On August 1, Bitcoin Cash (BCH), a hard fork proposal led by Chinese bitcoin mining pool ViaBTC, was forked and hours later, ViaBTC mined the first BCH block. BCH, which was initially developed by a bitcoin mining equipment manufacturer, struggled to gain acceptance from the industry, exchanges and businesses. As a result, its market cap has fallen below $5 billion while the bitcoin price has established its new all-time high at $3,163.
For all bitcoin holders that have had bitcoin on non-custodial wallet platforms have already been credited with BCH. For users on exchanges and custodial platforms, which handle private keys for their clients, each exchange is handling the BCH hard fork differently. Coinbase for instance, the world’s largest wallet platform and the operator of major digital currency exchange GDAX, announced that it will credit BCH to all user accounts by January of 2018.
David Farmer, the director of communications at Coinbase, stated:
“Over the last several days, we’ve examined all of the relevant issues and have decided to work on adding support for bitcoin cash for Coinbase customers. We are planning to have support for bitcoin cash by January 1, 2018, assuming no additional risks emerge during that time. Once supported, customers will be able to withdraw bitcoin cash. We’ll make a determination at a later date about adding trading support. In the meantime, customer bitcoin cash will remain safely stored on Coinbase.”
Many users and investors remain unsatisfied with the decision of Coinbase to credit user accounts with BCH after nearly five months since the initial execution of the BCH hard fork. However, according to bitcoin analysts and experts including Tone Vays and Paxos principal architect Jimmy Song, such precaution is necessary and investors should be extremely careful throughout the process of claiming BCH.
Vays, a prominent bitcoin trader and well-respected analyst within the cryptocurrency sector, noted that claiming BCH with non-custodial wallet platforms such as hardware wallets, paper wallets and online wallets can impose security risks as they involve private keys of bitcoin wallets. When private keys are exposed, bitcoin can be stolen from users and redirected to external or alternative wallets.
If the Mt. Gox hacking incident is taken for instance, WizSecurity revealed that a hacker working closely with Alexander Vinnick, the owner of now-defunct bitcoin exchange BTC-E, stole the wallet.dat file from the centralized systems of Mt. Gox and like that, $2.21 billion in bitcoin were stolen.
Hence, because the manual claiming process of BCH requires the handling of private keys, investors should instead just hold onto bitcoin, wait for the BCH market to stabilize, more BCH wallets to emerge and then cash out or trade their BCH.
As Vays noted:
“Right now, my backup is pretty secure. I know there is one backup in a Mac that doesn’t turn on, and another back up on a couple of USB thumbdrives. I’m not in a rush to get this bitcoin private key out because right now I know it is safe. The moment I plug this USB drive to some computer, the moment I get it out, the moment I change the wallet.dat file, I bring this bitcoin into the world and that scares me. I’m really keeping my bitcoin private.”
For users and investors that remain unclear and insecure about BCH, all users of bitcoin already have been credited with BCH. The difference between exchanges and non-custodial wallet platforms is that because exchanges control the private keys of users, they control BCH of their users and can decide when to credit them to user accounts. For users on non-custodial wallet platforms, BCH has already been credited.
Another major reason to simply wait until the BCH market stabilizes is that as of current, there exists no legitimate and secure BCH wallet. Thus, when BCH is withdrawn from a wallet or an exchange, there is no alternative BCH wallet that users can utilize apart from exchanges that support BCH/BTC trading to store BCH.
Some leading bitcoin exchanges including U.S.-based Kraken and South Korea’s second largest bitcoin exchange Korbit support BCH/BTC trading and offer wallet services. Trezor, the most popular and widely utilized bitcoin hardware wallet, has also integrated beta BCH wallet for users to withdraw or store their BCH but none of the abovementioned BCH wallets are completely safe as of now.
To sum up, for investors and traders of bitcoin, it will be safer to simply hold onto BCH and wait until the Bitcoin Cash market stabilizes.