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For someone who already owns cryptocurrency A, isn't there a perverse incentive to fork it into A', A'', A''', etc., because doing so multiplies the person's we
by grandalf 9y ago
For someone who already owns cryptocurrency A, isn't there a perverse incentive to fork it into A', A'', A''', etc., because doing so multiplies the person's wealth.
I'd expect that a fork will exist if: a) it has a nontrivial chance of survival, and b) if there is an exchange mechanism for cashing out.
Another way of looking at it, what scenario creates an incentive for a fork to die once it has been created? There's no such thing as free money.
On the other hand, forking is a way of bootstrapping a new cryptocurrency variant without becoming a billionaire like Satoshi and needing to worry about would-be adopters questioning your motives.
The "exploit" of forking to generate a wealth multiplier generates a lot of wealth, just not Satoshi level wealth.
In a sense, forking is a signal of too much centralization, as those benefitting from that centralization fork to cash out on their accumulated influence.
With such a large percentage of cryptocurrency economic activity being speculation, the incentive to fork is ripe. On the other hand, if Satoshi wanted to sell of all his Bitcoin Cash and sink it, he could easily do so to protect his original creation, so perhaps we learn more about Satoshi's stewardship intent by watching what he doesn't do rather than what he does.
- misterHN 9y agoyes, it is perverse, this is a scam
- sf_rob 9y ago>What scenario creates an incentive for a fork to die once it has been created? If mining fees get low enough to not be profitable, mining will cease and the fork will be dead (even if the chain still exists on inactive Nodes). >Because doing so multiplies the person's wealth. I don't think you can necessarily extrapolate this. In theory this should be something like when a public company splits or pays a dividend; the value of the parts should be equal to the whole. You're correct that it's not that way right now. That probably speaks to the inefficiency of the cryptocurrency markets currently but I would hope that that will improve.
- wmf 9y agoisn't there a perverse incentive to fork it into A', A'', A''', etc., because doing so multiplies the person's wealth. As the article says, this worked once but don't expect it to work indefinitely. Arguably forks that allow new use cases (e.g. Bitcoin Cash is supposed to re-enable low-value transactions) create value while other forks (e.g. Ethereum Classic, Bitcoin Gold) should be more zero-sum. what scenario creates an incentive for a fork to die once it has been created? Looks like the death process is low exchange volume -> delisting -> zero liquidity -> zero value. https://medium.com/@EthereumRussian/why-cryptocurrencies-get-delisted-tenx-bitshares-digix-monaco-iconomi-66b32cda4c24 https://medium.com/@EthereumRussian/why-cryptocurrencies-get...