The world of Bitcoin just became much more complicated.
Bitcoin, the world’s most popular cryptocurrency, is either the money of the future or a hopelessly overvalued fad, depending on whom you ask.
Over the next several days, we’ll likely find out. The currency is currently worth about $2,700 per bitcoin, or BTC—up from around $560 one year ago—despite many analysts’ predictions that the currency would drop sharply in value following a “split.”
Yes, Bitcoin split into two currencies. Sort of—not really.
Here’s what you need to know (and why you might want to hold off on a big investment).
First, a quick primer on how Bitcoin works.
Essentially, a global network of computers manages Bitcoin without any central authority.
To send a bitcoin, a user sends the transaction to a network of computers (or “nodes”) that then verifies the transaction. This adds a block to the
Because bitcoins are essentially just numbers on a spreadsheet, they’re infinitely divisible. That means that you could buy, say, 0.000456
With the right tools, you can use
Makes sense? Here’s where it gets a little more complicated.
Nobody knows who designed
The creator went by a fake name, Satoshi Nakamoto, but he (or she) hasn’t played a public role in Bitcoin’s development. In fact, because the blockchain isn’t stored on any single computer, nobody controls it.
Some bitcoin owners were concerned about the technical aspects, so they split off from the rest of the community to create a new currency with similar (but not identical) technology. Basically, they wanted to use a different kind of ledger.
The new currency, Bitcoin Cash (BCC), doesn’t make the original Bitcoin (we’ll call bitcoin BTC from here on out) less valuable or obsolete. In fact, most people will continue to use BTC.
However, the creators of Bitcoin Cash decided that when launching the new currency, they’d issue BCC to anyone who currently owns BTC. Some outlets have called this a “fork,” although that’s not technically correct—BCC is simply a brand-new cryptocurrency.
In other words, if you’ve got 10 BTC, you’ll receive 10 BCC for free. It costs you nothing. That’s an easy bet, right?
That sounds like free money, but it isn’t that simple.
BTC is extremely well established. Japan even recognizes it as a legal currency, and there are currently about $45 billion in BTC in circulation.
BCC, on the other hand, is completely new, and its value will be difficult to gauge for a few months. Days after its launch, BCC is the third-largest cryptocurrency (after BTC and a rival currency, Ethereum).
Currently, there’s a lot of confusion in the market, which has led some investors to put down stakes.
“We are receiving a lot of off-market orders for bitcoin cash—they’re exploding!” venture partner Sebastian Quinn-Watson said to Business Insider.
So, what should you do if you’re considering an investment in either BTC or BCC?
Will the price of BCC and BTC continue to rise? That’s entirely possible. Another possibility is that the currencies could be overvalued, and we could see a permanent crash some time within the next several months as investors rapidly change their minds (see the Dutch tulip craze for a historical example).
Before you invest in either of these cryptocurrencies, consider whether you’re willing to lose that money. The market could fall apart—it could also soar, of course, but you’re betting solely on demand since both cryptocurrencies are intrinsically valueless. In other words, you’re betting on people, and people change their minds.
In plain English, wise investors should probably play it safe. If Bitcoin is a bubble, it’s about ready to pop.
