Coming off of the recent news of the Bitcoin Cash (BCH) hard fork into BCH ABC and BCH SV, it made me think about the commercial implications of blockchain forks.
TLDR: Forks in blockchains add costs to the commercial entities using it.
Let’s take an analogy…imagine if HTTP as an internet protocol was able to hard fork.
Let’s imagine that URLs had to be agreed upon by a consensus mechanism and for whatever reason, the protocol forks. One day you’re site is located at http://www.mysite.com, then the next day its located at both httpabc://www.mysite.com AND httpsv://www.mysite.com.
Now all of a sudden, because you adopted the HTTP protocol as a business to use the internet, you now need to maintain two different sets of DNS records, two different SEO backlinking profiles, two different adwords campaigns, and two different TLS (SSL) certificates for login forms and secure transactions.
In other words, because you adopted a ‘forkable’ internet protocol for people to request your site, you now run the risk of the number of digital assets your team now needs to manage multiplying ad infinitum.
When a protocols fork, the number of associated digital assets multiplies, which adds carrying costs and risk.
The same applies to forkable blockchains. If a commercial entity has adopted a blockchain protocol that has the ability to hard fork (whether they’re using it for smart contracts, cryptocurrency, asset tracking, etc.), that commercial entity runs the risk of having to track and maintain two separate sets of digital assets associated to both chains.
If the entity is using a cryptocurrency, they now need to maintain two central wallets which means additional accounting costs for reconciliation. If their customers’ are using the cryptocurrency and hold wallets for transactions with the commercial entity, that entity will now need to create new wallets for the forked currency and issue them to its customers, which means increased operating costs and an accounting headache.
In other words, when protocols fork in any medium — blockchain, internet, telecom, currencies — it adds additional costs to a business.
When protocols fork, it adds costs to the entities using it in commerce.
Remember when businesses only had telephones? They only needed a phone line.
Then the fax machine came around and now you needed two phone lines, one for your main line and one for your fax line. Increased cost.
Then the internet came with dial-up, and you now needed three lines, because if you used your main line for your dial-up connection, you’d get disconnected when a call comes in. Increased cost.
Then broadband and cable came around, so now you had to drop your extra dial-up line and go purchase a ethernet-enabled modem, plus a cable line. Increased costs.
Every time a communication protocol of any type splits, it causes maintenance costs to commercial entities.
“Well, in that case, just pick one protocol, and drop the other protocol. Problem solved.”
Except its not that easy in commerce. When the internet came around, businesses couldn’t just ditch fax lines because email was the new rage. Businesses still had to maintain fax lines because some of their customers and vendors preferred to still use fax machines. Most businesses still have fax lines. Businesses need to maintain communication protocols according to their target market, they can’t just drop them.
When the internet came around, businesses couldn’t just ditch their fax lines because email was the new rage. Businesses need to keep their fax lines because some of their customer and vendors still preferred to use fax machines.
So knowing this, it becomes risky for a business to deal in forking blockchains, simply because the costs of maintaining a multiplying digital asset base are unpredictable.
Takeaway: A blockchain’s historical state is certain. Its concatenation path needs to be certain as well or its a commercial liability.