Bitcoin’s Hard Fork of BCH Bitcoin Cash a milestone for cryptocurrency
The hard fork occurred on August 1st, 2017 with some nodes of the Bitcoin network implementing the “Segwit update”. Although a lot of potential chaos could have happened, many in the industry called it correct that the most probable scenario is that the split would occur with the creation of BCH and Bitcoin users would not lose any coins and would be rewarded with an equal amount of BCH. However, most exchanges and users were advised to backup their wallets and not do any transactions in the meantime.
Beyond this a lot of questions and issues need to be sorted out in the cryptocurrency world for things to stabilize and be universally accepted by businesses and individuals. The key issues in my mind are “volatility”, “stability”, “security” and “regulation”. Really a serious issue with either of my three cores issues puts people and businesses at big risk although new updates and coins keep coming out with some promising the solution to these various issues.
This is in reference to the extremely unpredictable nature of many currencies and Bitcoin is a core example with rapid swings. Now people have often been warned that “don’t store your coins for the long-term” and this comes from the Bitcoin team itself as no one can be certain of the future of any coin at this moment.
Some have lamented that cash is the same, this is true but with the caveat that cash is backed by a government and central bank (all of who which do not really like cryptocurrency unless it is managed or under their control-more on regulations later). Cash of course has had its issues whether run on banks, robberies, theft, fraud and other misuses of currency however cash is what most of us know and there is some safety and security in the “right cash” and at least often some predictability.
Take for example a record high of Bitcoin at the time in 2013 of approximately $1300 USD but sometime in 2015 trading was just at $267 USD. The point here is that at this time cryptocurrency can be very volatile and unpredictable. It can create chaos in everyday life for both business and individuals. A risk that many businesses echo is the above scenario what if you accept payment based on USD in a cryptocurrency and the value plummets by 80% or some other high number suddenly? It creates huge issues to say the least and time should address them but until there are more coins that have some consistency in their valuation without rapid descents there will be some reluctance.
There have been many instances on both the networks and exchanges for Bitcoin and Etherum where there are a ton of unconfirmed transactions. I still have trouble understanding this but there are various numbers of “confirmations” before once can be comfortable they really have the currency that has been sent. What if the network stops working or slows down creating massive fraud or inability to process transactions?
Fortunately there are new coins coming out which are instant that solve this issue but still there are many in the wild, common and highly valued that do not have these features.
There is also of course the concern that massive DDOS attacks could take out the network of a cryptocurrency or effectively shutting it down.
The biggest threat is that there is the assumption that blockchain is secure and irreversible and it is impossible to play around in ways you shouldn’t. However, this also relies on someone not finding a weakness or exploit against the blockchain, and what is more probable going forward is that an organization with massive computing power ultimately finds this and exploits this in various ways.
There are also other considerations such as people losing their coins to viruses or hackers, this has even happened to exchanges such as Coinbase executives. One thing for sure is that it is not wise to leave your coins in an exchange if not for the risk that in the recent Bitcoin Fork the exchange refuses to give you the split/new currency.
This is the biggest uncharted territory but governments and large financial institutions have made their position clear and my interpretation is that “we love blockchain” but “we hate that it is not under our control yet”. This will have significant repercussions worldwide on how individuals and businesses deal with cryptocurrency. Significant regulation and the introduction of state-run/central cryptocurrencies could potentially wipe out or make worthless some coins overnight. On another note it appears to be increasingly difficult to buy or sell out of the cryptocurrency markets with banks making it increasingly difficult for the coin exchanges to operate.
Bitcoin and other cryptocurrencies have made it far beyond the naysayers and through many difficult and unpredictable times. Ultimately I believe cryptocurrency will continue to evolve and improve but as with any tool there are always going to be some pitfalls and bottlenecks.