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How the “Hash War” Broke November’s Key Support Level:

Updated: Apr 8, 2019

Bonus read from our Q4 2018 Investor Letter.

First Published Publicly on Epoch Partners' blog. Epoch is a global investment management firm.


In August of 2017, a group of early Bitcoin investors and developers forked Bitcoin to form a new cryptocurrency called Bitcoin Cash. Bitcoin Cash differs from Bitcoin in that it achieved increased transaction throughput and lower fees through a larger block size (allowing more transaction data can be inputted into each block). The project gained moderate adoption in the period between August 2017 and August 2018, though was never recognized as the “real Bitcoin” as its supporters had hoped. By Q4 2018, two major Bitcoin Cash figures, Roger Ver and Craig Wright, made it publicly known that they were in disagreement about the future direction of Bitcoin Cash. The two predominant figures decided that they would each pursue their ideas separately, resulting in yet another fork. This time Bitcoin Cash splintered into Roger Ver’s “Bitcoin ABC” (BCH), and Craig Wright’s “Bitcoin Satoshi’s Vision” (BSV).

Before we can go any further, we must first provide some context as to who Roger Ver and Craig Wright are...

Roger Ver began investing in Bitcoin in early 2011. In the same year, he was credited with launching the first online store to accept Bitcoin as payment. In 2012, he was one of the five founders of the Bitcoin Foundation. Ver established the mining pool, which mines 1% of the total Bitcoin network and mined 9% of the legacy Bitcoin Cash network. It is Ver’s billionaire status and access to mining hardware (measured in a unit called “hash power”) that we will focus on below.

Craig Wright is an Australian computer scientist and current chief scientist at nChain, a blockchain research and development company. It has been speculated that Wright was part of the initial group to work on Bitcoin. Wright has frequently claimed that he is Satoshi Nakamoto, the creator of Bitcoin - a claim that has still not been proven by hard verifiable evidence. It is our belief that he was privy to Bitcoin before its launch, but that he was merely a contributing member to the consortium that has come to be known as Satoshi Nakamoto. Similar to Ver, Wright has amassed a net worth alleged to be in the billions of dollars and owns or influences a collection of mining pools: Coingeek (owned by Calvin Ayre), SVPool (created for Wrights BSV blockchain) and BMG (owned by nChain).

Roger Ver and Craig Wright’s disagreement snowballed into a feud that resulted in each wanting the other’s project to fail. Each party threatened to take down the other’s blockchain in what is known as a 51% attack or reorganization attack. In this type of attack, the malicious attacker gains control of the majority of hash power on a blockchain allowing the attacker to control the blocks (and transactions) inputted into the blockchain. With this power, the attacker can simply post empty blocks in perpetuity (rendering the blockchain useless for users) or spend and reverse their own transactions (which would allow them to steal money from exchanges, likely causing coins to be delisted and thereby lose value). Both Ver and Wright threatened to divert their own mining pools’ hash power and to rent additional hash power from other miners in order to attack the other’s network - a costly battle (which many believe was at least partially funded in Bitcoin) that has come to be known as the “Hash War”.

Fear and uncertainty spread through the Bitcoin market as investors were unsure just how the Hash War would affect Bitcoin (both the blockchain itself and because of the anticipated sell pressure caused by each party’s Bitcoin being spent to fund this war). A sell-off ensued on November 14, 2018 causing the price of Bitcoin to drop over 10% and on November 15, 2018 the Bitcoin ABC and Bitcoin Satoshi’s Vision forks took place. The following days were filled with uncertainty as Bitcoin ABC and Bitcoin Satoshi’s Vision battled each other while Bitcoin dropped an additional 15% and 8% on November 18th and 19th respectively. Once the dust settled, it became evident that Bitcoin was far too decentralized to have its network affected by the extreme actions of the wealthy fringe. Despite the money spent and hash power rented, Bitcoin’s network remained robust and further cemented its place as the most secure blockchain in the world. Although the fundamental case for Bitcoin may have been strengthened, the short term and medium term price were negatively impacted, a wound that can only heal with time.

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