Bitcoin cash ‘burning’ claim adds fire to PR battle with bitcoin

PORTLAND • Bitcoin cash is the hottest cryptocurrency around right now for more reasons than you may imagine.

The offshoot of the biggest digital token has surged about 25% since last Friday — in part because Antpool, one of the largest mining groups, is “burning” a portion of the coins it receives in exchange for solving the complete mathematical puzzles that serve as the backbone of the network, potentially reducing supply and driving up the value.

The manoeuvre is the latest salvo in an escalating battle between backers of bitcoin and bitcoin cash, which was spun off last year. Through a war of words playing out on Twitter and Facebook, some of the largest holders of both cryptocurrencies are attempting to influence the coins’ prices after seeing significant losses since last year.

“Antpool has burned US$12 (RM46.92) worth” of bitcoin cash a day, said Kyle Samani, managing partner at the Austin, Texas-based crypto hedge fund Multicoin Capital, in an email. “This was purely a public relations (PR) game so they could say ‘reducing supply’.”

Antpool, whose users’ computers confirm 8.2% of all bitcoin cash transactions, announced on April 20 on Twitter and Facebook that it will voluntarily “burn” 12% of the coins it receives.

The mining outfit is sending a portion of the fees it receives “to a black hole address”.

Bitcoin cash has the advantage of lower transaction fees and faster transaction times.

The more widely used bitcoin has been testing a new technology, called Lightning Network, that, if deployed at scale, could significantly cut bitcoin cash’s advantage, Lucas Nuzzi, a senior analyst at Digital Asset Research, said in an email.

“Now, projects like bitcoin cash are struggling to remain relevant, which is hard when very few users are using the network,” Nuzzi said.

“Miners have to liquidate their holdings regularly to pay for their expenses. The move from Antpool is intended to slow down further price depreciation, by attempting to increase the perception of scarcity. Whether the move will be successful remains to be seen.”

The number of bitcoin cash transactions per day has roughly doubled since August, when the coin made its debut, according to The number of daily bitcoin transactions is actually down from last August’s levels.

Other bitcoin cash adherents such as investor Roger Ver, who was widely known as Bitcoin Jesus, have also been actively promoting the coin on Twitter.

Ver often calls bitcoin cash the better bitcoin, where “the old, pro-freedom, economically and philosophically literate radicals have been replaced by a bureaucracy of charlatans who destroyed bitcoin so they could cling to their power”.

Bitcoin has long been plagued by disagreements between its software developers and miners on how to improve the underlying network, and that rift had ultimately spawned bitcoin cash.

The @Bitcoin Twitter account was recently suspended, then reinstated. The account fired back at bitcoin cash supporters saying that they are “trying to steal the bitcoin brand”.

In practical terms, the actual impact of the Antpool announcement is unclear. Cryptocurrencies’ quantity can change for a variety of reasons: The ethereum community, for example, has recently began considering capping its ether coin supply, which is currently unlimited.

Ripple destroys the small amount of its coin, XRP, used to pay for transactions, as “this makes XRP more scarce and benefits all holders of XRP by making XRP more valuable”.

Whether the burning really makes a cryptocurrency more valuable is unclear.

“Cryptocurrencies have a bewildering variety of mechanisms for determining quantity — of course, ever since we left the gold standard, traditional currencies are even more bewildering,” Aaron Brown, a business author who writes for Bloomberg Prophets, said in an email.

“Who knows what would happen if Jeff Bezos converted all his wealth to US$100 bills and burned them? So, it will be an interesting experiment.” — Bloomberg