Most of them are jokes, performance art, scams and everything except serious projects with real potential.
A fork is when a cryptocurrency blockchain splits off into separate chains. If enough cryptocurrency miners choose to switch their machines to that new chain, then it might keep growing and extend to become its own cryptocurrency.
This rarely happens, and the most likely outcome is for new forks to quickly disappear under a profound lack of interest or their own outright shadiness. A new report from BitMEX has picked out 44 forks since Bitcoin Cash, showing the sheer number of bitcoin forks that sit in some of the danker corners of the internet.
Of those, only Bitcoin Cash, Bitcoin Gold, Bitcoin Diamond and Bitcoin Private have actually gone on to maintain a certain trade volume.
Why give a fork?
Forking an existing cryptocurrency might be the second easiest ways to create your own coin. The easiest to date is probably to just create an ERC20 token on the Ethereum platform.
The benefit of forking bitcoin is that you can also mirror bitcoin’s transaction history to date, which can make it easier to dump the new coin onto existing bitcoin holders. By combining these freebies with some hype, it’s possible for the coin to acquire some value.
These days it’s relatively easy to fork bitcoin thanks to handy tools like the bitcoin ForkGen, which for legal reasons is technically “interactive performance art.”
Interactive performance art might also be a good way to describe the vast majority of useless bitcoin forks, most of which are almost self-parodying projects promising to become the future of blockchain currency with an almost identical range of features. Smart contracts, bigger block sizes and private transactions are all popular promises.
The scam coins might be less artistic but just as numerous as the dead end performance art coins.
Theft by fork
The idea is that coins will be freely and proportionally dropped to current bitcoin holders at the time of the fork. The wild success of the Bitcoin Cash fork, and more tempered success of the Bitcoin Gold fork, created a lot of wealth out of thin air. The idea of picking up all bitcoin forks, just in case one goes somewhere, has created a good environment for scammers and thieves.
Compromised wallets might be one of the main attack vectors.
Projects will often release a new wallet along with the fork, to hold the forked coins. Sometimes these will have backdoors for the creators to access them later, if and when the newly forked coin gains value. The more obvious scammers will invite people to plug their private bitcoin key into their totally-safe-they-promise wallet to receive their coins.
One of the more sophisticated examples of this was the Bitcoin Gold wallet scam, which managed to net millions of dollars of bitcoin from unsuspecting victims.
Bitcoin Gold wallet scam
Bitcoin Gold came along at the right time for a scam, in November 2017. The recent Bitcoin Cash fork had successfully and contentiously created a lot of money out of thin air, and with crypto prices on the rise the space was full of newcomers hoping to cash in the same way.
Bitcoin Gold was a widely promoted and largely legitimate project, and one of the helpful developers working on it was kind enough to create a Bitcoin Gold wallet generator. Community insiders and other developers knew and trusted the wallet creator, and were happy to endorse the wallet generator on the main Bitcoin Gold site. It was an open source project, and people who scoped it out didn’t find anything suspicious.
The wallet generator simply required users to plug their private key or recovery seed into the website to create a wallet. It was a hair-raising red flag, but assurances from the Bitcoin Gold developers and scouring of the code set people’s minds at ease.
Why don’t more bitcoin forks succeed?
There are some legitimate forks out there, and some large projects such as Kik’s Kin might decide that a fork best suits their needs. But forks run into the same obstacle as any other project, in that they need buyers to believe in it, and to believe the developers have the skills to achieve their stated goals.
A quick glance at the vast majority of bitcoin forks should probably leave anyone dubious. When a project isn’t an outright scam, its vague promises of smart contracts, indeterminate scaling solutions and complete privacy — which is incidentally extremely difficult — and other buzzword bingo should also be off-putting.
Any blockchain developer with the skills to actually pull that off has much better things to do than paddle around in a project called “Bitcoin Kandy” or similar. Plus, bitcoin architecture isn’t necessarily the best starting point anymore.
It’s probably a good thing that most bitcoin forks sink without a trace. The alternative would be unusual.
Disclosure: At the time of writing the author holds ETH, IOTA, ICX, VEN, XLM, BTC, XRB
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