Knowledge of digital asset currency classification: Bitcoin has not split, only forked altcoins have been added

Currently, digital asset coins can be divided into four categories: Bitcoin, altcoins, split coins, and tokens. BCC is a forked altcoin among altcoins, not a split coin. This article was published simultaneously on the official account Bitejiang.

1. Altcoins and Bitcoin

Altcoins are cryptocurrencies similar to Bitcoin that are created by imitating or copying Bitcoin or learning its ideas. They can be divided into: copy altcoins, competitive altcoins (competitive coins), and forked altcoins. The focus is on the newer forked altcoins.

1. Copying altcoins

This type of coin began to appear more frequently in 2013, and exploded in 2014, with several coins even being created in one day. They simply copy the open source code of Bitcoin or other coins, modify and adjust the coin parameters, modify and replace the mining Hash algorithm, and change the coin icon and coin name. The development cost is very low, and there are even teams that specialize in helping to develop this type of copycat coins. It often only takes a few thousand yuan to get the open source code, wallet software, nodes, mining pools, etc. All the coins that belong to the category of copycat coins, although there are many types of them, almost none of them have survived to this day.

2. Competing altcoins

The biggest difference between this type of coin and the copycat coins mentioned above is that they have substantial innovative improvements, which makes them competitive. Therefore, they are generally referred to as [competitive coins], and many of them are also of great value. The birth time of competitive coins is relatively scattered. Litecoin in 2011, Dogecoin in 2012, Dogecoin in 2013, Dash and Ethereum in 2014, and the currencies with high circulation market value that have been born in recent years are mostly competitive coins. Competitive coins often have their own niche applications. For example, Dogecoin is positioned for rewards, Litecoin is positioned for small amounts, Dash is positioned for gray, Ethereum is positioned for contracts, and so on. Generally, there will be no direct competition with Bitcoin. Competition only means that multiple competitive coins with the same or similar positioning will compete with each other. For example, many competitive coins have launched smart contract applications to compete with Ethereum, and Ethereum also intends to strengthen its anonymous competition with Dash, and various currency applications other than pure rewards for Dogecoin are also under development.

3. Forked altcoins

Many people have conceived of this type of currency in history. I saw it in the early days of the Babbitt Forum and also communicated with the owner of a WeChat group. However, if the timing was wrong, it would be considered as wanting to split the currency circle and be attacked. In addition, there are also currencies such as Byteball and Stellar that will issue coins to users who hold Bitcoin, which is somewhat similar to forked altcoins, but in a strict sense, the first well-known forked altcoin was Bitcoin Cash, abbreviated as BCC (also abbreviated as BCH, the recommended Chinese name is: Fenshan Coin), which was generated on August 1, 2017. This is just a new model for the birth of altcoins. Many people, including some old people in the currency circle, have misclassified it and mistakenly classified it as a split coin, while its proper classification is: forked altcoins. The characteristics of this new model of the birth of altcoins are: the issuance of new altcoins no longer starts from scratch, but is directly based on a snapshot of the Bitcoin blockchain on a certain day. That is to say, if you have how many Bitcoins at that time, you will have as many forked altcoins. The default automatic claim can be taken out and thrown away, but you cannot refuse to claim it.

This new model of altcoin birth has an advantage that if Bitcoin users do not actively use their private keys to sell coins or are new to it, they will naturally "automatically" become long-term holders, so the amount of coins in circulation is not large. The number of users will have more user advantages than those altcoins that start from scratch, and also have advantages over those that need to manually claim altcoins with proof of holding Bitcoin. Forked altcoins do not require this step of claiming.

Because of its obvious advantages and the fact that it no longer has the "hat" of splitting the coin circle after the split of BCC, it can be expected that in the near future, many forked altcoins will be born one after another, such as BTG (BTCGPU.org), B2X (Segwit2X), BCU, BCP, etc. (see: https://wx.xiaomiquan.com/mweb/views/topicdetail/topicdetail.html?topic_id=28888824441221&group_id=518282522844). Everyone must be clear that these are just new forked altcoins, not Bitcoin split coins. Their birth is different from split coins. Like other altcoins, they do not need Bitcoin to cooperate in doing anything to be born, and Bitcoin cannot do anything to prevent their birth.

2. Characteristics of Split Coins

Split coins require a hard fork of the blockchain as a necessary prerequisite. If there is no hard fork, there will be no split coins. Of course, hard forks can cause split coins, but not every hard fork will have a corresponding split coin. Only hasty hard forks that fail to reach a full consensus will have a greater chance of generating split coins. This section introduces some characteristics of split coins and compares them with forked altcoins.

1. Hard fork with participation of the main development team of the coin

It can be a hard fork that is proactively initiated and prepared for a long time, and is intended to proactively upgrade the performance of the coin. It can also be a hard fork that is deployed temporarily and urgently after a major vulnerability occurs, similar to the DAO hacking incident. If a split coin is generated, the first feature is that there must be a hard fork. Before the emergence of the Fenshan coin BCC, the currency circle development community had always considered whether BU had the possibility of a sudden hard fork. The Bitcoin ABC wallet version plan that gave birth to BCC almost suddenly appeared overnight, and the number of full nodes also rose rapidly overnight. Coincidentally, the height reached was almost the same as the number of BU full nodes, which seemed to be ordered to install ABC nodes at the same time for all BU nodes. It is terrifying to think about it carefully. It has never been formally proposed and discussed in detail as a hard fork plan in the Bitcoin currency circle. Its issuance of BCC coins is just the behavior of a certain mining industry, and it has not sought the consensus support of the entire currency circle as a hard fork. August 1 is just the issuance date of the Fenshan coin, and the Bitcoin blockchain is running normally without any hard fork or soft fork.

2. There must be community consensus on the hard fork plan

The existence of a hard fork does not necessarily mean the birth of a split coin. The key is whether the hard fork plan has received sufficient community consensus support. For a passive hard fork to fix a major vulnerability, there is almost 100% consensus. No one would be willing to stay on a split chain with a vulnerability, so the possibility of a passive hard fork generating a split coin is very low. The only hard forks in the history of Bitcoin are passive hard forks of this type, and there has never been an active hard fork. The other type is an active hard fork to upgrade functions or make up for application errors. The hacking incident of Ethereum's The DAO project was not a vulnerability of Ethereum itself, but a vulnerability of the DAO project, so it does not belong to a passive hard fork to fix the vulnerability, just like a certain trading platform being hacked by hackers. Some people agree that the hard fork should freeze and recover the hacked coins and return them to the owner, while others agree that the Code is Law should be followed and the project should bear the loss itself as a lesson. If this project sets a precedent, will other projects with similar problems recover the coins? In addition, who will decide whether to recover the coins? What if the forgery hacker steals the coins? Where is the decentralization? There have been many cases of hackers stealing coins in the history of Bitcoin. Without on-chain rollback, rolling back and recovering hacker stolen coins is a joke in Bitcoin. However, because The DAO raised so much money, it was the largest crowdfunding in the world at that time. Therefore, the official development team finally decided to launch a hard fork rollback. However, according to the vote on the amount of coins at that time, about 87% of people supported the hard fork. That is, there was no full consensus. It was precisely because of the fundamental reason for the lack of full consensus on the hard fork that the first well-known coin split case in the history of the currency circle was born, the split coin of ETC and ETH. In fact, a small domestic copycat coin had also split into two currencies before, but it was not well-known.

Let's look at the birth time of BCC. At this time, almost 100% of the computing power voted for NYA (New York Consensus) in the Coinbase in the block, and all voted in the version number to support the first phase of SW2M to activate SW first. That is, there is already a sufficient consensus in the currency circle. As for the specific consensus of 2M in the second phase of SW2M, that will be a few months later. It cannot be said that there are already differences now just because it is expected that there may be differences in 2M in the future. Therefore, even if BCC must be said to be a hard fork, there is no community consensus difference to support it to become a split coin. The community and computing power had already reached a consensus on SW2M at that time. And BCC is not 2MB but 8MB, and the entire mining industry did not vote for 8MB at that time.

3. When split coins are born, there is no distinction between primary and secondary coins and they compete for the name of the coin

Forked altcoins have a primary and secondary relationship. The main coin will not be impacted by the issuance of forked altcoins, and forked altcoins will not covet the name of the main coin. For example, after the birth of the forked altcoin BCC, it cannot directly call itself Bitcoin BTC, but only provides the English name with Cash added at the end and the abbreviation BCC, so there are many Chinese names in the currency circle. I suggest calling it "Fenshan Coin" so that it can always remind you of the classification of forked altcoins. If you directly say that BCC is Bitcoin, you will probably be attacked by many Bitcoin fans.

However, for real split coins, there is no distinction between the primary and secondary coins during the split. For example, ETC and ETH both claimed that they were the primary coin and the other was the split coin when they first split. People who support ETC call ETC the original Ethereum chain and ETH the Ethereum fork chain. They have been fighting for a long time, but later, when the market value difference became larger and larger, they accepted that ETC was fixedly named Ethereum Classic.

4. The hash rate competition between the two split coins must be fair competition

Split coins are two opposing views, which often change violently and swing. For example, there was a plan to attack ETC miners on 51, but they changed to support ETC. The computing power team means the team situation of supporting views (whether to support the blockchain cannot be modified under special circumstances). Once one party creates an unfair computing power competition mode, it will be attacked instead, and the computing power will directly fall to the other side.

However, there is actually no opposing view on the splitting of the altcoin BCC. Currently, the chains that mine BTC have all voted for NYA, and they are not mining pools that insist on a permanent 1MB, so they do not constitute an opposition to the BCC hashrate view. If NYA is disintegrated, then BCC may be a split coin. Now BCC is trying to disintegrate and destroy NYA. It is precisely because of the emergence of BCC that more and more people have called for a boycott of NYA.

Take a look at the recent vote on Twitter, whether to support the NYA New York Consensus to expand to 4-8MB in November hard fork. Thousands of people participated in the vote, and the result was as high as 68% disagreed, 23% agreed under consensus, and 9% agreed even if it was a forked altcoin. It can be seen that under the impact of the forked altcoin BCC, the NYA that was finally reached is facing the risk of collapse.

The competition between Bitcoin BTC and BCC in terms of computing power lies in the unfairness of the rules. Simply put, BCC can reduce the difficulty of future coins by adjusting the new rules and stack them in advance to the present, creating the illusion that mining is profitable now and attracting computing power, but what will happen in the future? BCC has two mechanisms for adjusting the difficulty. One existing rule is to adjust once every 2016 blocks, and the other is a newly added rule that if there are only 6 blocks in the recent 12 hours, it will be reduced by 20%. Under the joint control of the mining pool, temporarily reducing the number of blocks on the grounds of bad luck can meet the conditions of the new rules and reduce the mining difficulty. In this way, a relatively continuous overdraft of future coins can be achieved, absorbing computing power from Bitcoin BTC. This rule will put Bitcoin in an unfavorable and unfair computing power competition environment. Looking at the above figure, the difficulty of Bitcoin has been reduced by 3.62%. Although it is not large, the historical trend is generally rising. I hope that the altcoin BCC will not frequently use the new rules to adjust the difficulty, otherwise it will be a disguised computing power attack on Bitcoin. The unfair rules of the forked altcoin BCC can create time differences, control and reduce difficulty, produce blocks at a very fast speed, and overdraw future coins to achieve short-term profits and attract computing power.

As shown in the figure, the 6 BCC blocks starting from block 478577 have been continuously reduced by 20% (see BiQan link for details.)

If it is a split coin, their hash rate competition rules should be the same, like ETH and ETC, the mining algorithms have not changed. If there are special rules to reduce the difficulty like BCC, it is possible to overdraw the future to accelerate the block time and attract the birth of unfair rules of hash rate. The hash rate competition is no longer a competition to reflect the support of the view. It is not a split coin, but just a forked altcoin designed to issue coins quickly. However, if BCC does not deliberately use the newly added difficulty reduction rules in the future, it is still fair. However, the difficulty will increase by nearly 3 times in about two days, and a large amount of hash rate will be lost from BCC to Bitcoin BTC.

3. Misconceptions about Tokens

Tokens are usually issued through ICO projects, but not always. Tokens issued through ICO may also be altcoins. Tokens may not be in the form of ICOs but sold directly or issued for free. For example, to be precise, XRP is a token on the Ripple system, and it existed as early as 2011. In addition, most tokens based on the currency system, such as colored blockchain coins, are also like this.

1. Tokens are not digital currencies, they are just digital assets

The most basic characteristic of digital encrypted electronic currency is decentralization, while tokens are almost all centralized or semi-centralized! In fact, it is very simple to distinguish whether a coin is a token or a digital currency. Assuming that the company or team that issued the coin suddenly disappeared, such as an earthquake, then is the coin still valuable? If it depreciates severely or even approaches zero, then this is a token. The value of the token comes only from the development and feedback of the issuer. For example, the time token can be regarded as the token of the BitTime trading platform, and the feedback to the holder of the time token is half of all transaction fees.

2. Tokens are not shares, but commodity vouchers

Although the price of tokens may rise if the project of the issuer of the token is well done, please note that it is not a share, but only the right to use its services, not the ownership of the project! This feature has become a paradise for entrepreneurial teams to raise funds. By selling 0% of the equity, a large amount of funds can be obtained, and a large number of potential users can be attracted and locked. Similar to Tencent's use of QQ coins to raise funds, participants can also consume QQ coins on the platform after obtaining them, and exchange them for shopping, which activates the application of the platform.

3. Tokens are not limited to the blockchain field

Almost any entrepreneurial project can be packaged as an ICO project. First of all, any entrepreneurial project generally has a cash flow, and all the cash flow can be exchanged for tokens. In addition, when designing users, many projects will have a points or gold coin incentive system, which are also exchanged for tokens. Finally, each project generally generates some data. Regardless of whether it is necessary or not, if it can be made public, it will be put on the public chain, if it cannot be made public, it will be put on the private chain, and if it can be put on the blockchain, it will not be put in the database. With these simple steps, almost all entrepreneurial projects can be transformed into "blockchain" projects, and if they are packaged well, some big Vs will be invited to stand on the platform, and they can raise a lot of money in ICO. The project has not even started, but it has been successful! Therefore, everyone must be calm when participating in ICO, and think more about whether their tokens can be exchanged for legal currency, whether their incentives can be exchanged for points, and whether their data can be stored in traditional databases. If all of these are feasible, it is likely to be just a regular project. Through this kind of thinking, you will find that many, many ICO projects are actually very ordinary, and venture capitalists will never touch the project, but they use it to make money in the currency circle. There are very few truly good ICO projects, so you must analyze them carefully and participate with caution.

4. The market value of tokens is likely to surpass Bitcoin

Assuming that super companies such as Alibaba or Tencent issue token ICO projects, especially if the central bank issues national tokens, then in theory, the circulating market value is likely to easily surpass Bitcoin. However, it should be noted that such company coins and even central bank coins are centralized tokens, and their market value is guaranteed by their central credit or assets. This is essentially different from decentralized encrypted electronic coins. In fact, at present, BCC is not only a forked copycat coin, but also has obvious centralized control over computing power, development and trading, and may evolve into a token for a certain mining industry.