Digital Currency Roundup
A wrap-up of the biggest news in cryptocurrency for the week
Bitcoin Fork – Should we stick a fork in Bitcoin?
Undoubtedly, the biggest digital currency news of the week is bitcoin’s $200 drop in price, precipitated by the announcement of a few major mining groups that they were going to switch their mining focus from bitcoin core (BTC) to Bitcoin Unlimited (BTU). The fear of investors is that bitcoin’s popularity may dwindle – or even be replaced – by the success of BTU.
The Pro-Fork Argument
Spearheaded by bitcoin wunderkind Roger Ver, Bitcoin Unlimited is a fork of bitcoin that offers a solution to bitcoin’s transaction speed problems. Instead of capping the amount of data in each block at a set amount, BTU block sizes are dynamic and set by miner consensus. This would allow more transactions to be confirmed in each block, thus speeding up confirmation times and reducing mining fees.
How the Fork Could Win
For BTU to overthrow BTC, it would need to be adopted by at least 51% of bitcoin nodes across the network. Currently at 34% support, there is a real chance that a hard fork may take place, which would put BTU on its own version of the blockchain and an altogether separate coin. Critics fear this new approach may increase centralization and corporate ownership of the network and the debate in the community has been highly contentious.
How the Fork Could Lose
The would-be fork is already having problems of its own, including bugs and susceptibility to DDOS attacks. If BTU doesn’t reach implementation in 51% of bitcoin nodes during this current push for its takeover, it will likely to fall to the wayside like other failed forks Bitcoin XT and Bitcoin Classic, doomed to the label of “just another altcoin.”
Ethereum Solidifies Position As #2 Cryptocurrency
Shrouded in mystery, long-delayed and oft-ridiculed, Ethereum hit the markets with a bang in 2015, after having been in development for three years. The brainchild of 23-year-old crypto programmer Vitalik Buterin, Ethereum offers far more user interfacing capabilities than bitcoin, allowing developers to create financial applications that run on the Ethereum network. On March 17th, the price of ether hit its all-time price high of $55.11, having overcome early obstacles including hacks, security issues and ongoing criticism from the old bitcoin guard.
Ethereum: Competitor or Co-Habitant?
With the transaction speed and costs woes currently plaguing bitcoin, it’s becoming apparent that there will be room for multiple digital currencies in the future, each serving a niche market and having attributes geared toward unique purposes and customer bases. Ether’s 200%+ price rise in the first half of March is attributed to the market’s growing acceptance of the need for altcoins.
Why All the Attention?
There’s plenty of reasons to be enthusiastic about Ethereum this week:
- The popular crypto exchange Coinbase was recently granted approval for Ethereum trading by financial regulators, making it much more accessible for purchase and sale
- The Ethereum client is scheduled for an overhaul, including a migration to proof-of-stake mining to enhance network security and reduce carbon footprint
- Industry titans Microsoft, J.P. Morgan, ING, BP and Thompson Reuters all announced their partnership with Ethereum, in hopes of using its smart contract and security features to handle complex, speed-demanding business needs of the digital money era
- Dark markets are now considering using ether alongside bitcoin for online transactions, citing popularity and stability as reasons for their adoption
Is a Price Bubble in the Works?
The price of ether has since leveled off in the mid-$40 range and is resting comfortably on what is considered to be organic momentum, meaning the price is not thought to be manipulated or driven by large financial institutions, but out of genuine interest. The consensus of technical analysts around the web is that Ethereum is the real deal – it is a fundamentally sound technology that is backed with corresponding money flows. With a current market capitalization of $4.2 billion, Ethereum is far above the rest of the altcoins in terms of value and popularity, however it is still a far cry from removing bitcoin and its $16 billion market cap from its spot as #1 cryptocurrency in the cryptocurrency world.
What Happened to the Bitcoin ETF?
On March 10th, the Securities and Exchange Commission (SEC) ruled against the approval of an official exchange-traded fund (ETF) for bitcoin, citing too much non-conformity of regulation to have clear legal footing. An ETF is a security (think stock or bond) that represents the price of tradeable good or item. Gold, silver, real estate and industry-specific ETFs have facilitated Wall Street’s investments in commodities for decades, and an ETF representing bitcoin would finally bring it to their arena.
Speculators Lose as BTC Price Tumbles
The ruling caused a short-lived 25% drop in the price of BTC as speculators wanting to get in on the ground floor of bitcoin’s Wall Street era had their hopes dashed. The fund is the brainchild of Mark Zuckerberg rivals Cameron and Tyler Winklevoss. Having been anxious to make it visible to institutional investors for quite some time, the Winklevoss twins pushed to make bitcoin investable through a market-listed ETF — a security whose price rises and falls with the price of bitcoin.
Plans for New Life
The would-be home of the ETF, the Bats BZX Exchange recently announced plans to appeal the SEC’s decision, breathing new life into the Winklevoss plan. Two different bitcoin ETF proposals are still looking for a SEC ruling and hope to learn from the loss of the Winklevosses. By anticipating and managing hurdles to approval ahead of time, these like-minded ETFs potentially have an improved chance of being listed on a securities exchange.
The Inevitability of Bitcoin
Despite the setback in the introduction of bitcoin to the world of Wall Street, bitcoin’s price recovered within a matter of days after the ruling and remains above or around the $1,000 mark. While financial regulators in China are seemingly bipolar in their relationship with bitcoin – frequently reversing course in policy from acceptance to prohibition – their effect on the price of bitcoin is waning as the larger picture of bitcoin’s global acceptance is now coming into focus. Just as Satoshi Nakamoto himself once hoped, the importance of bitcoin is not being ignored, and will eventually be embraced by Wall Street in some form or another.