A Fairer Commentary on Bitcoin Cash

The topic of Bitcoin Cash is a very divisive one and we’ve reached the point where itʼs hard to make statements regarding the issue without being labelled as a zealous fanboy of either side. The believers call it the original vision and Satoshiʼs true intent, while the “coreheads” dismiss Roger Verʼs invention for being just another altcoin that isn’t worthy of the Bitcoin brand.

Bitcoin Cash was created in a moment when Satoshiʼs invention was growing unexpectedly fast while having an identity crisis, and it proved that the words of an absent founder can become gospel.

Bitcoin: A Peer-to-Peer Electronic Cash System

In a nutshell, Bitcoin Cash refuses to embrace the sole function of Bitcoin as a store of value: in the vision of Roger Ver and his supporters, HODLing is a vice and cryptocurrencies should be spent on goods and services, as it is a P2P cash system after all.

The main change for BCH were the bigger (8MB) block sizes which increase the number of transactions that can be made in one block - which consequently reduces the fees. There is nothing wrong with this approach and some may argue that it contributes to a speedier adoption of cryptocurrencies in the financial system and international markets. Lower transaction fees are an incentive to actually fulfil the “peer to peer cash” purpose that Satoshi Nakamoto presented in the whitepaper.

Roger Ver was a strong advocate of the controversial New York Agreement, and opposed the time and resources-consuming SegWit and Lightning Network. The development and implementation costs were deemed too high, the testing would require an indefinite amount of time, and the original vision of Satoshi Nakamoto never mentioned such scaling solutions.

In the short term it was so much easier to increase the block size. This meant that the new coin would be supported by a more centralized network which meets the technical scaling requirements but places slightly more power and profit in the hands of miners.

The Bitcoin Brand Battle

However, the advantages come at a price and we shouldn’t be ignorant in regard to these issues. From a marketing perspective, itʼs bad to create confusion of the bitcoin brand as it makes it difficult for newcomers and creates a distorted image about the divided nature of Bitcoin.

The fact that Roger Ver owns the Bitcoin.com domain name, a proprietary wallet and the Twitter account, further contributes to the confusion. And the way he refers to the original Bitcoin as “core”, while pointing out its flaws as a liquidity transfer facilitator seems to work for his own brand. There have unfortunately been multiple cases of new investors sending BTC to BCH wallets provided by Bitcoin.com.

A Sustainable Solution

We shouldn’t deem Bitcoin Cash as a long-term solution, though: it might be better for payments and transactions for now, it most certainly won’t be able to keep up with demand if it solely relies on increasing block size as a solution. The Lightning Network, despite not being part of Satoshiʼs original vision, is a solution, that if successful will provide better scalability and greater security.

Bitcoin Cash does not benefit from the support of as many big developers and engineers from the cryptocurrency world. The block size vision is not quite revered among the brilliant minds whose heads are focused on innovating around BTC.

If anything, Bitcoin Cash is like 3dfxʼs Voodoo 5 video card: an improvement that relies on stacking together existing technologies, and one that will have to compete with true development and innovation. There are plenty of supporters and advocates, but their loyalty also revolves around a mirroring of principles: if they think that cryptocurrencies should act as liquidity and get spent, then they will go for the brand which offers them the lowest fees. But if the competition manages to deliver an overall better product, then even the most faithful of supporters will choose according to their best interests.

It All Rests On The Lighting Network

Whether or not the Lightning Network will succeed and solve all the scaling issues is something that remains to be seen. But for now, if you really care about using the Bitcoin version which has the lowest transaction fees and the most accessible interface, then you may go for Bitcoin Cash.

Then again, Bitcoin Cash isn’t much different from Litecoin or many other alts in technical terms, and some may argue that Charlie Leeʼs coin is much more secure against 51% attacks and has lower fees thanks to SegWit.

Competition is always healthy for growth, this is an open source market where anyone can start a new coin, but that doesn’t make the gospel approach to the whitepaper and the appropriation of the name alright. Bitcoin Cash can be recognized for its technological virtues but will never be the real Bitcoin, nor will it replace it.

JPMorgan Chase’s Shifting Attitude Towards Cryptocurrency

Siamak Masnavi

In this case, we look at how JPMorgan Chase's stance on cryptocurrency has softened in the past couple of years.

JPMorgan Chase & Co. (aka "JP Morgan") is the largest bank in the U.S., the sixth largest bank in the world by total assets of around US$2.687 trillion, and the world's most valuable bank by market capitalization.

Jamie Dimon, JP Morgan's Chairman and CEO, has long been a fan of blockchain technology but not cryptocurrencies. In fact, he called Bitcoin a "fraud" as early as September 2017. 

According to a report by Bloomberg, on 13 September 2017, after calling Bitcoin "a fraud", Dimon went on to say that Bitcoin was “worse than tulip bulbs." And if a JPMorgan trader began trading in Bitcoin, the J.P. Morgan CEO said that he would "fire them in a second."

He went on to say that:

If you were in Venezuela or Ecuador or North Korea or a bunch of parts like that, or if you were a drug dealer, a murderer, stuff like that, you are better off doing it in bitcoin than U.S. dollars. So there may be a market for that, but it’d be a limited market.

On January 2018, in an interview with FOX Business's Maria Bartiromo, Dimon said that he regretted his previous comments about Bitcoin, and expressed his faith in blockchain technology: "The blockchain is real. You can have crypto yen and dollars and stuff like that. ICO's you have to look at individually. The bitcoin to me was always what the governments are gonna feel about bitcoin as it gets really big, and I just have a different opinion than other people. I'm not interested that much in the subject at all.”

In an interview with the Harvard Business Review (July–August 2018 Issue), here is what Dimon had to say about crypto: "I probably shouldn’t say any more about cryptocurrency. But it’s not the same as gold or fiat currencies. Those are supported by law, police, courts. They’re not replicable, and there are strictures on them. Blockchain, on the other hand, is real. We’re testing it and will use it for a whole lot of things."

Then, on 14 February 2019, CNBC reported that JP Morgan had created its own stablecoin -- JPM Coin -- "a digital token that will be used to instantly settle transactions between clients of its wholesale payments business."

And last Friday (February 21), Bloomberg reported that the bank's Global Research team had released its annual "J.P. Morgan Perspectives" report; this year's report was titled "Blockchain, digital currency and cryptocurrency: Moving into the mainstream?". 

Here are a few interesting highlights from what the report's Executive Summary had to say about distributed ledger and blockchain technologies:

  • "While blockchain technology has not yet emerged into the mainstream, it has moved beyond experimentation and use in payments, with stock exchanges embracing the efficiency around settlement/clearing and collateral management."
  • "Trade Finance and Payments blockchain solutions offer the most incremental efficiencies in the banking sector relative to other use cases, but widespread implementation is at least three to five years away."
  • "We see the long-term potential for Distributed Ledger Technology (DLT) to transform banks’ business models by providing efficient and resilient information transfer and storage once scale has been achieved…"
  • "The crypto market continues to mature with the increased participation by financial institutions and the introduction of new contracts on regulated exchanges."

However, for our purposes, the most interetsing part of the report was the section titled "Cryptocurrencies for portfolio diversification: Struggling to prove uniqueness". Here, the report makes some interesting acknowledgements:

  • "Despite their extraordinary standalone volatility, crypto assets still raise the efficiency of a multi-asset Equity and FICC portfolio (the Sharpe ratio, or return per unit of risk) due to high historical returns and low cross-asset correlations."
  • "While crypto might serve some retail investors with a small asset base as one of several hedge instruments, it could not serve all retail investors nor institutional ones and corporates due to a liquidity constraint tough to circumvent without legal currency status to convey scale."

So, it seems that we have gone from the bank's CEO calling Bitcoin "a fraud" in September 2017 to the bank launching its own digital currency in February 2019 to the bank admitting in February 2020 that cryptocurrencies (such as Bitcoin) can "raise the efficiency" of some investment portfolios and that they could be useful to some investors as hedging instruments.