With Bitcoin and the blockchain, life continues to be damned if you do and damned if you don’t. On August 1, if you hold any bitcoin, then you’ll receive the equivalent in a new cryptocurrency called “Bitcoin Cash.” The reason why is messy, but you can think of it as a kind of dividend.
There’s a catch. If your Bitcoin is held on certain platforms, including the largest one, Coinbase, then you won’t receive your due. That’s because for reasons political or technological, those platforms are automatically rejecting the new currency. (Although Coinbase noted in a tweet yesterday that there’s a possibility it will change its mind.)
The rational thing to do then if you own Bitcoin on one of those platforms is to move your funds elsewhere, claim your free Bitcoin cash on August 1, and then move back when things have settled down. That’s the common refrain you’ll find online, but because this is the cryptosphere we’re talking about, that refrain needs to come with a fat warning sticker.
Consider Coinbase. For many years it’s been the de facto platform for less techy folks to buy and store bitcoin. Coinbase’s easy-to-use design and PayPal-like features stand in contrast to the tech horror that is the rest of the industry. That’s a problem.
If Coinbase is all you know, then you’re not equipped to beam your money to another platform or to a private wallet; it’s too different and too much can go wrong.
Use a malicious website to generate your private key? Your funds vanish. Hash a bad password? Your funds vanish. Copy and paste the wrong hash? Your funds vanish. Choose the wrong exchange? Your funds vanish. Save your key on a malware-infected computer? Your funds vanish. Store your key on a sheet of paper that your roommate throws away? Your funds vanish.
The list is endless and many items apply even to sophisticated investors. The point is that moving large sums of cryptocurrency from one place to another has non-zero risk attached and may lead to catastrophic loss.
Yet, ignoring the free Bitcoin cash distribution is also a bad option. Bitcoin cash will have value, maybe small, but also maybe very large. You never know in this space and if the creation of Bitcoin cash leads to a devaluation in regular Bitcoin, then staying put means taking an automatic loss.
There’s no good move here and this situation is representative of the whole space, one where tech gimmicks continue to trump basic safety and accessibility.
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