A hard fork necessarily means that two versions of the block-chain exist and value is held in both. Now realistically one of them should probably go down in value and the other increase or hold steady such that the total value held in them is roughly the same at the end of the day ( assuming a rational crypto-currency market). However assume that the market is undervalued and somehow the market decides that both the blockchains have the same value or that the new one is way more valuable than the older one, with the latter holding its value; isnt that equivalent to something like 4 billion dollars of value being created out of thin air? And also, how likely is that scenario, especially in the context of bitcoin classic....

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    "assume that the market is undervalued and somehow the market decides that both the blockchains have the same value": This is approximately as likely as the market suddenly deciding that Monopoly money has the same value as US dollars. Jan 25, 2016 at 15:55
  • That's why I chose not to address it strongly. ;) The market constantly reevaluates itself. Being undervalued strongly ties into the estimation of future prospects. A hardfork surely would let these fall through the cellar floor.
    – Murch
    Jan 25, 2016 at 17:36
  • My bad, I should've phrased it better. What I meant wasnt a case where the market suddenly decides that both are of the same value. It was more like the case where in the long run, one really takes off, whereas the other equilibrates near the original value. Jan 25, 2016 at 18:40

2 Answers 2


I'm not an economist, but…

No, that's very unlikely.
Starting from your assumption that the network splits into two persisting blockchains*:

  • The number of active participants of each network is reduced. This reduces the utility of the network. → Negative effect on the value.
  • The amount of transactions that can be sent increases. This improves the utility of the network. → Positive effect on the value.
  • The shortterm security of both chains is reduced as hash power is spread to two chains. → Negative effect on the value.
  • The longterm security of both networks is reduced, as one or both of them become more likely to cease existing. → Negative effect on the value.
  • Unforeseeable reactions of various invested parties. → Unknown effects.

I'm fairly confident that a project fork would throw the community into turmoil. Some developers might leave, some companies may be bankrupted, lots of users would lose money. The community would have to reorganize, work on governance, work out new goals, and rebuild teams. Blocks will slow down due to hash power splitting to two chains. The underdog may use this opportunity to completely redefine themselves, thus bringing their project back into the game. Development would slow down significantly for a while. I would expect each chain to have a lower value than the original chain, most likely the sum of both would fall well below the original chain's value.

I'm convinced that cryptocurrencies benefit so strongly from the network effect, that only a small number of them will be able to coexist, i.e. both blockchains would be competing for the same market share. Either they diversify to an extent where they appeal to vastly different userbases, or balance will at some point tilt, causing one side to take the lion's share. Even if the projects significantly diverge, one should end up much more widespread than the other. Should this schism have a clear victor quick enough, the winner, now improved in comparison to the original blockchain, could attract the bulk of the community, and rally. If they split without a clear majority and the schism drags on, it might become so ugly that both bleed support and go extinct.

*It's not clear that two chains would persist after a hardfork. The game theory seems to work out in a way that one chain would very quickly be abolished.

  • A problem you left out is that in case of a fork computing power has to be split across the forks. Due to the role proof-of-work has in bitcoin, that means each fork will be more vulnerable to attacks.
    – kasperd
    Jan 28, 2016 at 21:21
  • @kasperd: Good point, thanks. I've added something for that.
    – Murch
    Jan 28, 2016 at 23:12

I agree with Murch on what would happen if we get a persistent de-facto fork of the blockchain; the sum of both would fall well below the original chain's value.

However, I don't believe we will ever get there. I believe it's a common misconception to think we could ever get a split into "core-coin" and a "classic coin" (or XT coin) with those two being on somehow equal footing. That won't happen. The hard-fork is only reality when;

  1. At least 75% of the hashing power signals support for the new chain rules
  2. Some grace time period (28 days) have passed, allowing the remaining 25% to upgrade their software
  3. Some miner actually mines a block that is not accepted by the old rules (that is, a block that is above 1MB).

And even then the coins won't be split; transactions will still be going into a shared mempool and they are likely to be included on both chains. Now if the split is allowed to continue it will be messy as hell, some transactions going through at both chains and some only at one. Some clever people will probably be doing double-spend-attacks to make sure to split their coins. After a while freshly minted coins will be entering the chains, they will be valid only on the chain they are mined.

That said, I believe the hard-fork, when/if it comes, will be successful - the chain following the old rules will be abandoned, and the BTC value will go through the roof once the market realize that the much-feared-for hard-fork went smooth.

To initiate the count-down for the hard-fork, at least 75% of the miners have to signal support - but in reality the threshold is likely to be higher:

  1. Miners depend on a high BTC value, hence they will only be willing to signal support for the hard-fork if it is overwhelmingly probable to be successful. Last I heard, Chinese miners will signal support when it seems likely that at least 90% of the hashing power will support it.
  2. Miners will have a very hard time selling their freshly minted coins if they mine at the "wrong" part of the fork - hence whatever minority is against the fork will be very quick on switching sides and support the "winning" side.
  3. The "old" fork will for all practical purposes become unusable for several months, even if as much as 25% of the miners still will support it - the everage interval between blocks will be at least 40 minutes, the mempool will become overflooded, transactions won't go through, it will be a sinking ship for sure.
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    I'm not sure it's valid to assume that the hard-fork necessarily would go so smooth. I see three potential issues: 1) Miners retract support after support was signalled. 2) A steadfast minority of 10-15% refuses to switch chains. 3) As consensus is never reached, a frustrated majority attempts a contentious hardfork with 60-70% support. – E.g. even a 90%-10% split could get really ugly. Say, in the case of 10% small blockists: 90% of the miners accept big blocks, and 100% of the miners accept small blocks, perhaps leading to the checkpointing of a big block and 3).
    – Murch
    Jan 25, 2016 at 17:33
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    #2 is a legitimate concern, not only due to "die hard smallblockers", but also due to folks who just don't care upgrading software. One can hope for the first big block to be mined just after difficulty recalculation, then the problem will become insignificant. I think #3 is unlikely, I can only say I strongly believe it won't happen. The minority will accept defeat, and miners won't vote for the proposal unless they expect success. #1, only if miners intend to sabotage, and they don't.
    – tobixen
    Jan 26, 2016 at 18:44
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    "once the market realize that the much-feared-for hard-fork went smooth." Why would anyone trust a system whose fundamental rules can be changed by a simple minor majority? What kind of "digital gold" guarantee is that? Most of the world has such a minor majority rule already.
    – Jannes
    Jan 27, 2016 at 1:22
  • As to "why would anyone trust a system whose fundamental rules can be changed by a simple minor majority?" - that's FUD. There is a lot more to it than a "simple majority". This debate has already been going on for several years (and it has been a heated debate for more than half a year already), lots of negotiations and compromises has been made, 75% miner approval is needed to move forward. And, this is more about keeping "status quo" (keeping the limit well above actual block sizes) than to change something.
    – tobixen
    Feb 10, 2016 at 11:54

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