A senior hacker tells you why Bitcoin is an invincible cockroach

With the strengthening of regulation and the division of the community, Bitcoin has been sentenced to death countless times, but it has stood up again countless times and its price has repeatedly hit new highs. What makes cryptocurrency an invincible cockroach? What is the secret of this crypto revolution? Ramon Recuero, a hacker from Y Combinator, explained the development process of Bitcoin by comparing natural selection and genetic evolution.

Bitcoin has gone through several forks. A fork is defined as the moment when a digital currency splits in two, creating two different currencies. A few months ago, a Bitcoin fork created Bitcoin Cash (BCH). Another fork just last week created Bitcoin Gold. Segwit 2x will follow next month.

At the moment of the fork, every holder of the first currency gets an equal amount of the second currency. To the casual observer, these forks can be seen as little more than a means of creating coins out of thin air - the "philosopher's stone" of crypto. However, if you look at it from the right perspective, you will find that this process reveals the best adaptation mechanism invented in the digital age. Forks clone the original DNA, such as the programming code of the currency, and then modify it to better suit the needs of the market/community.

Suddenly, a multitude of alternative paths are being explored, experienced, and measured, while retaining the core ownership, idea, or philosophy that gave rise to them.

Why fork?

Cryptocurrencies provide innovators with greater liquidity and flexibility. These incentives drive innovation and development in this ecosystem at an unprecedented pace.

In short, forking is a revolutionary mechanism for digital networks that allows people to try out many different futures at the same time. What if Facebook could build and explore wildly different versions of itself, all sharing past data and operating completely independently of each other? This type of experiment is A/B testing on steroids.

This evolution happens at different times throughout the life of a cryptocurrency. Many now famous cryptocurrencies, such as Litecoin, Dash or Zcash, started as implementations of Bitcoin. Unlike other forks, these cryptocurrencies do not retain any of the original data. They start from scratch, from the so-called Bitcoin genesis block. Each of them explores a different future from the beginning. Litecoin aims to provide faster confirmations after each transaction, while ZCash and Dash focus on increasing privacy and anonymity.

This evolution mechanism can also be used to move things along later in the absence of full consensus. What is happening within the Bitcoin community is a perfect example. First, there is a huge split between those who want to scale with larger blocks (Bitcoin Cash) and those who want to scale with Segregated Witness (Bitcoin Core). Now, the ones who doubled the size via segwit are fighting over whether to go with 1MB or 2MB blocks. These forks, unlike the ones mentioned above, happened much later, so all previous transaction history is preserved.

Natural Selection

Forking is the digital process of evolution. Just like genetic programming, each generation you select the most adaptable organisms and merge them in, combining the most promising code to create new individuals that can become the starting point for the next generation. The most successful ones, in this case the ones with the most support and acceptance, will survive, and the minority chain will become extinct. In practice this is deduced through the support of miners. Miners provide their computing power (hash rate) to ensure the security of the network. Miners choose the best/most profitable blockchain.

So far this evolution has not turned into a zero-sum game - the sum of the values ​​of the two new forks is higher than the original one. At the time of the Bitcoin Segwit (BTC) and Bitcoin Cash (BCH) forks, the price of BTC was around $2,800. After the fork, the price of BTC did not drop, while the newly minted BCH peaked at $900. It has received not insignificant support and is now trading at around $300. The value of these currencies can be directly compared to their prices, because their money supply is almost the same.

Some animal species are more resilient when split into different biological populations, but are more vulnerable if they become too fragmented or isolated. Decentralized cryptocurrencies exhibit similar behavior.

There is such a thing as too many forks.

An extreme split would naturally disintegrate the value of all resulting networks. Cryptocurrencies rely on participants (miners) to verify transactions for security. If the number of participants drops dramatically, all minority blockchains become vulnerable to attack and therefore worthless. For example, if after several Bitcoin forks, 10 different chains emerge, each with 10% of the hash rate, each will be extremely vulnerable to a 51% attack. Brand dilution and loss of consumer trust are other risks, which we will explore and test in later articles.

Offspring and resilience

Another way cryptocurrencies have evolved is through the creation of digital tokens through ICOs (Initial Coin Sale). These tokens can be considered the offspring or children of crypto platforms. For example, assets developed on Ethereum, like Golem, Augur or OMG are all part of Ethereum’s ERC20 family. These ICOs choose the platform that best serves their interests based on support, the fastest path to approval, and the transaction costs of the network. They are a source of necessary chaos. They test the resilience of the networks and push the boundaries of what these networks can offer and handle.

New cryptocurrencies test new evolutionary paths, just like different species do. Forks then evolve some of these species, and miners/community support naturally selects the most promising ones. These two mechanisms are then mixed with the "bloodline" of these crypto assets or tokens. The resulting evolution rate is staggering, and the possibilities that can be explored are vast.

Many of these individual organisms will die, but the species as a whole will evolve and thrive from them. The species then becomes non-fragile. The same is true for cryptocurrencies.

Benefit from chaos

“Recall that the fragile wants tranquility, the antifragile is born in disorder, and the robust doesn’t care much.” Bitcoin (and Ethereum) have proven themselves to be antifragile so far. In the face of major wars within the community, forks provide a way to move forward in difficult moments, increasing the overall value of the crypto market. Despite the chaos, it is also interesting to watch the price of BTC climb in anticipation of some of these forks.

Bitcoin has been declared dead countless times. The collapse of Mt. Gox, regulatory Armageddon, rejection of ETFs, or community struggles all seemed to spell the end of the currency. But it never fell.

In his latest article, Nassim defends the idea that volatility and stress are signs of stability. These shocks contribute directly to development, causing them to experience post-traumatic growth. Like a hydra, Bitcoin has been able to come back every time, hitting new highs with huge volatility (although volatility has been declining in recent years).

Segwit 2X and Bitcoin Cash came about because of the differences in the communities. Objectively speaking, both can be considered better alternatives to a state on the blockchain. Many of these individual organisms or currencies are fragile but the Bitcoin chain as a whole has become stronger. The same thing happens with other major crypto chains like Ethereum. Life always finds a way.

It is not the strongest of the species that survives, nor the most intelligent; it is the one most adaptable to change.
(It is not the strongest of the species that survives, nor the most intelligent, but the one that is most adaptable to change.)

——Charles Darwin & Leon C. Megginson