Safely Claiming Bitcoin Fork Coins Like Bitcoin Cash
(source)
You can read all about Bitcoin Cash in this Coindesk article: Bitcoin Cash: Why It's Forking the Blockchain And What That Means.
The basic idea is the blockchain will be copied and slightly modified so your private keys will give you access not only to your bitcoin but also to a corresponding amount of a newly created tokens. In this case, Bitcoin Cash.
There's a glaring security concern here because, often, you have to import your private keys into the new coin wallet in order to access and control those funds. Let me run through a worst-case scenario to illustrate why this could be a big problem.
Imagine someone comes out with a new scam coin (we'll call it BitcoinAWESOME) including a new QT wallet. Let's say they convince some heavy financial backers it's the real deal to gain lots of publicity and support. The con then involves people importing all their bitcoin private keys in order to get some new BitcoinAWESOME. Then, as planned, each and every one of those bitcoin addresses gets drained because the scammer hid some code in the BitcoinAWESOME wallet to broadcast a transfer to the Bitcoin network using the private key you just gave it.
This isn't a highly plausible situation based on how many people can review open source code, but we do know pretty serious accidents can happen (a recent Parity multisig wallet issue led to a $30M theft).
I'm not suggesting or even hinting this may be the case with Bitcoin Cash, I'm just giving a hypothetical situation which could happen at some point in the future. This is a risk we should be aware of and protect ourselves against.
Seems to me, if you're doing one of these bitcoin split coins, be sure to move your bitcoin off the address in question BEFORE you try to claim your new coin. That way, if it is a scam, they only get access to an empty wallet.
If you own some bitcoin and you want to get some Bitcoin Cash after August 1st, I suggest you follow this process:
Get all your bitcoin into addresses where you know and control the private keys. Coinbase and others will not support BCC, so you'll have to move your coins if that's where you have them.
After the snapshot is taken (in this case, after 12:20 pm UTC on Tuesday, August 1st), move all your BTC to new bitcoin addresses.
Claim your Bitcoin Cash via the Bitcoin Cash wallet using the private keys of the old addresses where the BTC was at the time of the snapshot.
If you're not a long-term Bitcoin Cash holder, send it to an exchange and sell for free money.
Move on with your life.
Yes, you could also move your bitcoin to an exchange which has publicly announced their support of Bitcoin Cash and promised to give their customers an equivalent amount based on their bitcoin holdings there. But... that's a risk. If you don't own the private key, then you don't own the cryptocurrency. Trusting exchanges has historically been a really bad move.
I have no idea what the price of bitcoin is going to do or if Bitcoin Cash will hold any long-term value. I do know it's our responsibility to learn how to properly use cryptocurrencies safely and effectively if we want to be part of this financial revolution. For more on that, please see episode 3 of UBF: Safety and Security.
Please let me know if you have any questions, but try also to Google for answers first. You'll probably find many well-written articles to explain the answer to your question much better than I can.
Be safe out there, kiddos. Interesting times are coming.
This is so helpful, @lukestokes! Thank you so much for being a great resource. Bitcoin makes me feel slightly lost, no matter how much I read, so your ongoing how-tos and commentary are like a lifeline :)
D! So glad you joined Steemit! Here's a full upvote for your first comment (though my voting power is down a bit right now, as is the price of Steem).
I see you've been lurking since January. Hahah. Glad I could help you out on Facebook.
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You can also add Kraken to the list of exchanges who will trade BCC day 1. Doesn't apply to all forks, but it applies to this fork.
BCC is the ticker for Bitconnect; they have made Bitcoin Cash into BCH. Or atleast that's what I see it abbreviated as in newer articles
True, I will amend from her on out, thanks for the heads up.
I purposefully didn't list out the exchanges because I'm not convinced that's the best approach to teach people to trust centralized exchanges. I did that when ZClassic did a fork on Bittrex, and it worked out well enough, but I still think history shows us it's much safer to control your own private keys.
100% agree in terms of pure safety; in this case, if you want to participate in erly trading it seems like only Kraken is the place to be. Bittrex will offer it but we don't know when.
Thanks Luke! Been looking for ideas on how to proceed. Be careful everyone and take your time, practice safe crypto.
Thanks luke i will be following your advice!
That's a great idea - Moving your funds on the main chain before importing the keys on the alt chain. Glad you're keeping ahead of the game
Great post Luke. Very concise and easy to follow. I've been debating on whether to do this money grab with BCC (that's the way I see it, but I could be wrong) and had decided against it b/c I wasn't 100% comfortable with "how" to do it properly. Well, you just solved that with your post, lol. I've learned my lesson with trading and know I'm more comfortable simply investing, (buying and holding) so I'm going to refrain from participating and just hold my BTC.
One question I'd love to hear your take on is Polo in regards to them disabling the ability to withdraw Steem. What is really going on here? There's a pretty good disparity between the price of Steem on Polo vs Bittrex and I've thought of buying some Steem on Polo and just waiting it out until they fix their issue, but something definitely doesn't feel right. Would really like to hear your opinion regarding this issue.
It's still down, huh? Man, sorry to hear that. I was quite happy to get my 3,000 Steem out. After that drama, I don't trust Polo. I won't use them again if I can avoid it. I don't know what the deal is there. Maybe try tweeting at the guy I tweeted at and see if that moves things along?
You could take the risk... http://www.steemdollar.com/steem_index.php does show quite a gap (almost $0.25). But... yeah. You might learn another lesson if you take that risk.
I'd really love to see STEEM trading everywhere.
Great article @lukestokes. With many folks helping to cover of this topic, it strengthens the community the greatest amount possible.
I have already created a helpful guide that anyone can use to ensure they get all the free coins coming to them in the fork right here on Steemit:
[How to] A Helpful Guide & Complete Compendium to the whole NEXT WEEK of BITCOIN: From Price to Fork(s) and MORE
My page regularly posts about Steemit, Bitcoin and other crypto related material, check out my well written and easy to read content; follow for the FASTEST active news you can run with!
Thank you,
Jeffrey Anderson
Editor in Chief
The Anderson Report
@cryptoNEWScoins on Twitter
Great post, thanks for sharing!
I sent my bitcoins from one electrum wallet to another after 8:20.
Then I couldn't find a BCC wallet that would work and restore my private keys, because electron cash is incompatible.
What can i do? I feel like I got robbed.
As long as you control the private keys, you should be fine. It seems to me the BCC network isn't working so well right now (12 hours since the last block?) and very few exchanges allow deposits anyway. It's kind of a mess. My current thinking is to not imagine I have any value, no matter what the listed price of BCC is, since it might just be a manipulated price at this point. I think we'll know more in the weeks to come.
If I had a good option for getting BCC out of my paper wallets and on to an exchange, I'd do it now. I think others feel the same way. Since there aren't that many good options, I think the price is artificially high at the moment. Once people can dump their BCC, I expect the price to go down quite a bit.
But hey, it could also go up. No one really knows.
Received my email this morning form Coinbase, regarding the Bitcoin fork, but sad to report Coinbase, will only continue to support the original version of BTC.
i don't forsee bitcoin cash holding long term value owing to the fact that i think most likely there will be a lot of sell order for the equivalent bitcoin cash gotten after the fork and that will drive the value down and it might have a hard time recovering.investors will probably stick with btc, as they saying goes, the devil you know is better than the angel you don't know.
Yeah, it's going to be interesting either way. I imagine the price will fluctuate a lot and the experienced traders will do very well. Massive whale dumps, people buying cheap to bring the price back up a bit, followed by more dumps, some coordinated pumps, etc... it's going to be a wild ride. Especially if the miners start playing power trip games with it and moving their hashing power around to impact the market.