BCH hash war shows just how centralized crypto really is

21 Nov, 2018
by Arthur Sillers
BCH hash war shows just how centralized crypto really is

Despite reports that BCH SV has had a number of setbacks and is reportedly getting left behind by exchanges, Coindesk maintains that its likely that both chains will continue for the foreseeable future.

While Craig Wright has steadfastly held that the chains will compete until one of them dies, Calvin Ayres’ CoinGeek holds the majority of mining power for the SV chain, and he seems ready to reach some kind of agreement which preserves both blockchains.

Furthermore, following Binance’s lead, exchanges Poliniex and Bitmex have both recently listed the two chains as separate tokens.

Furthermore, while Coinbase listed BCHABC first, they have announced that they are in fact working on withdrawal and trading services for BCHSV, but that it will take a number of weeks. Of course, while there is no clear winner, everyone seems to have lost, including the rest of the crypto market.

The BCH hash war itself has cost at least $8 million so far, and many point to the contest as the factor that precipitated the market downturn, though other factors have been pointed to as more significant.

Craig Wright continues to maintain that he will fight essentially to the death, trying to persist in mining SV until it overtakes the ABC coin, at which point it can mount a 51% attack and overtake it. So far, Roger Ver and the ABC chain has been mining at a loss to keep apace so that this is not a possibility, and ABC has been introducing technical fixes to protect the chain from being rewritten.

Either way, Ver has had to divert a lot of mining power from his Bitcoin.com pool from BTC to BCH, which is not only a less valuable coin, but is actually a loss. This has led to some backlash, with critics noting that anyone buying into the mining pool expected that not only would the pool mine Bitcoin, but that it would not switch to an unprofitable cryptotoken. In a video interview on the official Bitcoin.com Youtube channel, Roger Ver said, “It’s none of your business where the hash rate came from and it’s not for a single day, it’s for as long as we want. We can go for a single decade if we need to so bring it baby.”

This perhaps works to dispel notions that BCH SV will overtake ABC imminently, but it further highlights the structural problems that the hash war has highlighted. BCH SV, or Satoshi’s Vision, was underwent in order to keep cryptocurrency as similar to the original vision as possible, and the extent to which the substantive differences between the chains does this is perhaps up for debate, but what is clear is that the manner in which the hard fork happened shows that cryptocurrency has come a long way away from ‘Satoshi’s Vision.’

Craig Wright claims he is Satoshi, but putting that aside, the original vision of cryptocurrency relied on its decentralized nature. If mining was truly decentralized, the logic went, the free market would not allow anyone in particular to take control. Since the introduction of ASIC’s, individual mining operations are all but completely unprofitable, and the only mining that gets done continues to pool to a number of centralized actors. While these mining pools rent out their hash power, they still ultimately control the game and are economically untouchable by individuals who cannot afford the overhead of a competitive mining rig.

The situation now is that even if crypto is a ‘decentralized’ technology, the control is extremely centralized, something which has been happening since Bitcoin became a legitimate (or somewhat legitimate) investment vehicle, and is elucidated by the fact that a single actor can switch hash power from one coin to another while claiming to viewers, and presumably investors, that its ‘none of your business.’

This of course, doesn’t mean that Craig Wright is being anymore democratic in his decision to force a split, but rather is exhibiting the same behavior, and in fact pushing Roger Ver into making these decisions, which ripple out and have crashed the rest of cryptocurrency. If cryptocurrency was truly decentralized, and functioned based on market competition, the actions of two individuals should not have an effect on every other investor in this way.

In fact, Craig Wright shows just how ineffectual the original Bitcoin is at remaining a ‘decentralized currency.’ The events show how much control lies in a small number of people, and also how much crypto has become a speculative vehicle for day traders. The fact of the matter is, if crypto is to really get more in line with ‘Satoshi’s Vision’ of a currency which disrupts the banking system and allows cheap, fast, peer to peer transfers of value rather than replicating or enabling the kind of top-down control which it was originally designed to combat, there needs to be much greater changes to crypto’s infrastructure, rather than reactive returns to what is clearly not functioning the way it was intended.

Read more: Roubini takes another swing at crypto, Anthony Pompliano steps upASIC mining rigs, decentralization, and the future of the crypto market 

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