The Impact of CSTs on Bitcoin Ecology


IFO – The initial fork coins, circulated in the currency circle. Especially today, the news that Li Xiaolai plans to issue an SBTC detonated coin circle, of course, voice of condemnation is high.

I will not talk about whether it’s a reasonable and just act to copy the Bitcoin blockchain and issue a coin by any rule. The fact speaks the truth. it is of little significance to discuss power or morality.

Chapter1  CSTs will steal the limelight of altcoins

The speculative function of digital currencies generates a big market, but basically the total amount of capital will not have a huge change in a short period of time. While the CSTs, built on the natural network of bitcoin, will inevitably play a big part in the speculative function.

At present, except Bitcoin and Ethereum having a fulfilled transaction data, other altcoins basically have little trading volume. This means that the vast majority of altcoins actually do not have much practical function, their main function is for speculation in the exchanges.

CSTs allows everyone who holds bitcoin to automatically earn money, which in itself is a good start and will have great liquidity. The probability for such a CST to be listed on the exchange is considerable. CSTs can be listed for futures trading even before they come out, which means that speculation of CSTs starts before they are born. The better liquidity, the more conducive it is to speculate. Altcoins however do not such opportunity.

CSTs can be hyped technically, you say also attach any new features to it, anonymity, smart contracts, decentralization, so long and so forth. Who cares whether you are fake, filling up the brochures is the priority.

Those who are engaging into the altcoin business are facing new challenges, be cautious before investing in these altcoins.

Chapter 2  CSTs are exhausting the exchanges, offchain wallet, escrow currency institutions and individuals

Anyone who holds bitcoin before fork will receive the same amount of altcoins after the fork. Essentially these CSTs belong to the bitcoin owners. But it gives a hard time to exchanges, offchain wallet, escrow currency institutions and individuals

I myself have kept a few coins for many relatives and friends. I am so sick of these CSTs and airdropped coins. I have to keep a big ledger book. Those coins require private keys, signatures, new wallets now and then, and any change entails a one by one notice. You wanna sell it or hold it? Should I charge a fee? How much? Will they think that I overcharge them ? Well…forget the commission…

It’s not that every time when a new coin comes out, it comes with a well-functioned wallet like BCH does. Much CSTs created for speculation have a poor development team. It often takes me a day to develop a new wallet, two days to separate the coins or to sell them in the exchanges. Bookkeeping, damn, I need to spend three days…

Then I think it would be more of a headache for the exchanges. When a news coin comes out, they need to snapshot and suspend recharging and withdrawal. They need to guess the users’ mood and the amount of reserves as to relevant futures trading. And when it comes to the point of listing, they need to test the new wallet, write a software to distribute and withdraw coins.

And the situation can be worse for those doing fractional reserve business.

Such exchanges often sell the borrowed bitcoins for RMB for investment purpose or use the bitcoins directly for investment. Anyway, the transferred bitcoins can’t bring equal CSTs to the exchanges after fork happens.

In this case, how to withdraw the users’ storage of bitcoins?
Under normal circumstances, knowledgeable users will go before the fork to withdraw bitcoin, however, if the number of such users are big, it will lead to bank run.

In addition, if the exchanges want to prevent user runs, they have to introduce policies to substantially raise the fractional reserve ratio before the fork in order to repurchase insufficient CSTs to subsidize users.

Whatever approach the exchanges take, they will face a great reduction in the profits or loss of credit due to denying distributing CSTs to the users. Coupled with the issues of the way to distribute, write software, testing. . .

Wallet company can’t be spared of the headaches either, the users will chase them for the way to receive CSTs.

Anyway, they would be exhausted. No wonder Li Xiaolai turned off Bufubao and Bitesha.

Chapter 3  Coin holders have mixed happiness and fear

Speaking of annoying side, let alone green hands, old hands are annoyed: Another new wallet to be installed? How? Should I call the cold wallet or not? Is it safe to use private key? Sell it? Damn, would Bitcoin die from forking?

Then the happy side: Great! Got another coin to sell, I’m gonna be rich!

Chapter 4  Conclusion

Forking brings endless trouble. The risk of investing in fork currency is great, do not buy them blindly, really, do not be fooled by ads of fork currency.

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