vision of Bitcoin has changed. With the changes to the Bitcoin protocol moving away from the creator’s original vision, the future of Bitcoin is uncertain. According to Mises, this would make Bitcoin an unlikely candidate for a medium of exchange.
Adding Mises’s definition of a common medium of exchange into the equation, we get an interesting phenomenon. For speculators that believe liquidity is important, Bitcoin is your coin. Due to the wide ranging infrastructure surrounding Bitcoin, Bitcoin is far more liquid than Bitcoin Cash. However, if the speculator views stability as important, Bitcoin Cash is your coin. Bitcoin Cash follows the vision of Satoshi Nakamoto and is not set to change drastically. Once we view things in this way, the Bitcoin split was inevitable. Now it is time for the free market to work it’s magic; for we will finally see which coin will be the medium of exchange for the future.