Insights

Fork You!

daocat

Another day another high, and no I’m not talking about Fear and Loathing in Las Vegas or more recent drug-fueled finger slicing incident which ironically got Johnny Depp flown to LA. Clearly, you know that I’m talking about crypto, and surely you’re seeing a ton of headlines and tweets, especially on a day like today, “I told you so”, “you should have mortgaged your house and bought BTC”. Good thing you can check if these Monday morning quarterbacks are honest by looking at timestamps such as my recommendation over 3 months ago when the price was trying to break $10K. It’s funny how everyone is becoming an expert on crypto these days, even CIOs of $270 billion funds have started prognosticating $400,000 price targets.

What I want to talk to you about is something different, and that’s forks, and tell you that I am DAOCAT and I’m an alcoholic, sic ... actually tell you that you should get rid of every single fork that you have in your portfolio – today. Bitcoin Cash, Bitcoin Gold, Bitcoin SV, and though not officially considered a fork Litecoin (the granddaddy of all forks) and anything else called Bitcoin XXX or Ethereum XXX. My rationale for this is simple – these coins were not made out of the benevolence of their creators; they were made out of sheer desire to print money. While private enterprise is good, and competition creates perfection, just as Ethereum has bested Bitcoin in certain ways, the aforementioned forks and others are not breakthroughs in technology and are not the work of thousands of engineers. They are simply copies of the existing codebases of other blockchain projects, with minor cosmetic changes to icons and things such as block size, which is typically just one variable in code.

To make matters worse, many of these forks have been and will be monetized by their creators via pre-mining and selling into BTC. What pre-mine means in a proof of work (PoW) chain is when the difficulty of a certain number of initial blocks is made such that you can mine them on your old Nokia. Developers deploy the main-net, proceed to mine huge chunks of these tokens, partner with unscrupulous exchanges to pump them to their unfortunate clients, and while the mining difficulty rises the creators sell their pre-mine and abandon their projects. In some cases, more public developers maintain visibility of working while in reality the tokens are abandoned.

You can say what you want, but when the founder creates tokens out of thin air by copy-pasting code on Github and just adds the pre-mine variable such as the case in BTG or sells their entire stash later, as in the case of LTC, the value and incentive misalignment becomes apparent. In the case of BCC, BTG, LTC, BSV, and others, even more importantly, there are absolutely no use-cases to speak of. BTC potentially has a use-case as store value vs fiat money, similar to gold, while ETH could empower DeFi, or other projects via its smart contracts. Neither is perfect, but both are undergoing an evolution with codebases gradually improving (as you can see by commits), which has an effect on lowering commissions, and transaction speed, making them more useful. On the contrary, forks of Bitcoin or even Ethereum forks such as Ethereum Classic are doomed to eventually fail and become completely worthless as they have:
1. No adoption
2. No use cases
3. Very few if any developers improving their codebase and the surrounding ecosystem
4. Founders who have not sold their pre-mine yet, are waiting at every uptick to hit the bid
5. No scarcity value, as you can fork with just a few clicks

Talking about these shitcoins makes me feel pretty depressed but there’s a silver lining, because of the massive rally we’ve had in December. As they say, a rising tide lifts all boats, and while they rallied a lot less than BTC and ETH, they still did, and actually, LTC has had a fairly pronounced rally breaking $100 as of this writing. Perhaps it could go higher still, but I would rather HODL BTC.

While it’s tough to say short term what to do in BTC given the dynamic price action as of late, one thing is clear, if any of these shitcoins are still in your portfolio, sell them into fiat immediately. If you want to have more crypto exposure, replace them with BTC or ETH or perhaps another project, with real developers and at least some possibility of future prospects.

When I was little my mother made me read Emily Post, Baltimore-based author, and socialite, so that I could learn about etiquette. As you can tell I never liked etiquette, and remember her writing being very boring and stuffy, which is probably why Mr. Post became famous for his well-documented affairs with chorus girls (a group of dancers who together perform synchronized routines). I still remember one quote from Emily Post – “Manners are a sensitive awareness of the feelings of others. If you have that awareness, you have good manners, no matter what fork you use.” In my view, the deplorable bunch who clone Github code, pre-mine coins, and release forks don’t have any manners or future and these forks don’t have a place in your portfolio.

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