Creating a cryptocurrency is similar to writing a contract (when it comes to the economics of such), and buying a cryptocurrency is like agreeing to that same contract. The contract is written in programming language, enforced by each node on the peer-to-peer network, and then it is further enforced by miners or stakeholders (depending on if it is a PoW or PoS cryptocurrency). Included in this contract are the stipulations on exactly how a cryptocurrency functions, and the economic realities of each cryptocurrency’s distinct ecosystem are defined within these stipulations.
I posit that changing these economic stipulations contained within the contract, or violating the contract through the use of loopholes, will always lead to a breach of contract, and thus most always induce a fracture in the cryptocurrency’s community (read: a fork) just about every time. Economic realities are something people are very passionate about (people generally care about their money), and as a result… a breach of contract affecting economic realities will almost always cause a fork. The best-case outcome from such a scenario is that the dissenting parties will sell their stake (or mining hardware investments) and move along to other cryptocurrencies that are more aligned with their druthers.
There is historical evidence of such that supports my hypothesis. Ethereum Classic was born when Ethereum did a hard fork to roll back their blockchain due to the DAO hack. Bitcoin Cash was incepted when Bitcoin activated Segwit via a soft fork as a precursor to taking micro transactions to a “second layer”, and Bitcoin miners will not profit off of the transaction fees accrued on the second layer. I’m sure there are other examples, but these are the most momentous forks of recent history that were caused by breach of contract which resulted in changing economic realities.
Then there are instances where the stipulations did not change, but the economic realities still played a huge role in causing certain cryptocurrencies to fork. Although the stipulations in the contract did not change, one of the parties violated the contract via loopholes, and thus it still results as a breach of contract. Monero was conceived after the cryptocurrency community learned that Bytecoin was stealthily pre-mined. Stellar derived from Ripple tokens being almost wholly owned by a centralized entity which in turn caused the network to be highly centralized.
If my hypothesis is correct, then you can expect Ethereum to fork when Casper (a novel PoS consensus algorithm) is activated via a hard fork, because the miners will no longer be earning coins from inflation and transaction fees. Only stakeholders will be earning fees from transactions after the planned hard fork. Therefore, the names are arbitrary, but "Ethereum Casper" will be forked away from what is currently known as the main Ethereum chain. The chain currently known as the main Ethereum chain will be continued by miners and supporters which will be known by a different arbitrary name... let's call it "Ethereum" for now.
I think that Vitilak might have enough sway in the community to make "Ethereum Casper" the main Ethereum chain, and "Ethereum Classic v2" will be the less dominant chain. ICOs will have stake in both forks, but most will probably stick with Vitalik. Some might stay on the "Ethereum Classic v2" fork though. I think that the preceding statements are almost an absolute certainty. What will be interesting to me is which chain will be more valuable? Ethereum Classic or "Ethereum Classic v2"? I posit Ethereum Classic will be more valuable because it is the original chain and did not have a roll back. At the end of the day, Ethereum's value comes from "applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third party interference." When the chain is rolled back, it kind of negates the selling point of running without third party interference.
What other cryptocurrencies have contract amendments planned that will affect the economic realities of their chain? What other examples support my hypothesis? I know there are others…
Until next time,
Ch
There's much more information (along with other blog posts by yours truly!) here: https://www.decentralized.tech/
I agree with you. The context will be favorable for any opportunistic individuals that would like to generate a huge amount of capital from a fragile situation. But as on the ICO niche, there is also a saturation when too many forks happen, like is the case those last weeks with Bitcoin, and such coins born from forks loose value and interest. Nice reading, keep it posting!
Thanks! Good point about fork saturation. :)