This is a concise and accurate description of the fun that occurred with Bitfinex's handling of the BCH fork.
At least, it's fun if you weren't involved. If you naively held BTC on Bitfinex and were hoping to receive an equal amount of BCH you probably didn't think it was fun. If you carefully read Bitfinex's statements and decided to take advantage of their policy to acquire risk-free BCH, you probably think it's even less fun. But for the rest of us, it's fun.
Imagine if I announced tomorrow that I had created a new blockchain,
called Bitcoin Matt, and that everyone who owned a BTC today
will tomorrow own both a BTC and a BCM.
Fine, great, you all own BCMs, congratulations. But also anyone
short a BTC today will be short a BCM tomorrow, and will be
forced to go buy in those BCM shorts.
Even with no economic support for BCM -- with nobody mining
it, or using it, or treating it as a store of value -- I have
magically created demand for it, just because BTC short-sellers
will be forced to buy it in to cover their shorts.
And if no one else is using it, then it will trade very thinly,
and it will be very expensive to cover. (And anyone who does sell
it will make a lot of free money.) Nothing stops me from just
announcing that I've cloned a copy of the bitcoin blockchain
for BCM; the only way to avoid this abuse is for people to ignore
it -- and that means not forcing short sellers to cover it.If on the other hand you short a stock, and a third party says "Hey, I'm going to give everyone who owns this stock on this date a bag of cash!" I don't think that shorts would be obligated to cover that. This is, I guess, like what happened with Dole, except that there the third party was a judge, who has the force of law at his back. And this strikes me as similar to what happened to BTC/BCH, except without said force of law. Wherein lies the ability of someone to compel a BTC short to now owe BCH too? What exactly is it that shorts have agreed upon to return to the longs that they borrowed from, and if it's just BTC, isn't returning a BTC enough? If not, what stops someone else from making their own fork and compelling shorts to come up with that too?
Besides, the exchanges do not seem to have implemented this as a demerger spin-off (you were short BTC, but you do not need to return BCH - just bTC), and as a consequence NOT created "forced buy in".
Published by another guy worth reading
> As one trader puts it Short 1 btc. Buy 1 btc. Get 1 bcc free :).
Because there is greatly reduced liquidity of BCH (most exchanges don't support, hard/slow to deposit into exchanges that do), supply of BCH is artificially limited at the moment. Proponents of BCH can trade their BTC for BCH at a rate greater than they believe it is worth to easily pump the value and 'market cap' (most market cap stats have no measure of this 'locked supply') to make BCH appear more popular than it is at a fraction of the price that would be necessary if selling was easy. This could sway more miners to choose to mine BCH over BTC, and in doing so, actually increase the real value of BCH.
From: https://www.reddit.com/r/btc/comments/6ooorn/small_blockers_...
This really has nothing to do with the Bitcoin Cash blockchain, since there’s no connection between it and the tickers on the exchanges (you can’t convert one to the other).
An analogy would be ten different commodity exchanges who all trade “steel” instruments, but neither allow you to either sell “steel” instruments and receive actual steel, or deposit actual steel and receive “steel” instruments. In this case, can we really say these exchanges are trading steel? Why would their steel prices ever reflect the actual price of steel, when the two markets are not connected in any way?
This is what I'm always repeating about blockchains: they're very valuable if and only if you cannot use the protection of contracts and laws when making a transation - for example because you're doing something illegal. In Every. Other. Case. systems based on trust, contracts and law (such as the banking system for example) are more efficient.
It doesn't mean that there isn't room for improving existing systems, just this is probably best done with regular servers and databases rather than a blockchain.
If existing providers are anticompetitive, blockchains allow you to bootstrap an alternative without the same capital requirements you might need to compete with, say, VISA or Wells Fargo.
I'd also note that transacting across borders can easily make legal remedies cost prohibitive, especially for smaller transactions, even if both countries have mature legal systems. So I expect cross border activity to be more typical than the illegality example in the long run. But that fits your conditions as written, so this is just a quibble.
I don't think that's entirely fair. They're also valuable to those who want to transfer money without ridiculous fees, excessive bureaucratic friction, and many mandatory middlemen.
What other system would allow you to instantly be able to accept payments without giving an exorbitant portion of your revenue?
This invention or exaggeration of issues with modern banking just shows how weirdly desperate these people are for a problem their get-rich-quick scheme actually solves.
Fix the banking system. Make new banks. Whatever. You don't need the blockchain for that.
But well, governments won't move fast.
Then, me and my intellectualism lost big to the australopitheconomists-with-crypto.
So yeah pretty impressive to see that currencies based on unicorn blockchains of the future jump right into the old bandwagon of making up complex financial instruments that few people really understand on top of an experimental core concept.
I mean, the Dutch Tulip Bubble was driven by derivatives (and in particular, a law change forced by the politically connected that retroactively changed some future contracts into option contracts), so if you're looking for some halcyon age prior to "complex products", bailouts, and people using lobbying to reap outsize profits, you're apparently thinking of the 1500s, if not earlier. :)
Similarly, short selling is integral to markets correctly performing their role of allocating investment. Saying "we should ban this thing required for A to work so we can get back to having A work" is...not a compelling argument.
The markets are worse without them, the market was worse before HFT which is the only thing new here, trades used to cost way more due to wall street middle men taking a big cut of every trade, far far bigger than HFT's take now. The only people who have a logically valid reason to hate HFT are the old school manual traders who were displaced by them and can no long make a living trading chart patterns. As late as the 70's and 80's there were people getting rich with strategies as stupid simple as buy the 10 day high and sell the 10 day low. Those people hate HFT, it took away their cash cow.
HFT is a sign of a healthy free market, better traders came in and offered to take your trades for far less money than the manual traders could, and took over; that's healthy competition, and they competed with each other driving the prices lower and lower until they hit the penny. Now they all fight over that penny to see who can be fastest because congress won't let them compete on price anymore (the sub penny rule) so they compete on speed instead.
that's why, to protect the pensions and savings of its citizens from a catastrophic collapse in equity markets a couple of years ago, the chinese government decided to ban short selling. up and up and up, baby!
i think the government should go one step further, and prevent anyone from selling stock lower than the price they paid for it. guaranteed profit for everyone!
Short selling is what keeps the cheerleaders in check.
Seems like the people who do understand banking history are unwilling or unable to make any kind of improvements, at least in regards to the issues that digital currencies are working to address.
Doesn't this throw up any red-flags to the btc/crypto apologist? This type of behavior is not how healthy markets work.
They could have started fresh like the zillion other cryptocurrencies that have started up since 2009, some of which appear to have real value. You wouldn't look askance at those, at least from a healthy-market perspective. The only difference here is they distributed initial currency fairly perfectly to the best possible audience of Bitcoin fanatics -- without a single spam email!
Cloning a company makes no sense in the physical world. But when it's a purely digital asset, it can be copied very cheaply.
Why isn't this zero-sum? Because it increases the TAM, rather than competing with its doppelganger in a saturated market. Maybe one ends up killing the other, but for now there's room for both.
And that doesn't sound... insane to you? I mean, skipping the problems with physics where a "split" company would have to clone its employee talent pool as well: such a company would share the same products and the same markets and the same sales channels and have zero share of all of those at the start. And you're saying that a "healthy market" would be expected to bid up shares of that crazy reincarnated zombie company thing to like 20% or whatever of the original value? Based on "different mission"?
This is crazy, and I want no part of it. The coin community is literally inventing phantom cash and pretending like there's no bubble. How often has that been true in history?
With companies it is usually done with a particular division, or business area - but in the case of an anti-trust settlement (go and compete with yourself) it would be exactly what you describe and be implemented as a demerger.
Also possible that the split generated free publicity that made some people invest in it.
Seriously, though, there's all sorts of weird psychological stuff like that going on in all markets. This isn't really any stranger. (Plus, the $700 seems to be illusory. Hardly anyone (or no one) managed to sell them at that price.)
If I gave away a tulip bulb so every Alphabet shareholder, would that diminish the value of Google stock? What if I gave away a sports car?
It's weird free money, sure, but that's because someone is willing to speculate against you. The reason it's initially given away instead of sold is marketing. There are new coins being made every week and you have to stand out.
I don't see any more red flags than with every other altcoin out there. If anything the fact that Bitcoin value hasn't changed means the market doesn't value this new coin very much. It's unfortunate that Levine repeats the $700 value because it's not possible to trade in the open market yet.
You cannot deposit Bcash in any exchanges. Make sense now?
How can that be measured?
This is pretty funny though - it turns out that you don't need to control 50% of the mining pool to mess with it - you only need enough to start a half-credible fork that presents BTC holders with enough paper-losses to make them angry and potentially expose exchanges to lawsuits.
BCC is far from pointless since it serves those who have a different ideology. Whether it remains as valuable is uncertain. Whether it is already valuable to some, is clear.
There seems to be a lot of propaganda out there trying to marginalize and minimize Bitcoin Cash. The belief that literally everyone will instantly sell their BCH as soon as they can seems to be one of the messages of that propaganda rather than a reflection of reality.
Perhaps's that's not what you intended but if you had an explanation for why parent's response doesn't work I'd love to read it.
Not trying to minimize BCH, but if you don't see that, look at what happened when people had trouble withdrawing from Gox, or when BitFinex had issues with USD withdrawals. It leads to pressure on the price.
This is a misleading analogy, because EBAY holders can only be granted PYPL shared because EBAY owned PYPL. So unless BCH was an existing entity before the fork, which was covered under BTC already, this analogy doesn’t capture what happened here.
We’re not talking about companies, were talking about distributed databases. Databases contain information, and can be copied, as opposed to a company. A better analogy would be someone scraping Twitter, making a copy called Twooter with all past tweets from Twitter, and then forking off from there with their own “twoots”. In other words: it’s a copy, not a stock split.
Fair and no way to game. Why aren't exchanges doing this?
In a sense, what you suggest is exactly what the exchange did: They calculated the number of "actual" BTCs in the exchange, and split the appropriate number of BCHs evenly among everyone.
Random: there two YouTube live streams during the fork - WorldCryptoNetwork and Cryptoverse - both with 3000+ liveviewers - both featured on YouTube home page in technology section.
Massive event!
There are some new wallets that support BitcoinCash, but being new, they are not trusted yet. Here's the official procedure to safely use the Electrum Cash (fork) wallet according to the non-fork creators: https://electrum.org/bcc2.txt
Even after you do that, most exchanges are not yet supporting importing BitcoinCash into their accounts. Once everyone is able to do so, the price is expected to tank. I guess we'll see...
I won't claim to know any more than you, mostly because ~80% of bitcoin use is in Asia and i know little about it. All of China and Japan and 2/3 of korean exchanges offer withdrawals or trading of BCH.
Instead, we're back where we started where legalities and regulations matter and the reliability of your durable ledger is limited to the transactions it actually captures.
Is that really true? That would mean that both Y and Z should get dividend payment, which doesn't make sense. I always assumed that when X borrows one share from Y, the Y does not own that share any more.
> What doesn't make sense is for both Y and Z to vote, for example.
Very good point. But it just confirms that it makes no sense to say that Y still owns a share.
All BTC wallet balances will receive BCH
They did not issue another post saying that this would not be the case and broke their distribution terms. Regardless of whether it was "free money" (it wasn't if you consider opportunity cost), they did not respect this simple and clear statement from their terms.
1. Set up an account, borrow one bitcoin, sell it short, collect $2,700.
2. Set up another account, buy a bitcoin, spend $2,700.
3. When the fork happens, your long account ends up with +1 BTC and +0.8 BCH.
4. Your short account ends up with -1 BTC and -0 BCH (because Bitfinex doesn't require you to come up with the BCH).
5. Net, you have $0, 0 BTC and 0.8 BCH.
6. The 0.8 BCH were worth as much as $560.
7. That money was totally free.
[1] Ninja edit to specify to whom credit is due.
The money wasn't totally free. There was a huge opportunity cost to holding BTC at that time, and even having any in the margin wallet was a huge liability as opposed to funding your margin account with altcoins. Any serious trader knew that alts would rise immediately following the fork and Bitcoin would drop.
And regardless of whether it was free, their terms explicitly stated that those with a BTC balance in their wallets would receive BCH [1]. They did not issue a follow up post clarifying that hedging was strictly not allowed and thus robbed people. After how they handled both this and their hack, I urge/beg people not to use this exchange.
2. Get mad when said organization amends policy so you can't get your free money.
If you're gonna try to profit in the wild west it looks kind of unseemly to get mad when your scheme doesn't go off quite as easily as you had hoped.