What the fork? Get your free coins

fork

Last week Litecoin Cash forked from Litecoin. A fork occurs when developers want to modify the code of a coin and create a new coin. Often this is due to disagreement among developers about how a coin should operate. For example, Bitcoin cash is supposed to be a faster, cheaper version of bitcoin. Sometimes modifications are substantial, such as with Bitcoin Cash. Other times the changes are smaller, like with Litecoin Cash and Litecoin.

The great things about forks is that it’s a chance to get free coins. Developers take a snapshot of the old coin’s blockchain right before the fork takes place. Whichever wallets have the old coin at that snapshot will also be eligible to receive an amount of the new coin. For Litecoin Cash, for every Litecoin you held, you will get 10 Litecoin Cash. Similarly when Bitcoin Cash forked from Bitcoin, for every 1 bitcoin someone held, they received 1 bitcoin cash.

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First of all, to get new forked coins, you need to have some of the old coins. The developers of the new coin will issue a date in advance for when the snapshot will be taken.

You also need to have access to the private keys of the wallet where your coins are stored. For this, you will like have to make sure they are not on an exchange. Because when your coins are on an exchange, the exchange holds the private keys so you don’t know what the private keys are. I’m not the most knowledgeable in wallets, but I’ve found that paper wallets the easiest in terms of giving you access to the private key. For some software wallets, it’s not always easy or even possible to access the private keys. There are a lot of paper wallet tutorials out there, but it’s basically a piece of paper that has both your public and private key written on it. So simple.

paper wallet

Who needs technology when you have paper

Once you have the private key, you have to wait for the new coin’s wallet to come out from the developers of the new coin. This can take weeks or months. Once you have the wallet, enter the private key that held your old coins into the new coin wallet. This is used to verify how many old coins you had and subsequently transfer the appropriate number of new coins to you. But before you submit your private key, be sure to transfer your old coins somewhere else. Otherwise some unscrupulous developer could use your private key to take all your old coins.

There really is no risk in claiming new coins, as long as the private key you are using to claim the new coins does not have any old coins in it. The worst case scenario is that the new coins you get are worthless and you’re back where you started.

Getting free coins can be a quick way to make money. When bitcoin cash forked on Aug 1, 2017, 1 BCH was worth about $470 while BTC was at $2,700. So for every bitcoin you held, you got an extra $470, or an immediate 17% return. Since then BCH has gone as high as $4,000.

You also have to look at the psychology of coin forking. Because people know in advance that a coin will work, there is often a sudden spike in price of a coin before the fork because everyone is buying in. Some people will immediately dump the coin after the fork which causes a drop in price. Other will even sell off the coin before the fork, anticipating a drop after the fork and foregoing getting any of the new coin. I think most people will try to sell off the new coin immediately after claiming them to pick up some free money. But perhaps the most savvy investors will see others dumping the new coin and pick up the new coin at the low price, see bitcoin cash, and hodl long-term. (This reminds me of the Princess Bride poison scene.). How you act on this depends on how successful the new coin will be. Not all new coins end up being worth much.

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Look out for the next bitcoin fork, Bitcoin Private which is scheduled to fork on Feb 28. This is going to be an anonymous version of Bitcoin. The interesting thing about this is that it is forking both bitcoin and ZClassic (ZCL). That is the most likely reason that ZCL has been surging since December. The Bitcoin Private fork will distribute the new coin to both bitcoin and ZClassic holders at a 1:1 ratio. For every 1 Bitcoin and 1 ZCL you hold, you will get 1 bitcoin private. With ZCL only costing about $150, if your goal is to load up on bitcoin private, you will want to load up on ZCL, rather than BTC which is around $10,000. If you don’t want to risk buying ZCL and you already have bitcoin lying around, just make sure your bitcoin is on a wallet where you have the private keys and you’ll at least get some bitcoin private.

Happy forking!

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