“What should I do with my bitcoin cash (BCH) to prepare for the hard fork on November 15th?” readers have been asking us this past week. Fearful of either losing funds or missing out on potential free tokens of value, they’re wondering what to do with their stash — or whether they should have a stash at all. In this article, we’ll explain some of the options available.
“History never repeats but it often rhymes,” said someone once, in an oft-repeated maxim. And now, over a year since the Bitcoin BTC/Bitcoin Cash BCH hard fork and a year since the aborted BTC hard fork over SegWit2x, history rhymes again. So the best option would be to look over our guides from that time, since the rules are basically the same. Otherwise, read on and we’ll explain specifically your options for the current BCH situation.
Option #1: Do Nothing
What? It’s a hard fork! How can I just do nothing? Well, to be honest, if you don’t hold bitcoin cash or don’t particularly care which protocol software drives its network, this is the best option for you. Bitcoin and other proof-of-work cryptocurrencies are designed to follow the chain with the most computing power, meaning BCH coins are still BCH coins no matter what happens.
Whatever wallet or exchange you’re using, if it supports bitcoin cash now it will most likely still support the main-chain coin after a fork, at least. You may or may not receive extra “free” coins if the chain splits into two surviving assets, but you won’t lose what you already have.
*It’s advisable to not attempt any bitcoin cash transactions around the time the fork is happening, or until the dust has settled after (we can’t say exactly how long that will be). With no “replay protection” built into BCH or a minority-chain forked asset, there are dangers transactions may be broadcast to both networks, and that bad actors may exploit this.
Option #2: Store BCH With Your Own Private Keys
However, our advice is always that your cryptocoins are always safer on a wallet where you control the private keys. In fact, that advice follows for any cryptocurrency, and whether there’s a fork happening or not. This is the way these digital currencies were designed to be used. Any service that “keeps” your assets safe for you is designed to make things simpler for newcomers — but remember, in those cases they own the coins, not you. You’re just trusting them to do it professionally and long-term.
But well-known, major bitcoin services should be trustworthy, right? Ahem.
If you own your own private keys then you’ll still have access to newly-created forked BCH (and anything else) in perpetuity — even if you take no action in the immediate aftermath. We consider this the most versatile option.
It’s possible, even highly likely, there will be no new coin and all BCH mining power consolidates behind the “winning” chain. And even if it doesn’t, you haven’t lost anything you didn’t have before. If you want a shot at grabbing some free money though, here are some other recommendations.
Option #2A: Why Paper Wallets Aren’t Recommended
“Paper Wallet” is a generic term to describe any private/public key combo you generate yourself, and store on something that’s not a computer. They can be on paper, wood, metal, (or Jello if you really want to live dangerously). These typically create a single private/public address in which an infinite amount of cryptocurrency can be stored.
However, while this was often recommended as a safe option in the past, that’s no longer the case. According to the official Bitcoin Wiki, there are several risks to creating your own Bitcoin keys that could result in loss of funds, mistakes, malware that records key creation, and changes to private key format. The same goes for the once-popular concept of “brain wallets”, where holders would remember a password in their heads. Both these options are now regarded as not secure.
Option #2B: Hardware Wallets, Non-Custodial Wallets
Hardware wallets like Trezor, Ledger or KeepKey are great because you hold your own private keys, but are also able to spend the funds at will. They usually store the keys in a way that puts a secure wall between them and the device they’re connected to, so (in theory) hackers cannot access your keys directly.
“Non-Custodial Wallets” also give you access to your own private keys, meaning the coins are uniquely yours and aren’t stored on a central server. Some of the popular ones that support (today’s) bitcoin cash are Jaxx (and Jaxx Liberty), Edge, Bitcoin.com Wallet, and Coinomi.
Both these wallet types usually generate new private/public keys for every transaction, for security and privacy. The main downside to this option for claiming new coins is, if the wallet software developers don’t provide a “splitting tool” to separate the dominant asset from the newly-created one, you could find yourself searching through every address you’ve ever used on it to see if there are any funds stored there.
Note that hardware wallet manufacturers and non-custodial wallet providers have not given any guarantees they’ll support any new coin other than main-chain BCH, whichever “side” triumphs. They have also advised their users again to not send bitcoin cash transactions until it’s clear what the results of the fork are. Otherwise, they say, existing bitcoin cash balances are safe.
Option #3: Exchanges
Usually we say: never store your coins on an exchange wallet! Why is that? Because exchanges have a long and sad history in cryptocurrency for being hacked and users’ account funds drained. “Mt. Gox” is almost a swear word in Bitcoin these days, and for good reason. Many of its account holders are still millions of dollars in crypto value out of pocket. Even since the BTC fork, the list of exchange hacks has grown:
Now, having said that, there are still reasons why you might want to move your bitcoin cash to an exchange wallet pre-fork. If your exchange has promised to support newly-forked assets, and you trust them to do so, having them on an exchange allows you to trade them quickly. Since new cryptocurrencies have a history of price-pumping hard and then falling, you might want to have them ready to sell as quickly as possible, especially if you shouldn’t be sending BCH around fork time. That’s your choice by the way, not financial advice — we can’t predict what any new coins will (or won’t) be worth in the future.
Note we said “pre-fork”. Move your bitcoin cash to an exchange after the fork and you won’t get any new coins, only the BCH you had before.
Some of the bitcoin cash exchanges that have promised to create balances for new minority-chain BCH versions (some even before the fork) include CoinEx, Poloniex, Binance, Huobi, and OKEx. Coinbase hasn’t decided yet but says a split chain with two coins is “unlikely”. Others, such as Kraken and BitPay, have stated explicitly that they will not support any new coins.
Option #4: Custodial Wallets
In this writer’s opinion, “Custodial Wallets” are for noobs who should not be worrying about hard forks. These services are aimed at those who find the whole concept of “private keys” confusing or difficult, and would prefer someone else hold the funds “safe” for you and far away from your prying hands. Like exchange wallets though, the operators hold your keys and not you — which means they technically (and “technically” is the only law in crypto) own your coins. It’s like buying gold bars and keeping them in a bank vault, except that (a) they’re not banks, and (b) there’s no physical vault for you to rock up with your pitchfork and demand your assets.
But maybe you don’t plan on being a noob forever, and decide at some future date that you do want those forked coins after all. Unless your custodial wallet has supported them and created a new balance for you, they’re gone. You’ll probably still have your original BCH though.
Option #5: Ditch Your BCH Altogether
Once again, this is not financial advice. The decision whether to sell off your BCH stash in fear it and any forked coins will plummet in value, or acquire more in the hope that both will gain value, is entirely yours.
Crypto history can be a rough guide. Bitcoin BTC/BCH is the most famous example of lucrative gains, with the BTC price at press time just under $6,400 USD and BCH worth around $540 (at the time of the August 2017 split, BTC was around $2,900 and BCH didn’t exist). Ethereum ETH/ETC, which split in 2016, is another.
On the other hand, a cryptocurrency project could drive itself and its forked assets into value-oblivion with publicly-warring advocates, unstable blockchains, and loss of confidence outside the community. It doesn’t matter which “side” you supported if there’s no value or adoption anyway.
Bitcoin Cash is already the result of a hard fork. It’s “the real bitcoin” according to its supporters, and “a fraud” to its detractors. This article is not a judgment call on either claim, or on which version of BCH represents “real bitcoin” after a split. Beware of experts who claim to know where the value of any cryptocurrency is headed — this is uncharted territory.
OK… So What Should I Do?
The bottom line is, if you want your best shot at claiming a potential new coin from the split, supporting exchanges are your best option — but check their policy first, and consider the associated risks with exchange wallets.
Holding your own keys in a non-custodial wallet means you’ll have a choice, though the process of actually recovering any new assets could be cumbersome. In the end, option #1 “do nothing” could be the most secure choice.