On November 29th, 2017, I wrote an article entitled “Why Bitcoin Cash Will Dominate”. Interestingly, the BCH/BTC ratio is at the exact level today that it was on that date:

BCH/BTC ratio is the same today (5/30/2018) as it was on 11/29/2017

That article concluded with “I doubt Bitcoin is going anywhere, anytime soon. It will likely continue to appreciate as a digital asset, and may even appreciate greatly. However, I believe that Bitcoin Cash offers a risk reward proposition that is far superior.”

Where are we at now? Does this statement still hold true today?

I am actually not so sure that Bitcoin “Core” (BTC) is going to continue appreciating. It may have trouble even holding its current value. On the other hand, I’ve never been more confident about Bitcoin Cash, and I’ll tell you why:

The Fundamentals of Bitcoin

Short term price fluctuations are usually speculative. Long term price is driven by fundamentals.

Bitcoin gets its value from its utility as a payment method, from its power to transfer value, quickly, cheaply, and without third parties.

All of its other properties serve to support that main function. For example, scarcity: It’s great there’s only 21 million coins but meaningless if you can’t actually DO anything with them, like use them to transact.

Bitcoin Cash (BCH) retained Bitcoin’s original payment method utility by allowing block size increases, which are the simplest, most fool-proof way to increase transaction capacity.

BTC, under the leadership of the ‘Bitcoin Core’ developers, intentionally PREVENTED block size increases. Instead they put their faith in an unproven roadmap featuring the Lightning Network.

The current speculative value of BTC includes the fact that many still believe that roadmap is viable. As time goes on, the real feasibility of the plan (or lack thereof) will become increasingly clear and eventually will reflect in the price.

Positive BCH Developments

Barely a day goes by without some kind of positive news in the Bitcoin Cash ecosystem. One of the best places to get these kinds of updates is on the subreddit r/btc.

Here’s a few recent highlights:

Adoption is taking off in places like North Queensland, Australia, and Tokyo, Japan.

New services are popping up, like CoinText, which provides Bitcoin Cash transactions via SMS… or the Money Button, giving any website instantly monetized content… or localbitcoincash’s new peer to peer online marketplace .

And what about user driven economic incentives like BitcoinRewards or Purse.io, which can save users 15% off Amazon?

BTC Missed Its Window of Opportunity

I know that a combination of on-chain and off-chain scaling works, IF the market is free to choose the most efficient path. However, I’m convinced that forced off-chain scaling (as BTC has done) does not work. At least not with any method I’ve ever seen.

Previously, one of the biggest risks to BCH was that BTC would actually go ahead and increase the blocksize, allowing on-chain scaling to happen, making BCH less relevant.

The best time to do this would have been last year by accepting the Segwit-2x compromise, but BTC passed on the opportunity.

At This Point, Can BTC Raise the Block Size, Even If It Wanted To?

There’s a number of arguments that point to the fact that BTC may have a hard time upgrading their protocol at this stage in the game.

One obvious reason is that the BTC thought leaders have been railing for years against both “contentious” hard forks and premature capacity increases. Suddenly changing narratives so drastically would create massive cognitive dissonance and contention. They would lose too much credibility and a lot of their followers would start questioning everything.

Unless there was very broad consensus, the risk of a chain split would be high.

More importantly, would the miners even allow it?

After the broken Hong Kong agreement of 2016, and the broken New York agreement of 2017, Bitcoin Core (whose software powers 99.2% of the BTC nodes) has definitely burned their goodwill with the mining pools.

The Tables Have Turned. Now It Is BTC That Carries a Huge Risk of Not Being Able to Scale.

Until recently, I considered this last argument mostly theoretical. But since the May 18th CoinGeek conference in Hong Kong , I now believe it wholeheartedly.

When Bitmain CEO Jihan Wu was asked on stage “Why are the miners still supporting Bitcoin Core? Is it just a short term profitability play?”, he answered: “Yes, exactly.”

The answer rang true. Think about it: the miners are now economically incentivized to keep BTC from scaling, since they are profiting from high fees.

You might ask “why does the short term incentive apply to BTC and the long term incentive apply to BCH?” The answer is because those are the incentive models already chosen by the nature of each of the protocols.

BCH meets the need of the long term business model — it can become global peer to peer cash, it wants to be that, and it already has 32MB blocks. There’s no reason at all to have 2 coins do that.

By contrast, BTC’s high fees already make the miners short term profits, so there’s no reason to change that either.

Mining Pools Working Closely Together… On BCH.

But it wasn’t just a single remark from Jihan Wu that caused me to give much more credence to the theory that the miners would not allow BTC to hard fork in the future.

There was something else… something big.

On Saturday, May 19th, a meeting took place among the major mining pools. Their goal was to design a system to donate mining rewards back to the BCH developers and the BCH ecosystem.

These major BCH mining pools, including Bitcoin.com, AntPool, ViaBTC, BTC.com, and BTC.top are ran by the same people who run the biggest BTC mining pools.

That’s some of them here in the picture, all wearing Bitcoin Cash shirts.

Look at these guys. They all seem to be on the same page. They all have a shared vision for the future.

If I was “all in” on BTC as an investor, I would be worried.

The fact that these pools proactively got together for the purpose of donating their own revenue to empower Bitcoin Cash suggests very seriously that they support it as their long term project.

Maybe BTC is Dead. It Just Hasn’t Figured It Out Yet.

I honestly do not know what is going to happen. Crypto is very unpredictable.

But the most likely scenario for the next 1–2 years is that BCH continues to gain adoption, and BTC continues to spin its wheels.

If that happens, there may be a tipping point where enough people simultaneously realize the rising demand for the version of Bitcoin that actually functions as a Peer to Peer Electronic Cash System.