Time to be honest about smart-BCH
The time is December 2020 and a new team started a new project which built on top of the Bitcoin Cash platform and blockchain.
They started a new chain, copying the rules and concepts from Ethereum and named it a 'sidechain' of Bitcoin Cash.
Now, looking back, we know that from the beginning things went wrong and in order to be honest about smart-BCH, we must look at those.
sbch was advertised to be a sidechain with a decentralized bridge allowing people to transfer real Bitcoin Cash onto the sbch chain and back again. This was the grounding concept of anchoring the price of a single sbch to the price of Bitcoin Cash.
In reality there is no such thing as a decentralized bridge for Bitcoin Cash. Bitcoin Cash developers tell us that this is a concept that is plain not possible. It was not just unavailable on start, it is never going to be available.
A bridge is only useful if it allows you to always go both directions. If you can go from one to the other, you need to always be able to go back. If you can't do that, it is not a bridge but it is a trap. As we have seen in real life, both with sbch as well as with banks, paypal and others, a permissioned bridge is not a bridge but it is a trap. It may go well 1000 times, but at one point it will fail. And then your money is gone.
This is the first domino to fall of the set, but we are not done with the highlighted section as the fallout continues. The basic principle of how a single sbch got value was based on the above false promise, but what does that mean?
Normally when a company starts a new chain they have to slowly make it gain value by selling it to investors. The smart-bch people sidestepped all that by pretending there was a two-way bridge. The idea that you could buy sbch and be guaranteed that you can sell sbch again for the same price sets that price to be equal.
But take away the guarantee of selling your sbch for the same Bitcoin Cash at any time you want, and you take away all backing of the price guarantee.
The next domino to fall is the claim that this is a side-chain.
Fact is, the smart-bch people can hard fork their chain and create new sbch coins out of thin air. At that point it can no longer be backed by Bitcoin Cash as the accounts are all wrong. More on one side than the other.
Practically speaking, nothing can be a side-chain unless the mainchain miners are validating the side-chain to avoid such tricks.
So, what is it then?
Smart-bch is a layer-2 chain. Much like the lightning network and liquid. There is nothing wrong with that, but it does make clear that it is a product that simply uses Bitcoin Cash. Which is what we built Bitcoin Cash for, for people to use it.
On top of that, smart-bch is unbacked. The price is really completely unrelated to any other chain. People have the idea it should be 1:1 with Bitcoin Cash, but any grounds for that belief are completely without merit.
Last, the basic promise of being able to buy smart-bch and being able to get the original coins back is impossible. Let me re-iterate that point! A decentralized bridge is never going to happen on chains like Bitcoin Cash. It is not technically possible and any future hard forks are unlikely to change that.
As a side-note, the naming of the chain 'smart-bch' was basically a neat marketing trick to get a lot of Bitcoin Cash fans to believe it was something it really is not. The name is at best misleading the buyer. It is similar to calling your gift-cards "smart-euros". A dirty marketing trick at best.
What is needed for it to come back?
An often asked question. Mostly by people that invested and are unwilling to accept their money is in peril or simply gone.
First and most important part here is that the company that volunteered to hold the Bitcoin Cash funds has to give them back. Without this there is zero chance of the vast majority of investors to trust the chain. Those millions need to be given back before any progress can be made to revive the chain in its current form. It is bankrupt and running on steam.
The sbch chain has already pre-minted all its coins. So there are 21 million coins and no price discovery because people imagine the price needs to be 1-to-1 with Bitcoin Cash. What needs to happen is that people's coins can be sold on an exchange in order for the real market to decide on its price. It is quite unlikely that miners will be able to support the chain should its real value become clear, though.
Stay safe out there.
