The blockchain and the concept of cryptocurrencies was difficult for me to grasp when I was first introduced to the story. Looking back, the central problem was that I was attempting to understand the architecture using its technical language. But as soon as I was growing comfortable with Bitcoin and the blockchain, the entire network throws me for a look with the hardfork.
As we all know by now, a few months prior, we experienced a major hardfork in the Bitcoin blockchain. With much anxiety and fanfare, Bitcoin Cash, an offshoot of the original namesake, was born. To my surprise, the valuation of the derivative coin (for lack of a better phrase) has held up well. But inside a few weeks, we will have two cryptocurrencies resulting from hardfork sequences.
The first such offshoot, Bitcoin Gold, is already live. The second hardfork, Bitcoin Segwit2x, will go live on November 16th. Coinbase, the world’s premiere wallet and exchange for major cryptocurrencies, will only support Segwit2x, which they will refer to as Bitcoin2x. The shunning of Bitcoin Gold is due to security concerns, as well as skepticism that the hardfork will foster a truly decentralized Bitcoin blockchain.
As useful as these hardfork updates are, outsiders can’t help but notice how incredibly cumbersome and divisive the process really is. When cryptocurrencies first launched, there was one and only one Bitcoin. In mere weeks, we will have four Bitcoin “pathways.” Ironically, in the spirit of improving the blockchain, hardfork proponents could actually collapse it.
The hardfork, or more specifically, the shortcomings requiring the sharp transition in the blockchain, is the first-generation cryptocurrencies’ original sin.
A commonly heard justification for the Bitcoin hardfork is scalability. That is, the original blockchain architecture could handle all crypto transaction volume for the simple reason that few knew of its existence. But fast-forward a couple of years, and the blockchain can no longer accommodate user volume without an intensive time expenditure.
As much of a revolution that the blockchain represents, the idea that a hardfork is even necessary — let alone actually executed — implies that we still have plenty of room for improvement. And the bickering that often results from these debates runs counter to the spirit of free markets and economic cooperation.
With Bitcoin, and prior to the hardfork madness, we had so much promise and potential, the capacity to overturn the financial hegemonic empire. Now, it would seem that crypto proponents’ biggest enemy is not the big banks, but rather, themselves.
Cryptocurrencies have won a decisive battle towards the pursuit of free markets. It won’t mean much, though, if supporters erode to the same standards practiced by the institutions which they claim to hate with a passion.