With the birth of a new coin on Friday, called “Bitcoin private,” the cryptocurrency space just keeps getting more meta. The much-discussed launch finds the cryptocurrency being created from a copy of the Zclassic cryptocurrency (itself a copy of Zcash, which was also a copy of Bitcoin).
But, if that sounds crazy, it is all allegedly – in the spirit of innovation. Rhett Creighton, who is the leader of the Bitcoin private fork, said:
The big experiment with airdropped coins was that they would just fall, and if people are getting free coins, they are going just immediately to sell them, and it is going to dump down to pennies.
In a lot of cases, that notion just did not pan out. Bitcoin cash, Bitcoin gold, and Ethereum classic are the three high-profile forks and are now valued at $1,285, $115 and $34, respectively. For those that owned large amounts of Bitcoin or Ether, those launches meant big gains with little effort.
But, for Zclassic, its fork was not exactly a success story. Zclassic flatlined throughout most of 2017 falling under $2 per coin, and Zcash stayed in the hundreds.
Rather than walk away, though, in December, Creighton doubled down. He tweeted:
I would like to propose revitalizing Zclassic by migrating it to become a Bitcoin hard fork, ‘Bitcoin private,’ or possibly some other name.
Even though Creighton told the members of a Telegram channel that he did not write any of the code or create the white paper, logo or website, his concept has come to life.
In this way, Bitcoin private is probably the pinnacle of the forking phenomenon, and in turn, it has also become somewhat of a punching bag for crypto enthusiasts on Twitter.
The trader named Peter McCormack dismissed it as “brand stealing” and “unnecessary,” while a popular Twitter user @dandarkpill called this project “an abominable potpourri of buzzword features.”
Still, the cryptocurrency has also garnered an important amount of interest, for distributing new, as well as free coins to users of, not just one existing blockchain, but two: Zclassic and Bitcoin.
By forking a code base, the private key of a user can be made to access multiple wallets, a method which, while criticized security grounds, Creighton sees it as a feature which could become important over time. He told CoinDesk:
So, in the case of Bitcoin, you have all these people who have their private keys, but when forks spring up now the same private key can also be used in different peer-to-peer networks. It also seems to be a key piece of the technology.
The founder’s fee.
Is this innovative? As Creighton sets it, “No one has ever done a fork like this.”
And, he is right – the value proposition, as well as mechanisms at work, might probably be the strangest and most complex yet of any fork.
Specifically, what Bitcoin private is implementing, or rather reinstating, is similar to the “founder’s fee” of Zcash, a line of code which allocates 20% of the cryptocurrency generated by mining to the Zcash development team.
Removing the Zcash founder’s fee was the core value proposition of Zclassic. But what shook out was a cryptocurrency which failed to keep pace its wallet causing a lot of problems it was shut down by exchange Bittrex recently.
According to the Bitcoin private white paper, this was because of the lack of developer funding:
Zclassic has also suffered from the same ideas that derived its greatness: the lack of a founder’s tax led to an absence of active development.
So, Bitcoin private will reintroduce a type of founders’ fee. Before the launch of Bitcoin private, Zclassic miners were asked to contribute computing power to the Zclassic protocol in exchange for new private Bitcoins, as well as to put the old coins into a pool that is going to fund development of the new protocol.
The white paper stresses this program was voluntary. Otherwise, Bitcoin private looks nearly identical to Zcash.
Stressing that updates would soon be forthcoming, he said:
We just wanted to create the fork in a short period I think that we did not feel that we had enough time to consider the best options.
Why should we not use Zcash?
For many people, Bitcoin private, in that is a basic carbon copy of Zcash is just another cash grab. Indeed, for a handful of investors, it seems that way already.
According to data from CoinMarketCap, the price of Zclassic shot up, peaking at $199.26, following the announcement of the fork. Then, shortly following the so-called snapshot of February 28th, Zclassic sank from $122 to $24.
This is notable, as a snapshot it is a process whereby developers create a type of freeze-frame of the blockchain they are forking, in the case, both Zclassic and Bitcoin, replicating the data, and then diverging from there.
The snapshot permits the new coins to be airdropped to wallets on the connecting blockchains at equivalent rates.
In response, to those price movements, the crypto investor and entrepreneur Richard Heart tweeted the following:
Have you heard of the pump and dump before?
The creator of Ethereum Vitalik Buterin even displayed some confusion, if not disapproval, after a user on Twitter linked the praise of Buterin of zk-snarks privacy technology to Bitcoin private, tweeting in reply:
Why not just use Zcash?
Plus, some crypto enthusiasts have become irate at the rate of hard forks by using just slight variations of long-established cryptocurrencies’ names that many thinks is confusing the industry, as well as exacerbating scams. The creator of Litecoin, Charlie Lee, for example, voiced his concerns recently over a Litecoin hard fork which is using the name Litecoin cash.
Creighton remains suspiciously optimistic. He said:
We are going to be tapping into all of the people who are key holders of Bitcoin, so we are tapping into that network and what we are also giving to those people is zk-snarks privacy, plus the same decentralized mining as Bitcoin gold, plus faster block times, as well as larger blocks.
Finally, he pointed to a typical refrain of crypto enthusiasts:
People decide how they are going to value that.