Bitcoin CTO Believes Bitcoin Cash Will Emerge as the Ultimate Winner
The co-founder of one of the world’s largest Bitcoin web sites has a message to share: Sell Bitcoin (BTC) for Bitcoin Cash (BCH). Coming from Bitcoin.com Chief Technology Officer Emil Oldenburg, this admission requires careful consideration. Not only is Oldenburg a leading subject matter expert, but the conviction behind his message is raising eyebrows.
In an article penned by Futurism, Oldenburg’s statements hit like a freight train running over a “Pinto” with the gear shift stuck in neutral. Responding to an interview question about the investment-worthiness of Bitcoin, Oldenburg stated, “I would say an investment in bitcoin is right now the riskiest investment you can make. There’s an extremely high risk… I have in fact sold all my bitcoins recently and switched to bitcoin cash.” (Source: “One of the Co-Founders of Bitcoin.com Has Sold All of His Bitcoin,” Futurism, December 18, 2017.)
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So why is a man who’s accrued so much wealth (his salary has been paid in BTC for the last three years) and business success (Bitcoin.com receives tens of millions of page views monthly) suddenly turning so bearish on Bitcoin? Quite simply, Oldenburg believes the utility of BCH will dominate over time.
Below are some of his key arguments in favor of BCH overtaking BTC over time.
Market Liquidity
One of the biggest factors Oldenburg points to is market liquidity. More specifically, the lack thereof. He posits that people don’t understand the inherent risks of owning Bitcoin because few have desired to sell it yet. “As soon as people realize that this is how it works, they will start to sell…The old bitcoin network is as good as unusable.” (Source: Ibid.)
While newly-introduced Bitcoin derivatives alleviate liquidity concerns on a trading level, derivatives are still based on the underlying commodity. Increasing Bitcoin activity is gumming up the system over time, leading to wild swings in the futures and options market. So much so that the deep-pocketed folks at Goldman Sachs Group Inc (NYSE:GS) set margin requirements at 100% for some Bitcoin futures products.
Although BTC and BCH should, in theory, have the same number of coins outstanding, the reality is different. Owing to larger hash power and block size, BCH is being mined at a much faster rate than BTC. Bitcoin Cash has recently overtaken Bitcoin in the number of coins in circulation. This will have a moderating effect on volatility (albeit a modest one) as new BCH “coins” enter the marketplace at a faster rate.
As well, fewer BCH coins have been “lost” as higher initial intrinsic values following the August SegWit fork led to better security protocols. Remember, some early adopters of BTC “lost” their coins in the early years due to carelessness when Bitcoin was worthless. We don’t know exactly how many coins are missing, but some estimates claim that the number is in the six-figures. Given that the total Bitcoin float can never rise above 21 million coins, the former is a significant number.
Transaction Times
Bitcoin detractors have long pointed to glacially slow transaction times as a prime reason BTC was doomed to fail. It can be said that Oldenburg feels the same way.
The problem centers on the limited amount of transactions per second you can make in the Bitcoin network. With a fixed block size of 1MB and an exploding user base, by some accounts, it takes on average 4.5 hours to confirm a Bitcoin transaction. In contrast, owing to BCH’s larger block size (8MB), it should be able to achieve a higher transaction per second average over time (although this hasn’t necessarily been seen to date).
Even worse for BTC, Oldenburg doesn’t see a reasonable solution forthcoming. Even though the critical problem of “up to 12-hour transaction lead times” could be addressed, he sees no signs of change. The reason? Oldenburg posits the original network its run by “fanatical bitcoin talibans” who “want things this way. They see bitcoin as a digital gold and a technical experiment, as opposed to something you can actually use.” (Source: Ibid.)
The bottom line is clear: Oldenburg does not believe Bitcoin will ever be truly scaleable at the consumer level. Although there’s still debate about whether BCH can achieve commercial scaleability itself, the odds are much better.
Transaction Fees
Another huge advantage BCH carries over BTC is transaction fees. They aren’t even in the same ballpark.
According to Oldenburg, “It only costs $0.012 (10 Swedish “öre”, the centesimal subdivision of krona) to send a [Bitcoin Cash transaction] and there are no lead times.” (Source: Ibid)
The reason for this is simple: BCH’s bigger block size makes storage capacity faster and cheaper than BTC. According to BitInfoCharts, BCH’s average transaction fee is $0.256 USD versus $28.09 USD for BTC. That’s over ten times the cost. Obviously, high BTC costs relative to BCH will hinder its appeal as a mass transaction vehicle going forward. (Sources: “Bitcoin Cash,” and “Bitcoin,” BitInfoCharts, last accessed December 19, 2017.)
Verdict
Emil Oldenburg’s proclamations should be carefully considered by both BTC and BCH investors alike. As an expert Bitcoin analyst with no conflict of interest, there’s little reason why he would transition his assets into BCH unless he had strong conviction behind the move. Changing wildly profitable business models isn’t something you do unless you have an extreme belief in a particular worldview.
Perhaps Oldenburg will ultimately be proven both right and wrong. Perhaps Bitcoin will retain its value as an underlying asset, while Bitcoin Cash plays the role of the traditional payment system. Similar to a Central Bank balance sheet item (BTC) versus the merchant layer performed by Visa Inc, American Express Company, or PayPal (BCH).
Under that model, both assets can “win.” Oldenburg is clearly betting, however, that Bitcoin Cash will shine brighter over time.
