Yes, bitcoin is in crisis! Why?
Cryptomaniacs will have easily noticed that the value of their currency (s) fetish (s) or, if any, their investments, collapsed like snow in the sun. For over a week, bitcoin and some other cryptocurrencies like the ethereum, have lost between 20 and 50% of their value. And the optimism is not appropriate for the days to come … Some were then able to shout their tirade anticrypto (by the way, it is also quite funny to see that the articles in French on the current crisis are nonexistent), a bit the same who thought that the consumer internet would never see the light of day. Nevertheless, we must not deny that bitcoin is currently in crisis. How did we get here ? I point out that this is a rather complex subject and that there are many terms in English that do not have an established translation.
Continuing decline in value against conventional currencies
At the time of writing (July 16, 2017), the bitcoin is € 1,700 and the ethereum € 130. Values that we had not seen for several months. And especially that we thought behind us.
Like any financial value, the panic has invaded the “fans” and investors, some not knowing whether to sell, wait or invest … In my opinion, although the situation varies greatly depending on what you have placed, it is better to wait quietly on August 1st.
How to explain the crisis?
Many do not hesitate to use the term civil war . A situation that is not new and resurfaced several months later . To summarize in one sentence, the bitcoin can be divided into 2 entities: hard fork and soft fork . In what ? Explanations …
Hard fork : The blockchain (or blockchain …) splits into two separate books, depending on a fundamental change in the rules governing the software’s protocols. Basically, nodes that are not up to date software can not validate those who have been to follow the new rules of consensus. It’s as if your Windows 10 had not been updated and you could not browse the internet because of it.
Soft fork : you probably understand it … nodes that have not been updated can still validate those updated. If your Windows 10 is not up to date, you can still browse the internet anyway.
The starting problem is simple: transactions become too numerous for minors and a software update is required. This update must be completed by August 1st.
The Bitcoin community is then divided into 2 camps. First, the Bitcoin Core group, whose transactions are done under the BTC code, aims to solve the problem of the transaction by implementing Segregated Witness (SegWit) to increase the block size but keeping it limited, a principle of the Bitcoin industry since the beginning.
The second camp is called Bitcoin Unlimited (BU). This group wants to remove all restrictions on the size of the block and, consequently, the capacity of transaction ( hard fork ). This seems like a pretty simple solution to the problem but …
The “war” was declared by Bitmain, one of the leaders of the mining (the way the bitcoins are validated, I will come back in another article), when this one wished to launch a UASF ( user-activated hard fork ). This announcement was made a few weeks after the majority of the blockchain industry wanted SegWit to be a soft fork .
What is the problem of BIP 148?
The update, called BIP 148, is essential to deal with the rise of transactions. The soft fork has the interest to go molo (or the soft …) while the hard is a break between before and after. Above all, this hard fork goes against the bitcoin philosophy and undermines its decentralized nature. The BU will give power to minors who can decide when to increase the size of the block, which gives them the implicit control of the bitcoin network. The announcement of Bitmain to activate a UASF has therefore declared the “war”.
Some “traditional” miners wish to boycott these pools (the mining industry) demanding this hard fork . Problem: These miners are pretty powerful and have the power to literally break the bitcoin industry by refusing to validate transactions. The industry would then be divided into 2 camps.
Is the crisis irreversible?
NO ! The software update is essential for the development of the bitcoin industry as the current version will not support the exponential growth of transactions.
This “war” and the potential division into 2 camps will hurt bitcoin and other cryptocurrencies. Its value should continue to collapse the first weeks.
But, do not displease to some, bitcoin will come out strengthened. One of the camps will lose and the start division will give way to only 1 winner. The bitcoin should then see its value explode. This is the story of many industries, businesses, and new sectors that see camps clash until one disappears. The other is always stronger than the industry before him.
This is a bet that I make after analyzing the situation and read many articles on the subject … But, in any case, DO NOTHING BEFORE 1 AUGUST !!