On Forks

Last year Ethereum forked and we got a new crypto asset called Ethereum Classic. I own Ethereum. I don’t own Ethereum Classic.

I could buy Ethereum Classic but I have not been interested in doing that as of yet. That may change.

Next week Bitcoin will fork. If you hold your Bitcoin directly, you will get Bitcoin Cash, the fork of Bitcoin, in addition to your Bitcoin.

If you hold Bitcoin at a hosted wallet or exchange that will not support the fork, like our portfolio company Coinbase, you will not get Bitcoin Cash.

I am going to keep my Bitcoin at Coinbase and pass on the opportunity to get some free Bitcoin Cash.

If, over time, Bitcoin Cash becomes interesting, I could buy some and maybe I will do that. Like I might buy some Ethereum Classic.

Yes, passing on the opportunity to get some free crypto is a missed opportunity.

But I am not sold on Bitcoin Cash, like I am not sold on Ethereum Classic. I would like these crypto assets to prove themselves in the market before I take ownership of them.

All of that said, I think forks are valuable. They allow for innovation. They allow for others to try a different model. They allow for the market to decide what is valuable and what is not.

Forks are a pain for the companies that provide the infrastructure for these crypto assets. Forks introduce instability for a period and the Ethereum fork last year is a good example of what can happen.

But all in all, I think forks are a feature not a bug in the blockchain sector. There is more good that comes from them than bad.


Comments (Archived):

  1. LIAD

    I think we need a minimum percentage of mining power breaking off before calling it a fork. A small minority of miners deciding to do their own thing shouldnt warrant the classification.Whilst actual forks ultimately improve the ecosystem, by definition of if they’re sustained they’re clearly providing value, the fallout of the confusion they cause to normals is not to be underestimated. Which is the real bitcoin, which is the good one, which is the one I should have etc. Just opens up opportunities for scammers to come in, trade off the bitcoin name recognition and screw the pooch.

    1. creative group

      LIAD:We agree with the base of your position. But the principles of BCC are known to the ecosystem of crypto-currency and Blockchain. Do you disagree?It appears the rift between BTC and BCC is based upon control by wealthy investors and the technically savvy coders funded by both factions who realize this entire process will not work without them.East verses West.Asia is showing deep pockets are not only in the West.Popcorn is already out viewing the show.

  2. Michael Folkson

    More information please on why you’re turning down free money. You could sell it as soon you receive it. Just don’t want to exacerbate the bank run on Coinbase (a portfolio company)? That would be reasonable. Or is it on some kind of ethical principle?

    1. William Mougayar

      Btw – Coinbase is not the only exchange not supporting Bitcoin Cash. Here’s the latest , source: http://coinaffairs.com/2017…Crypto Exchanges and their BCC support:– Coinbase – no BCC support for now– Poloniex – no initial BCC support, may add it later– Kraken – will provide BCC coins and offer trading– Bitstamp – no initial BCC support– Bittrex – will credit BCC, may add trading– GDAX – no initial BCC support– Bitfinex – will be distributing BCC, no information on trading– Gemini – no initial BCC support– Shapeshift – no initial BCC support– Cryptopia – no initial BCC support.

    2. VorpalIncis

      Agree – Fred, please let us know why any rational client of Coinbase would not remove their BTC while the chain forks. I am not sold on the prospects of BCC either but it would be crazy to give up a free option because of such an opinion. I find it hard to believe that you would be making this statement if you were simply a Coinbase customer, rather than an investor first and customer second.

      1. fredwilson

        I disclosed my conflict. So nothing wrong about thatI just don’t value BTCC

        1. Camiel van Velthoven

          Is BTCC really worth nothing?I would happily receive your BTCC for my baby’s college fund if you don’t want it. Or is that a ridiculous proposition?

          1. fredwilson

            some people value time more than others. i value the time it would take to deal with all of this more than i value BTCC

          2. AM

            Hi Fred – I am very intrigued by your comment. Just curious as to why you don’t want to deal with all of this? By that statement, do you mean moving BTC off of Coinbase or is there a more involved process we are not aware of? Is custody a concern?

    3. fredwilson

      I don’t sell crypto assets so that’s not really my thing

  3. jason wright

    i await the dawn of the age of the forking founders. too many existing projects are fiefdoms protected in their autocratic style by Swiss hypocrisy. the serfs will rise up and create a more fair and equal distribution of value.i’ve moved all of my bitcoin away from Coinbase because it isn’t supportive of the fork.p.s. i see the Feds moved in on BTC-e and shut it down. The ecosystem is occupied by fraudsters, scammers, and schemers.

  4. Barabare

    Fred,I’ve been a customer of Coinbase since the very beginning. I am technical, and understand the benefits of and am capable of managing my own private keys, but I still maintained my BTC at Coinbase due to the ease and simplicity they provided, including with respect to their Vault feature.But the recent horror stories of their customer service, their frequent downtimes and delays, and now their handling of Bitcoin Cash fork, have finally prodded me to move to managing my own keys and to stop recommending Coinbase to those new to crypto. I know I’m far from the only one.I understand why Coinbase doesn’t want to offer Bitcoin Cash, but they at minimum should have done a much better job of communication. The emails they sent out were confusing and alarming. Even better, I think they should have committed to support Bitcoin Cash if it met some pre-determined and announced level of economic value after a certain time period.I apologize for criticizing your portfolio company here, but I do so with good intent. I think they are squandering the goodwill they’ve built up over the years, and I hope that you can help get them back on track. I’d love to see them continue to succeed.

    1. David C. Baker

      I too am a Coinbase client. I have head all the horror stories but have not been caught up in the customer service traps like others, just because I decided not to trade much during those volatile times.I will say that Coinbase has never been clear on the Bitcoin Cash portion of what’s going to happen in this fork tomorrow. Their public statements are “obtusity nicely formed” and I’m always left wondering what I just read w/ such clarity.

      1. jason wright

        “ambiguity is my friend” – Tony Blair.Would there be a legal restriction on Coinbase using the word ‘bank’ instead of ‘base’? It behaves more bank-like every time there’s an issue that could disrupt its model.While there was a time when a Coinbase model was welcome and needed it seems to me that the infrastructure of the entire crypto ecosystem has matured to the point where there are more than enough technical options out there for even the average person to be able to wrap their head around to become the sole custodian of their own tokens. a centralised token bank for a decentralised token network of value seems less and less plausible. I do not apologise for criticising a USV portfolio company here, and as i also do it with good intent. what we need is the building of a better blockchain ecosystem and not a cloning of the bad old ways of the fiat banking system.

        1. David C. Baker

          I’m probably smack dab in the description of the user that you describe. Technically competent and able to do everything that CoinBase does for me, but lazy and impatient about that particular portion of my portfolio. I like CoinBase precisely BECAUSE it functions like a bank and its UX characteristics are intuitive to me.

          1. jason wright

            David, please look at getting a hard wallet (when they’re back in stock!) and have a play with it. move fractions of a token around to become comfortable with the process. it’s not that difficult and you will be empowering yourself. It feels good.

          2. David C. Baker

            Where’s the best place to get one? You’re right–I owe it to myself to learn it all.

          3. jason wright

            at the moment you have to wait because most places are sold out due to bitcoin’s sudden price rise (the tokens became much more valuable and people were less happy to leave their wealth in the hands of third parties).Ledger (French)Trezor (Czech)Keepkey (USA)Keepkey is a fork of Trezor’s code, and is having one or two issues at the moment (company restructuring and growing pains). Ledger has a fancy looking new device coming out soon. A bit expensive, and untested in the real world as yet.

          4. jason wright

            get two.

        2. LE

          where there are more than enough technical options out there for even the average person. to be able to wrap their head around to become the sole custodian of their own tokens(My emphasis … ‘average person’).Where are these resources that the ‘average person’ can use?I am not a programmer (as I like to point out in deference to those that are like @failicon ) but I am way above average. [1]I am not seeing anything on a quick search that comes anywhere close to allowing the average person to do what you are indicating. Maybe that’s some SEO thing whereby those who stand to profit are pushing the results and easy down to the 4th page [2] but somehow I don’t think that is the case.I honestly think this is near the classic case where people need the Coinbase model.Look people can ‘easily’ host their own website on their PC at home (despite what Comcast or Fios might think) but they don’t and they won’t. They pay someone else to do that. And it’s not for lack of help guides or even easy ways around the knowledge issue. People want simplicity and will pay for it. That is why they use dropbox not rsync.[1] Jumped right into to running a mail server (SMTP/Pop) over 21 years ago when there were no online help guides, as well as other servers (hosting etc.) Then made money selling the fruits of that labor to others. Using Unix since the 80’s. Self taught and all of that jazz back when ‘self taught’ meant something.[2] Considering possible conspiracies.

          1. jason wright

            what do you want to be able to do Larry?

          2. LE

            Exactly this: “become the sole custodian of their own tokens”

          3. jason wright

            See below. Get a hard wallet, but it depends on which tokens you have and plan to have. This is not a solution for an obscure token on page two of CMC. That requires a paper wallet process. I also recommend a dedicated computer for crypto, and not Windows.See BTC-e and the Feds if you doubt that leaving tokens (and fiat) in exchange accounts is a risk. Busted for laundering only last week. Coinbase is a little different. More like a safety deposit box, but you still don’t control your private keys. Still some risk in that.

          4. jason wright

            get two hard wallets

          5. jason wright

            if you want a Keepkey flag 16th August for when Kk will be making an announcement (see Twitter feed).

    2. creative group

      Barabare:Apologizing for speaking your truth to perceived power? Humans have the power you surrender to them.The lambs are much too many on this forum.Now if you intentionally posted and promoted inaccuracies or obliques then we could understand an apology.

    3. fredwilson

      You should feel free to speak your mind freely here. There is absolutely nothing wrong with this comment. It is helpful to hear feedback on our portfolio companies. I understand the issues Coinbase faces very well which makes me more sympathetic to them but at the end of the day the customer is always right

      1. Korf

        Coinbase gets credit for being pioneers and blazing a trail that made it easier for settlers and town planners follow and begin to develop. Having dabbled in btc a few years ago I was pleasantly surprised to log into an old coinbase wallet and retrieve forgotten BTC a few weeks ago. User experience was flawless.

  5. William Mougayar

    Crypto without drama is not crypto.

    1. jason wright

      Digital Darwinism.

    2. David C. Baker

      Volatility is how:1–The knowledgeable and risk-accepting make money.2–How the masses w/o knowledge get “forked” very high or low.3–What prevents widespread adoption of any measure of wealth.

    3. Girish Mehta

      There is great drama, and then there is soap opera.Not clear where Bitcoin sits.

      1. jason wright

        and then there is pantomime. Roger Ver as the Dame? i would pay to see that.

    4. Twain Twain

      Forget all the drama and testosterone. Back this Kickstarter project, everyone! I’ve made a request to the author, Andrew Sassani, Director at Magellan Health, that he renames the book ‘SUPER Girls, Powerful Women.’https://uploads.disquscdn.c…https://www.kickstarter.com

      1. fredwilson

        just backed it. thanks for the tip.

        1. Twain Twain

          We fight for what’s right.

    5. Ryan White

      William, as an active participant in the crypto economy I would love to know if you agree and are going to pass on (free) BCC?

      1. William Mougayar

        I’m passing and ignoring and wishing it didn’t happen. Next. So many more exciting things happening in crypto land besides Bitcoin cash which is more like a hijacking.

        1. abn

          why? more crypto is always better. we defintiely have the room for more coins. you need to come to china and india before solidifying your opinion on BCC. from my talks with people, i see real grass level support for BCC. more will flow once miners jump in on the action after difficulty readjusts. Bangalore meetup group, a top 10 group is planning to get people educated on bitcoin cash. same with shenzen, mumbai, Ahmedabad, xiamen and many other population million plus cities. take another lool william. this is all very good for crypto. bitcoin is still king imho, but bcc made it fun or will soo make it fun for hardware again.and you get a ferrarriand you get a Ferrari and you get a Ferrari (said like oprah)dont bet against jihan and his syndicate. especially if you want a Ferraricrypto has and always be about community. its worth what someone is willing to pay for it.

          1. William Mougayar

            I’m watching its development, of course. More miners support would be a key progression, but I’m worried about future R&D for it. Is it just another speculative currency or will it find a unique position?

    6. JamesHRH

      Crypto without drama is mainstream crypto.

  6. Dean Roskell

    If your bitcoin sits on an exchange then you don’t own bitcoin, the exchange does.I’ve used Coinbase a lot and they’ve been great, but people should remember that with bitcoin if you really want to be secure, then you should be holding your coins in a wallet where you hold the private keys.

  7. creative group

    CONTRIBUTORS:Smart money interpretation-If we can’t control it directly or indirectly the risk is too great.

  8. JLM

    .There are three things at work here:1. The Devil in the old fashioned good v evil deviltry. Older than mankind itself.2. The masked man VC failure rate — pick your number. Startups, including bitcoin and ICOs, have some prescribed high mortality rate. This will be discovered as things play out.3. A guy named Darwin.When there is complexity — all of life is complex — then there is the opportunity for both great brightness and shadow. When there is shadow, there is mischief.Where there is competition amongst species, there is a nod to the strong v the weak even when it is timing and only timing. Darwin had some clever phrase to describe this.Drama is not the prelude to comedy — using it in a literary sense. Drama is the prelude to tragedy — again, in the literary sense.JLMwww.themusingsofthebigredca…

    1. cavepainting

      Drama is indeed a precursor to tragedy, at least for some, if not most.

    2. Michael Elling

      It’s not strong vs weak. It is “fittest” as in natural selection. More often than not it is the “freak” at the time, or over time, that survives.

      1. JLM

        .Gilding the lily a bit? Word play. I can agree to that.Not sure I really agree that it is the “freak.” Much of success is quite conventional. Freak exemplar?JLMwww.themusingsofthebigredca…

        1. Michael Elling

          a) Humanity has to move beyond the notion of winner takes all. Capitalism mistook Darwin’s work suggesting that the strong always win. In fact it is the outliers who win.b) What we’ve been witnessing for the past 100+ years of the information economy is enormous network effects that have led to the current wealth and digital divide. In all networks value (social benefit) grows geometrically and is more often than not captured at the core. The costs grow mostly linearly and are borne by those at the edge.c) when we understand the implications of a and b we see that networks need to equilibrate value and costs, but also, to be sustainable, allow for the outlier to effect change.The crypto and ICO crowd believe they are doing this (sharing the value), but in fact they’re going down the wrong path. They should all read Plato.

          1. JLM

            .Have a hard time getting beyond the notion that the winner doesn’t take all. What world are you talking about? Nobody I know is playing for second place.I am sure you have some exemplar to prove your statement that the outliers win.The info economy has NOT been around for 100+ years, has it?What you describe as the “current wealth and digital divide” is Mother Nature at her very best. You may not like the outcome, but there is A King of the Jungle. There are no co-Kings.There is no need to “equilibrate” outcomes, but there is a good argument to be made about ensuring opportunity is fairly presented.I am into equal starting points and not equal finishes. The race determines one’s place at the finish line.Plato — meh.Sun TzuJLMwww.themusingsofthebigredca…

          2. Michael Elling

            There is no winner takes all in nature. Look at your body; a set of 80 networks linked via price signals providing incentives and disincentives. (BTW, the internet has no incentive/disincentive system; so no true “inter-networking”). The rest of the universe is pretty much like your body. Nature is about balance. Winner takes all is a contrived human notion. Combine Gauss, Pareto/Zipf, Moore and Metcalfe and then we get close to understanding the math behind everything.Actually, if you include Morse, then “digital” information networks have been around 180 years. But I’m talking about the mass market 1 and 2-way information networks that really kicked off in the 1910-1920s. We’ve forgotten nearly all the lessons and mistakes from those early days. Just look at the stumblings and bumblings of the internet over the past 30 years after we broke up Ma-Bell and the absurd debate over net neutrality.All of socio, political and economic thought can be tied to network effects. The velocity of information and access to it have been the critical gating factors to what we consider advancement over the past 10-20,000 years. You do realize that what you have made of your life (private benefit) is ultimately dependent on everyone else (social benefit).I believe in free markets and competition too. But starting and ending points are never static and the current system has those constantly changing. Today’s information economy (which means pretty much everything) is totally imbalanced by inefficient rules and regulations that promote and sustain a winner takes all model.

          3. JLM

            .What’s going on? You waiting for the cable guy to come fix something? Pure nonsense.We play the FINAL Four, the World Series, the Super Bowl — of course, winner takes all. We had a Presidential election without a Miss Congeniality awarded, no?Starting and end points are always static. Think about it, if they were moving the start and finish lines, what would define the race?You need a Labrador to talk to. I am not that Lab, though I really want to be one in my next life.JLMwww.themusingsofthebigredca…

          4. Michael Elling

            JLM, you’re a big mouth here. Just trying to help you understand a different perspective. Humanity isn’t even a pimple on the body of history, yet it is the only thing in the cosmos, that we know of, that has the ability to conjure and project thought and reason into action that affects everything. What if we program in winner takes all into the AI? Already we see the destructiveness of this on the internet, which lacks inherent settlements.

          5. JLM

            .Mike, I think you may have violated the snowflake comment policy by calling names. Perfectly fine by me, but I don’t want you to be shamed or scorned.Let’s try this — I think “winner takes all” is programmed into our DNA. You disagree. Let’s drink to that and you can stop trying to do missionary work.I see nothing even remotely destructive about winner takes all. I see a lot of reality behind it. We may just not agree.I asked you for an illustrative exemplar and you didn’t give me one.And, I can live with that.”Already we see the destructiveness of this on the internet, which lacks inherent settlements.”I have absolutely no idea what that means or even what it could mean. My bad.Let’s call it a day. Shall we? Or do I need to buy you some ice cream and a trophy?JLMwww.themusingsofthebigredca…

          6. Michael Elling

            Big mouth was complement, unless you took it otherwise. But perhaps someone who slights so much would take it that way. The first time a cave-man carrying around some carcass met up with a cave-woman with a club on a trail, our pre-programmed DNA didn’t result in struggle. It resulted in some type of communication that resulted in a sharing or balance. And guess what, they probably mated and here we are. If one had killed the other (aka WTA), we wouldn’t be here. As for freaks or outliers or mutants, they’re the central body of Darwin’s work! He didn’t use the term “strongest”. You did.WTA is one aspect of network effects. The social benefit grows geometrically as to the number of participants in the network; and that value invariably remains at the core. But the other aspect of sustainable networks is that the social benefit be used to cover the private costs of those who can’t connect. And guess what, that cost is so low relative to the benefit that it makes sense to do so. In the future rural service will be paid not through tax or subsidies, but rather through corporate sponsorship/procurement of rural end-points and mobility services for those who transit through and to rural markets. Same holds in urban markets too.The internet does not have those settlement systems to rebalance the social value/private cost. You only see the effects of scale driving marginal cost to close to zero; but the majority of the benefit is captured by a few companies (WTA). That is not sustainable.

  9. Ryan White

    By leaving your BTC in coinbase you are allowing coinbase to gain free BCC. This is an asset that you should have access to as a participant in the crypto economy.I can understand the technical and operational challenges to Coinbase for supporting BCC. Financially and as a participant in crypto I don’t see the alignment. Your statement as a member of the financial community seems at odds (as other have stated) with a fiduciary responsibility. If I was investing in crypto and had a chance to get in at a zero cost on a new crypto giving it a ¯_(ツ)_/¯ seems irresponsible.If we assume a similar value to ETC (parity fork with arguably no value difference from ETH). When the fork happened ETC was worth about $2 and ETH worth about $12. That is roughly 10% of the value. From a fiduciary responsibility standpoint, transferring your assets for 2 weeks to get a 10% return on them seems like the only logical thing to do.”I would like these crypto assets to prove themselves in the market before I take ownership of them.” This is strange because they are being offered to you for free. There is literally no risk.The only risk I see here is that every person that leaves BTC in coinbase is giving coinbase free BCC that they can use at their discretion. It’s almost like issuing an ICO without having to make a whitepaper. A completely non dilutive way for a portfolio company to raise a significant amount of capital.Bit disappointed in this post.

    1. fredwilson

      that is not accurate. see this message from Coinbasehttps://twitter.com/coinbas…

      1. abn

        i also didn’t claim my BCC. it was a time consuming thing. i travel too much and access from too may IPs. i get that i lost money, but i knew i would lose that money and am ok with it. even now with bcc at levels of $200.i don’t keep all my bitcoin with coinbase either, but after seeing this image from fred.. i am pretty sure i will get my bcc from them.in india now, just got here from shanghai. too many people excited about bcc in these countries and i have a feeling it will be a top 10 coin soon.

  10. Jeff Lunsford

    I was a happy Coinbase customer until this fork. Given the Wild West nature of crypto, I chose them as my first crypto exchange and wallet primarily based on the pedigree of their investors – USV, A16Z and DFJ. I assumed that in a volatile world, they would do their best to operate a legal, safe and customer-friendly platform. They have done wonderfully up until the UAHF. You may not value Bitcoin Cash, but futures are trading at about $345 per BCC 24 hours before the fork. Unless it goes to zero rapidly after the fork, this is real value with BTC at around $2700. It’s as if the U.S. Govt. decreed a 12% one-time dividend for all holders of US Dollars and Chase or Cit decided to reject those deposits on behalf of all of their customers. Coinbase is riding an obvious wave and will likely not lose too many customers over this, but it is sad as an entrepreneur to see a company take their customers for granted this way. They should be burning the midnight oil and at least announcing they will sell their customers’ BCC and distribute BTC – or something. My 20-year old son has put half of his summer earnings into BTC on Coinbase and this is a meaningful amount of money to a college kid. We’ve both moved our BTC to Xapo and Bittrex while the HF occurs. Each will give us our ‘dividend.’ Coinbase has not lost us as customers, but they’ve disappointed us and eroded some good will. You said it best – the customer is always right – and I imagine a huge majority of Coinbase customers would appreciate getting their rightful BCC. Hopefully the Coinbase team will make a surprise announcement tomorrow!

  11. kidmercury

    IMO forks are definitely not a feature. that’s like calling secession a feature of nation-state governance, or divorce a feature of marriage contracts. sure, both secession and divorce are possible, and that is probably a good thing. but the exercise of this option is not a sign that all is well and innovation and progress are occurring; rather, it is a sign of an irreconcilible conflict.

  12. Kevin Hill

    This will certainly be an interesting test of bitcoin and blockchain. Basic economic rationality would mean that if you double the number of assets, you halve the price of each asset. You could build in a couple of added bumps from that base. Not everyone will split, so it won’t be a true doubling, and a relatively peaceful split could be a positive long-term sign for bitcoin.However, if the price of bitcoin doesn’t drop by something close to 30%, then we will have very good evidence that that the market is not behaving rationally.

    1. Kevin Hill

      After some more thought I realized that there are two related ways to think about this.First, the total BTC + BCH market cap should remain more or less constant. Total market cap will drift, but there shouldn’t be any big jumps. This doesn’t seem to be holding, as BCH currently has a market cap of $6B, but BTC has only droped to $45B from it’s high within the last week of $48B.Second, the prices should be anti-correlated. It is about the most classic textbook definition of competing good that you can get, so short term prices should signal market preference. This is doing a bit better. Over the last 12 hours they’ve been decently anti-correlated, but uncorrelated over longer time scales. This means that probably the fork wasn’t ‘priced in’ to BTC before it actually happened. In the last 24 hrs, BTC’s market cap basically hasn’t budged.I’d say the next 24 hrs are pretty critical for bitcoin. If BTC (or BCH) doesn’t loose maybe $2-3B in market cap, it’ll be pretty tough to argue that this market is rational.

      1. hf1

        The fork also marked a breakout of BTC + BCH to a new all time high above $3000. Probably many large players postponed entering large positions (or re-entering back from fiat money) until the fork-induced uncertainty settles down,Btw, no market is rational.

  13. abn

    boom. woke up to the news. coinbase wins again. Fred is gonna make some money on that company. pressure is on now india for unocoin and coinsecure