Bitcoin split shows the stupidity of the concept of cryptocurrencies

...and why the central, transparent control over a currency is a key advantage, not a vice...

Today, the Bitcoin (BTC) was split into two new cryptocurrencies. From now on, you may convert your cash to Bitcoin or Bitcoin cash (click and try to distinguish their symbols LOL). For quite some time, people were using the acronym BCC for Bitcoin cash before most began to appreciate that BCC was already taken by BitConnect, the 15th largest cryptocurrency by capitalization (which lost 20% today), so BCH began to spontaneously propagate instead – the new acronym originated after the currency was created! The very naming of the old and new currency is a complete mess: a minor example of a situation in which some "adults in the room" would be helpful.

If you held 1 BTC at a given moment, you were eligible to get one new BTC and one new BCH. In principle, the rule "when" you should hold the old BTC should be absolutely and universally specified – because you surely want to know whether you're buying or selling an "asset" that is eligible for this BCH "bonus" – which is worth some 10-20 percent of the old BTC. It's exactly analogous to the splitting of a stock to two, or the payment of the dividend. The price of the "main" stock is expected to decrease exactly by the value of the smaller stock or by the dividend at the very last moment when you still have the right to get the "bonus" – the new stock or the dividend.

But the people trading this stuff don't care about details such as 10% of their wealth.

In fact, the number of "exchanges" where you won't get the new currency – 10% of your cryptocurrency wealth – is comparable to the number of the "exchanges" where you get it. In particular, Coinbase, a very large "exchange", told its consumers that they won't get any BCH. So depending on your "bank" that manages your wallet, you may be 10% richer or poorer than the other group! That's handy. ;-) No one finds it particularly unjust. The very wealthy people who play with the Bitcoin don't care about 10% of their infinite wealth, and neither do the Millennials who get the money from their parents in order to play and build this bubble of hot air along with their comrades. 

So if they have a bad "exchange", they just ask their parents to pay them 10% more than what they would otherwise pay. It's a simple life to be a Millennial. 

Note that the bad behavior of Coinbase is directly connected with a feature of the blockchain that its religious advocates worship – the impossibility to regulate it. Well, as a client of such an "exchange", I would be grateful if someone could give them a proper thrashing so that I could recover those 10% of the deposits! Some people, regulators of banks, central banks do lots of good things. In the cryptocurrency system, someone else has this power but he's much more likely to be a criminal that will rob you!

Now, for some 6 hours after the "discovery" that launched the splitting process (the ledger's history was doubled but the new entries in the two histories were separate), it wouldn't be even clear whether BCH would emerge at all, or whether there was a bug somewhere. Well, BCH needed a bigger block for the discovery and only a minority, some 5%, of the "mining" hardware was reserved for BCH. But after some six hours, people were happy. The first payments could have been confirmed. And the difficulty of the subsequent discoveries was lowered so that one only needed to wait for some 10 minutes before the new discovery emerged.

But imagine how practical this payment would be in the desert if you needed to buy water. You would use this state-of-the-art electronic financial technology and some 6 hours later, your payment could get through. I hope you aren't too thirsty! ;-) 

After the first separate confirmed discovery of the block by BCH, the splitting process was completed.

BTC started the day between $2800 and $3000. Common sense indicates that the value must drop by the price of the new BCH. But if only 1/2 of the BTC users get BCH at all, the price of BTC should only drop by 1/2 of the price of the new currency, BCH. The price of the Bitcoin cash wildly oscillated between $180 and $400 during the day – up to some moment, BCH was only traded as futures.

You may see that it's roughly consistent with the sum rule. BCH is currently about $200 but only 1/2 of them will be saved, it seems, so you expect the drop of the price of BTC to be $100 over the day, and it roughly is.

Some people don't even understand why the total value of the new currencies is expected to be the same as the value of the old currency. But a funny thing about economics is that some of its elementary laws work even when almost all the traders are financially illiterate, like most of the traders playing with the cryptocurrencies. They could be willing to assume that they indeed get a $200 bonus for each BTC and the total price of the new BTC and the new BCH will be $200 if not $400 higher than the price of the old BTC – because they're financially illiterate, they have no problem to believe that "everyone in the system" is getting $200 or $400 for free.

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