by Tanzeel Akhtar
With Bitcoin currently trading above $12,000, any credible fork of the parent coin is likely to draw a frenzy of demand for both the parent and its offspring. Reports say Bitcoin Diamond (BCD) was launched on November 24 and has been trading on a number of exchanges after it was forked at block height 495866:
Nevertheless, according to some researchers, BCD is simply not the real deal. Though the US-based Bittrex Exchange currently supports Bitcoin Diamond, there's a plethora of information claiming the latest cryptocurrency is a scam.
Udi Wertheimer, a blockchain researcher says:
“As far as I know it doesn’t actually exist yet. There’s zero published code. The fork will happen retroactively once the code is ready and released and it’s hard to tell if this is happening any time soon (or at all). What’s being traded now on various exchanges isn’t actual coins, but futures contracts.”
Bitcoin Diamond team remains anonymous
It's not just the ongoing anonymity of its development team that's raising red flags about BCD, there are also concerns that no whitepaper is available, nor any other form of technical information about the new digital currency. One avid crypto follower, based in Australia, tweeted:
Guy Zyskind, CEO, and co-founder of Enigma, a firm that shares and analyzes encrypted data, points to earlier problems with Bitcoin Gold as a cautionary example:
“While the anonymity of the Bitcoin Diamond team isn’t preferable, what it is most troublesome is the almost total lack of preparation behind this rollout. The BCD team has yet to even release a whitepaper, and there is no evidence as to whether or not a viable blockchain even exists. After the massive theft of Bitcoin Gold last month, investors are likely to be extremely wary of this fork until the project becomes more open about their progress and development.”
Right now there are three official versions of Bitcoin, including Bitcoin (BTC) itself, Bitcoin Cash (BCH), and Bitcoin Gold (BTG (LON:BTG)). All were born out of a hard fork: BCH on August 1, 2017 and BTC on October 25.
But there were birth pangs as some of these offspring launched. When the BTG split occurred, warnings of a 'massive DDoD attack' were tweeted out, for instance. As well, an additional, recent hard fork of BTC—referred to as SegWit2x—was suspended because of lack of consensus. So it could simply be that Bitcoin Diamond's rocky start is just the new normal for how additional Bitcoin offspring enter the world.
Though perhaps not. Nolan Bauerle director of research at CoinDesk notes:
"After the success of the Bitcoin Cash fork, with its baked-in user base and instant demand for liquidity, forks of Bitcoin look like a trend. While these forks leverage the good name of Bitcoin, they must be analyzed as any other cryptographic protocol. In the case of Bitcoin Diamond, we have heard promises about how it will enhance the privacy features of Bitcoin..."
But Bauerle warns that in the world of cryptography, it's extremely easy to propose a bulletproof solution for keeping things secret. However, one doesn't know if the proposal is good until the cryptography has been tested and attacked. It's what makes Bitcoin so special, he explains. The digital coin has been attacked and tested for years yet still remains unbroken. In fact, it's only gotten stronger.
As for Bitcoin Diamond, he adds:
"...we still don't know anything, particularly how privacy will be preserved. Before looking into the quality of a privacy coin, it is vital to understand what cryptographic tools are orchestrated in the protocol. Until Bitcoin Diamond shares details, there's no way to distinguish the tech from marketing."
Chris Housser, co-founder of Polymath points out:
”The latest trend in blockchain seems to be forking Bitcoin. We had bitcoin cash, bitcoin gold, and now bitcoin diamond....users should be aware to ensure there are replay protection and no malicious code before attempting to claim these forked coins.”
Despite quite a bit of skepticism about Bitcoin Diamond, there are also a variety of news outlets reporting that BCD has been launched at 33 exchanges worldwide, though primarily in Asia, such as Shanghai-based Binance, OKEX in Hong Konk, Singapore's Huobi.Pro and Bit-Z also in China. China-based EXX.com has also announced futures trading of Bitcoin Diamond.
With so much competitive infighting, both across the broader digital currency world as well as within the Bitcoin blockchain, it's difficult to predict what the future holds for Bitcoin Diamond. One thing remains true about investing and applies across all asset classes, whether new or established: due diligence is critical. Caveat emptor.