Crypto Management is More Critical Than Ever Before, And That’s a Good Thing
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These are complicated days for the crypto economy. Having already endured a profound and well-publicized boom and bust cycle, digital currencies have come out on the other side more diverse and expansive than ever before.
When bitcoin first rose to prominence, it did so mainly on its own merits and hype. As the only major player in town, it had little competition and all of the name recognition, making market dominance unparalleled.
While it continues to be extremely popular – and still has the largest market cap of any digital token – the ecosystem is becoming increasingly crowded, and bitcoin is far from the only player. According to data compiled by , bitcoin’s dominance is more than 30% less than it was at the end of 2017 when the token held 85% of the collective crypto market cap.
Of course, this is undoubtedly a good thing. Greater competition creates better and more usable tokens that help the crypto movement make the mainstream debut that it’s been on the cusp of for years. At the same time, it makes crypto portfolio tracking more critical than when users simply managed a single bitcoin wallet, injecting both possibility and complications into the process.
Nowhere is the crypto expansion more evident than in the recent launch of , a decentralized crypto exchange that runs on the new blockchain. Until then, Binance operated on popular blockchain, where hundreds of other altcoins reside as well.
Now, with multiple prominent platforms used for launching and engaging with alternative digital tokens, the decentralized economy can be becoming bigger while also producing dueling allegiances.
For instance, Binance users can convert their Ethereum-based ERC-20 tokens to the new blockchain in a 1:1 swap, but they can also continue using them on the Ethereum blockchain. Meanwhile, new platforms are clamoring to gain a listing on the new Binance DEX, something that was once reserved primarily for Ethereum’s blockchain.
Moreover, the crypto expansion isn’t limited to just industry platforms. Even traditional financial institutions are expanding the ecosystem.
Last week, reported that , a financial management company with nearly $2.5 trillion in assets under management, was close to its crypto custody service. They join a list of prominent institutions pursuing this approach.
Each of these services creates new ways for crypto products to come to market, making them more usable and accessible to more people. It also necessitates a new plan for keeping track of all these tokens.
Increasing regulatory oversight and the above-board progression of the crypto movements means that users are tasked with keeping track of their cryptos in a clear and auditable way.
Currently, the U.S. tax system considers cryptocurrencies to be an investment, with tax consequences accompanying appreciation and tax benefits deriving from depreciation. Although crypto investors are engaging with many different platforms, they need a singular mechanism for tracking and recording their tokens.
Many are turning to to achieve these results. The right software can combine many disparate tokens into a single platform that allows users to easily manage and track their investments, consolidating an otherwise complicated endeavor.
As a result, crypto accounting is already for many companies.
Regardless of the methodology, crypto users need a plan for storing, tracking, and accounting for their different assets. Cryptocurrencies have evolved considerably since the days when bitcoin was the only token in town, and now it seems like new platforms are continually emerging, bringing innovation and forward thinking along with them.
This is overwhelmingly positive for users, but it means that they need a plan for managing their crypto assets so that they can positively and confidently participate in this expansion.
The hard fork part of the is scheduled to take place within about two weeks. This incompatible protocol rule change is set to increase bitcoin’s block weight limit, to allow for more transactions on the network — if everyone adopts the change. Otherwise, it will create a new blockchain and currency that be considered to be “bitcoin.” The list of signatories of this agreement includes several of the largest bitcoin startups and mining pools that, together, claim to represent a majority of users and hash power. Yet, it is far from clear that this part of proposal really has much support outside of these signatories. Most of bitcoin’s , a significant number of , some , as well as suggest otherwise.
And now, a growing list of international bitcoin communities is putting out public statements against the SegWit2x hard fork as well.
— the largest and longest-running bitcoin meetup in South Korea with over 1700 members — was the first user community to put out a on SegWit2x. More precisely, in their own words, the group voiced its “staunch opposition to this November’s proposed hardfork.”
In its statement, the Seoul bitcoin Meetup places emphasis on the manner in which the agreement was made. Typically, changes to the bitcoin protocol go through the Improvement Proposal (BIP) process where it is peer reviewed by developers across the ecosystem, whereas SegWit2x went through the New York Agreement, which was forged at an invite-only meeting among about a dozen company executives.
The Seoul Meetup states:
If a select group of CEOs and investors, no matter how benevolent their intentions, can unilaterally make decisions about the consensus rules without public comment and force these changes upon the network regardless of overall consensus, then bitcoin will have lost the properties that make it valuable in the first place.
Additionally, the Seoul bitcoin Meetup argues that the hard fork is needlessly risky without offering sufficient benefits to warrant the risk. It also takes issue with the of SegWit2x developers not to implement strong replay protection.
On the same day as the Seoul Meetup Group, the Munich meetup group also put out a public statement against the SegWit2x hard fork. This meetup group consists of over 2000 members — though only several dozen of them actually engaged in the vote whether or not the statement against the SegWit2x hard fork would be accepted. This itself was spread via on social media.
In its statement, the bitcoin Munich meetup explains it opposes the SegWit2x hard fork in part because of technical concerns:
Another doubling of the block size so quickly after SegWit seems hasty and might cause further mining centralization.
The statement further argues that a hard fork requires more and better preparation and should include more improvements from the, and it endorses bitcoin Core as “the true bitcoin client.”
The biggest user community also published the longest against the SegWit2x hard fork so far. A combined effort between a significant group of Argentinian and Brazilian users and companies, published on October 17,2017, voiced “their deepest concerns over the upcoming November hardfork as mandated by the so-called New York Agreement (NYA), also known as SegWit2x (S2X).”
Not unlike other critics of the hard fork, emphasis was placed on the process that led to the SegWit2x agreement:
The very nature of an ‘agreement’ between a few parties in a decentralized consensus protocol can be interpreted as an aggression against the network.
Similarly, the statement addresses the lack of transparency from SegWit2x proponents, criticizing the notion of a “political compromise instead of a technical upgrade” and the “consensus imposition instead of consensus building.”
Other points of concern include the lack of replay protection, the rushed nature of the hard fork, misleading statements by SegWit2x proponents and much more.
The Israeli bitcoin Association is a non-profit organization that promotes bitcoin and similar technologies in Israel, with an open membership. On October 24, 2017, this association put out its own on the SegWit2x hard fork.
Slightly different from several of the other statements, the Israeli bitcoin Association emphasizes the right of anyone to fork bitcoin and create a new cryptocurrency. That naturally includes SegWit2x proponents.
But importantly, the association adds:
A protocol change in the currency holding the name ‘bitcoin’, especially one requiring a hard fork, requires overwhelming consensus. The SegWit2x hard fork does not in any way enjoy such consensus, and while this remains the case we cannot refer to the resulting currency as ‘bitcoin.’
The SegWit2x currency will instead be referred to as “‘Bitcoin2x.’ ‘SegWit2x coins,’ BT2, B2X, S2X or any other distinctive term that the industry will adopt.”
The Hong Kong bitcoin Community / bitcoin Association of Hong Kong
The Hong Kong bitcoin Community in general, and the bitcoin Association of Hong Kong specifically, put out against SegWit2x on October 25, 2017.
While technically separate statements, both voice their concern about the lack of consensus for the hard fork. The Hong Kong bitcoin Community — a group of Hong Kong–based companies — states that “the lack of enthusiastic support for this fork among the community is striking.” The association — which mostly exists to promote bitcoin in Hong Kong — states that “the proponents of the hardfork should kindly ask the bitcoin community to support them and then only proceed with the hardfork if there is widespread community support.”
Additionally, the Hong Kong groups speak out against the lack of replay protection in the SegWit2x fork.
Due to the combination of both a lack of consensus across the community and a lack of strong replay protection, we consider SegWit2x a reckless endeavor that will cause disruption and harm to the ecosystem.
The Italian bitcoin community, more specifically a group of companies, meetups, lobbying groups and other organizations, put out a against SegWit2x on October 31, 2017.
The statement is largely inspired by an earlier by the Italian blockchain research lab , which rejected SegWit2x as “an attempt to perform a political takeover of bitcoin.”
The statement by the broader Italian bitcoin community is a bit more compact, but nonetheless touches on many of the familiar points of criticism regarding the SegWit2x hard fork. It reads:
The opposition is especially strong against any action of this kind that could cause huge inconveniences for service providers and serious confusion for users, potentially leading to financial losses: unilateral attempts to appropriate bitcoin name, logo or “ticker”, attempts to mislead light-clients and SPV wallets on alternative networks not explicitly chosen by them, attempts to launch new coins in a way which leave users vulnerable to “replay attacks” or address format confusion, attempts to attack the network with a temporary hashing-power majority in order to create disruptive reorgs or to slow down the normal activity.
Meanwhile, the French-speaking bitcoin communities are voicing their concerns with the SegWit2x hard fork through a. It is currently signed by over 1300 people and counting.
The (French) text that accompanies the petition is mostly inspired by and based on the statement published by the Seoul bitcoin Meetup. Like that statement, this petition emphasizes concerns about the manner in which the agreement was forged, while also noting the lack of replay protection and other problems.
Additionally, the petition includes a call to action to find alternatives for the companies that signed onto and continue to support the SegWit2x hard fork:
We would suggest avoiding the use of services of companies that support the NYA, and we hope to substitute them with alternative solutions.
Are they any more user communities that have put out statements against or in favor of the SegWit2x hard fork? Let me know at aaron@bitcoinmagazine.com.
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