Crypto Reporter Says Bitcoin Cash Project Wormhole is the BCH Destroyer
Project Wormhole Of BCH Raises Many Unanswered Questions
Bitcoin Cash (BCH) users and developers have been continually busy promoting the network forward. A few weeks back Project Wormhole launched promising to be a game changer by proposing the embodiment of the OP_Return code would allow any organization or person to produce a representative token. This, in principle, could represent bonds, stocks, loyalty points, and even fiat.
The project creates a cryptocurrency, called Wormhole Cash (WHC) that rivals Ethereum (ETH), which will result in the Bitcoin Cash (BCH) network switching into a developer’s playground—that’s not a bad thing on the surface, but it opens the system up to a whole host of problems by turning the ever-watchful eye of securities regulators and government agencies towards Bitcoin BCH. Below we explain the potential worst case scenario consequences of burning BCH. These are problems Bitcoin BCH as money hasn’t needed to worry about as it is not a security.
Notably, Bitmain’s CEO Jihan Wu has been a driving force behind the push for Wormhole on BCH. It is therefore not surprising that his AntPool miners were the final group needed to enable SegWit on the BTC chain.
The Problem With Wormhole
To work safely, Wormhole needs three things approved: (a) 1-minute blocks. to capture more confirmations faster; (b) pre-consensus and Canonical Transaction Ordering (CTO), which will allow Wormhole to have numerous competing “coins” and contracts; and (c) a high enough cap, about 32MB, which will allow the use of OMNI as a base layer but not so large that it would enable BCH to scale and be a global currency all by itself. The use of burn addresses means BCH will become a layer 0-solution.
Nevertheless, there is a dilemma. You do not “back” anything in a burn. When you “back” a token, you effectively place the BCH in a vault where you can remove it at a later time. “Burning,” on the other hand, means you seek to destroy it—you take the investors’ money, set it on fire, and give them a worthless, unbacked coin.
The real question now arises. For how long do you expect to maintain investor interest in WHC while the underlying asset is being destroyed? Alternatively, let’s assume that the value of WHC shoots through the roof as a result of all the burning. Again, this assumes demand for WHC remains constant or even increases, while the supply of its underlying asset (BCH) is slowly being reduced. In such circumstances, it is likely that nobody will want to sell their WHC as hodling is a preferred investment strategy. How will you generate transaction flow if no one wants to spend WHC because everyone expects it to be worth more if they hold on to it till tomorrow?