ERP Associates
Data Revolution

Friday, 04 August 2017

Coinbase, one of the world’s largest (if not the) largest cryptocurrency exchanges, has reconsidered its original stance on Bitcoin Cash and said it will introduce support for the “user activated hard fork” next year.

Coinbase was amongst several exchanges to opt out of trading Bitcoin Cash after it came into existence on August 1. Their decisions was announced on the grounds that it wasn’t a proven or safe currency. Meanwhile, the company claims that both bitcoin and BCC are safely stored and customers with Bitcoin balances at the time of the fork, “now have an equal quantity of bitcoin cash stored by Coinbase.” Its exchange GDAX made a similar announcement.

In addition to refusing to facilitate trading, Coinbase also said it wouldn’t allow customers storing original Bitcoin on its platform to claim their Bitcoin Cash entitlement. Those who wanted it were told to remove their coins and switch to an alternative to do that.

The company – which was started by former Airbnb engineer Brian Armstrong – is currently raising funding at a $1 billion valuation. It recently told customers by email that it had changed its stance and will be beginning to support Bitcoin Cash by the beginning of next year.

“We are planning to have support for bitcoin cash by January 1, 2018, assuming no additional risks emerge during that time. Once supported, customers will be able to withdraw Bitcoin Cash. We’ll make a determination at a later date about adding trading support,” Coinbase said. However some users are unhappy with the wait. One tweeted, “January 2018 is too long,” while another said, “I smell a class action law suit headed your way. You are basically holding client funds hostage,” in response to a company blog post.

As a summary, Coinbase are trialling the support before committing to trading.

The decision to trial support for the digital currency is almost definitely going to create an angry response from Coinbase customers, especially as many threatened to remove their coins and take them elsewhere. One Twitter user wrote, “Give us our BCC!!!”

In some cases, legal action was taken over their Bitcoin Cash entitlement. There is no evidence of any impact of this on the Coinbase business, but the indications given aren’t great. One analytics firm estimated that its cold storage reserves dropped to half of their previous level following customer withdraws.

However, despite that, a number of Coinbase investors told Business Insider that they are not overly concerned about the pushback; despite the overall future of Bitcoin Cash itself is still unclear. On principle, this is because the fork has the same mining difficulties as Bitcoin. Although, this is at a smaller fraction of its hashrate.

Despite it’s $7 billion market cap trailing Bitcoin ($44 billion) and Ethereum ($21 billion) by some way, right now, Bitcoin Cash became the third largest cryptocurrency based on total coins in the market on day one. Although Coinbase has tended to take a conservative approach to bringing new currencies on, it’s situation may have changed by January too.

Currently it offers trading for Bitcoin, Ethereum and Litecoin- despite gaining significant  attention in 2013, Litecoin was only added this past May. As insight into how stringent its policy is, Litecoin’s founder had been a director of engineering at Coinbase for nearly four years before leaving this summer.

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