Some confusion still exists around Bitcoin Cash (or Bcash), the new token that resulted from a split in the Bitcoin network on August 1. Many bitcoin (BTC) holders are still wondering how to safely remove the new tokens (BCH) from exchanges (and wallets) without putting their BTC at risk.
In a recent episode of the Crypto Show, Paul Snow, the founder of the blockchain-based data management solution Factom, offered some suggestions. He also talked about the potential benefits of holding onto BCH a little while longer.
First, while some exchanges may be offering to extract BCH for some users, Snow firmly advises people not to hand over their private keys to exchanges. He thinks sharing private keys is a bad policy in general. “Don’t do it,” he said.
“It is kind of like, you don’t wear underwear on the outside of your pants; you don’t give people your private keys,” he said. But for those anxious to cash in on their BCH right away, he describes a safe way to do it.
Create New Addresses
Snow suggests users separate their BTC from their BCH first, as follows:
If you had any number of addresses holding BTC before August 1, then you will now have an equal amount of BCH on those same addresses.
Snow recommends you go into your BTC wallets and move the entire amounts of BTC in those addresses, (imagine three addresses we’ll call A, B, C) to three new addresses (D, E, F). Now, the second set of addresses (D, E, F) will have BTC in them, but no BCH because those addresses did not exist before August 1. The first set (A, B, C) will have BCH in them, but no BTC.
“To reiterate,” Snow said, “move your Bitcoin addresses from where they were on August 1 to new addresses. Step two, input those private keys into your Bitcoin Cash wallet. Step three, profit,” he said.
For more info on how to handle your BCH safely, read A Beginner’s Guide to Claiming Your Bitcoin Cash (and Selling It).
Neutral on Bcash
Bitcoin Cash has, in a sense, divided the community. Some like Bitcoin Cash because it raises the Bitcoin block size limit to 8MB, while others are appalled at how the new chain is attempting to usurp users and hashpower from the main Bitcoin network.
Snow maintains a neutral stance. “I’m not sure I have an opinion on any particular blockchain out there,” he said.
After all, Bitcoin is not the only game in town. He pointed out that right now there are nine cryptocurrencies other than Bitcoin with a market cap of $1B or more. Those are the facts. “I don’t care whether you think Bitcoin should be the only blockchain or not. They [those other coins] exist,” he said
Moveover, he thinks Bitcoin Cash played fair and square in launching an alternative currency. Everyone who had BTC got their share of BCH in the airdrop. Nevertheless, nearly everyone he hears from is looking to reinvest that money back into BTC.
“I am seeing a lot of people who are going to cash out on the Bitcoin Cash as fast as they can and buy Bitcoin with it,” he said.
Of course, there is another option. People could hold onto (or “hodl”) their BCH just like they hold on to their BTC and see if the price goes up.
After all, Snow said the market for BCH won’t hit its stride until mid September when the mining difficulty on the new chain eases up to the point where Bitcoin miners consider it economically viable to redirect their hash power over to it.
“Right now, anyone mining on Bitcoin Cash now is effectively donating their power,” he said. “That [Bitcoin Cash] bandwagon doesn’t leave town until September 18th. Until then, it is just kind of puddling along and not quite getting anywhere.”
But, say the Bitcoin Cash chain were to beat all odds and become super successful. If that were to happen, would Factom anchor onto the Bitcoin Cash chain instead of the Bitcoin chain?
To explain Snow’s business, Factom is a protocol that runs on top of the Bitcoin blockchain. By doing so, it allows any kind of data to be time-stamped and secured using the Bitcoin blockchain. So hashrate is essential to Factom’s security.
“We are anchoring into a chain for its proof of work,” Snow said. “But if proof of work is largely in Bitcoin Cash, then we will anchor onto Bitcoin Cash.”
He added that if the hashrate between the two chains were to split 60/40, Factom could anchor on both chains and still get 100 percent of the hashpower.
“We can anchor as many chains as we want,” he said, but added that he doesn’t think Bitcoin Cash will ever capture that much hashpower. With BCH currently only valued at less than one tenth of BTC, the economic rewards for miners just aren’t there.
But as Snow pointed out, all of this plays into Bitcoin’s security. “Bitcoin is designed so that it is very, very hard to split off and be successful,” Snow said.
During the course of the interview, Snow also discussed the mechanics of how Factom anchors onto the Bitcoin network and the third annual Texas Bitcoin Conference, which he founded and helps organize. The conference will take place from October 28-29.
Listen to the entire podcast here.