What is Bitcoin Cash?

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Duke of Marmalade

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I understand bitcoin holders before Aug 1st have an equal number of bitcoin cash. So the fall in bitcoin price sort of matches the rise in bitcoin cash. Does bitcoin cash count towards the 21m limit or does it have a 21m limit of its own?

Bitcoin Cash is described by Wikipedia as a coin split by a hard fork. It was the first such split in August. It has been described as free money. Another followed in October, another in November now three so far in December.

So my question remains do these increase the 21m supply limit?

If they behave like share splits (overall value of shares stays the same) is this not a serious threat to the futures price?
 
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Developing that last point. For normal forward markets on shares there are rules for coping with corporate actions. For example a one for one share split would re-denominate the forward price at half its original price. Even for futures markets (usually on indexes) the indexes also cope "fairly" with corporate actions.

A coin split caused by a hard fork is similar to a share split. It has one big difference though the new coins distributed to the holders need to stand as a currency in their own right so the math for corporate actions doesn't work. It seems to me that a futures contract on bitcoin is simply a bet on all these factors. If you had gone long BTC two days ago then its just hard luck that its coin split was accepted by one of the exchanges with a consequent transfer of price from bitcoin to bitcoin cash.
 
The splits are independent of the original bitcoin. They just have different rules.
Instead of starting from zero, they are taking advantage of the network effect and distributing tokens to existing bitcoin holders.

BTC has 21m limit, BCH has 21m, BTG has 21m, some other has 4 times the limit etc.

I think only BCH so far has sufficient market volume to have an accurate market price. Coinbase is including it. Bitpay will support, that is good news as BCH fees are really low and merchants can accept it via bitpay soon.

Some say all these forks are not 'free money' as they come with socialised costs. Developers have to update software, on exchanges, wallets, BCH uses the same miner hardware as BTC etc.

As for the futures, I believe it has to be in the rules, and i think the future forks are ignored.
CME takes the price of Bitcoin from Bitstamp exchange does it not?
The possibility of a successful coin spit , transfering some value from the old chain to the new is something future traders have to account for.
However, these splits come with at least a few weeks notice, and other than BCH, they aren't worth much...
 
It's more like a company splitting into two separate companies. If you owned 10% shares of the company beforehand, now you own 10% of each. Hypothetically the worth of both coins after the fork should be about equal to the single coin before the fork, though weirdly each significant (subjective!) fork so far has resulted in a higher combined value, probably mostly due to low liquidity in the forked market as many people don't know how or don't bother to claim their coins on the new chain.
 

Nope. I didn't understand a word of this.
 

I understood this.

It seems to answer the Duke's question by saying, yes the supply is increased above the 21m by each fork, although instead of 21m bitcoin we have 21m bitcoin plus 21m bitcoin-forked total 42m units.

the fact that the new units are issued to the holders of the existing units is a delicious twist. How does this differ from printing money.
 
fpalb said:
It's more like a company splitting into two separate companies. If you owned 10% shares of the company beforehand, now you own 10% of each.
Click to expand...

Off you own 10% of a company you own 10% of the value of its assets. A share split does not effect this.

If you own 1/21 millionth of bitcoin and there is a fork now you own 2/42 millionths OF WHAT??

I know it does not change the argument about the worth of bitcoin, but I do think it throws it into stark relief.

Separately if bitcoin can be forked indefinitely and subdivided by 10^8 the claim that the supply is limited is questionable in two different ways.
 

Your understanding is correct, and there are undesirable consequences of forks, but the the possibility to fork is a necessary aspect of being open source and decentralised. I don't have time now but I can write a more detailed post discussing the good and bad of forks later using the bitcoin cash fork as an example if anyone would like me to.
 

I like this explanation, but I would imagine that the worth of both coins after the fork should only be equal at the time of the fork. Thereafter, each one can grow or fall in value independently of each other?
 
Yes please, I feel my understanding of Bitcoins has dipped below 10% again (more volatile than the price itself).
 
TheBigShort said:
I like this explanation, but I would imagine that the worth of both coins after the fork should only be equal at the time of the fork. Thereafter, each one can grow or fall in value independently of each other?
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Don't think so. I think the new baby bitcoin has to learn how to walk and talk via its own wallets and apps etc. but I could have that completely wrong
 
TheBigShort said:
Thereafter, each one can grow or fall in value independently of each other?
Click to expand...

Ooh my poor head.

If a bitcoin and a bitcoin-fork are traded separately then of course they could diverge in price. I see that.

But why would they. What makes 1/21 millionth of bitcoin worth more or less than 1/21 millionth of bitcoin-forked. Bitcoin-forked-August 2017, or indeed bit-coin-forked-December-2107-3.
 
TheBigShort said:
I like this explanation, but I would imagine that the worth of both coins after the fork should only be equal at the time of the fork. Thereafter, each one can grow or fall in value independently of each other?
Click to expand...
Well yes is should.
But since there is no immediate and efficient market to find the price of the new coin... who knows... Maybe if bitcoin hadn't forked it would be worth 10-20% more now (10-20% is the price of BCH compared to BTC).
There is little liquidity in the beginning because people don't know how to access these coins safely.
You could try and claim the new coins with some dodgy software and end up losing the original coins. You can protect yourself from it but why risk it? Just wait it out and some good software will pop up.

The new split-coin has to receive support from the existing exchanges, wallets, infrastructure etc, so that would make the price different.
I don't know really, the markets do not always make sense..
 
It seems that there are,

Client Forks
Coin Splits
Hybrid Forks

Is that clear now Ted.
 
To give yourself some kind of real world example outside of bitcoin, before I go into that, consider how there used to be one sport rugby... and then it forked giving rugby league and rugby union. Why could that happen? why did it happen? which is the real rugby and why? or is that subjective? Was that fork a good or a bad thing?
 
Exactly! basically the first point is that this is a governance/people aspect more a technical one. It comes from people being able and allowed to express their free will.
 
If I buy a bitcoin today, do I get a 1/21 millionth of all future bitcoin-forks ?

What about all previous bitcoin-forks.
 
cremeegg said:
If I buy a bitcoin today, do I get a 1/21 millionth of all future bitcoin-forks ?

What about all previous bitcoin-forks.
Click to expand...
Same as the company analogy, if you buy shares in any company now, you will get shares in any that it divides into, but you will not get an shares from any it split into in the past, those are now separate and must be purchased separately if you desire.
 
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