Or the invasion of the coin snatchers….
For every 1 BCH deposited (these are actually destroyed), 100 WHC are created (issued from the pre-mine PoS allocation — not created at all).
- A Wormhole token is denominated as WHC.
Let us start with a few other aspects of this before we model the effects of WHC and allowing the changes needed to make WHC work as more than the useless joke.
- The process of burning to generate WHC has no deadline.
- It works the same way [1] with Wormhole protocol. Each satoshi (BCH) burned will not be back. This type of “burning to issuing” is like a one-way ticket to Mars.
- WHC does not need Bitcoin Cash, it needs ANY PoW system (that it can act parasitically on)
- There is no limit to how many WHC tokens are created to (sic) the Proof-of-Burn mechanism.
- This “burn to generate” process is subject to risks of rollback of the BCH blockchain. Therefore, WHC can only be generated when 1,000 confirmations are finished. 1 BCH can get 100 WHC.
- Note [1] — this refers to a statement that WHC is like space travel from the issuer.
Basically, Wormhole is a Blackhole. What enters is destroyed.
The reason there is no deadline is the aim is to slowly take all value from BCH and move it into WHC.
Money is valued through use. This is, though velocity. As WHC reduces use of the base layer (just as the Lightning Network does in BTC) it lowers the value of the system as a whole. This lowers the value to miners and hence, decreases the overall security of Bitcoin.
A WHC is created when a BCH coin is destroyed, but the un-minting of a token on WHC returns the WHC. This is a backed system. The distinction is that it is the WHC that is the backing asset for the tokens, not BCH.
If the value of any token made on WHC ever goes below the value of the WHC used in minting the token, the token is effectively dead. The reason is that it is more cost efficient to un-mint the token and collect the WHC that backs that Wormhole minted token. This rights offer is basically an option. This is a form of security where the issuer can choose take the “option” to redeem a security based on the strike price.
As a consequence, the number of WHC does not decrease and remains in circulation no matter how many BCH are destroyed.
GAS
WHC “smart contracts” provide nothing that Bitcoin did not have natively in 2009. Many do not under stand the power of just a few OP_Codes. In an interview, Clemens Lay explains a token system that he is releasing in Bitcoin script that does not require separate nodes.
The concept is that BCH and ETH are merged with Solidity as the language.
The side effect of this is that WHC is used as GAS and BCH is burnt to make more WHC. This however does not push the price of BCH up as BCH is not essential and WHC can move to BTC and consume it once BCH is destroyed.
Now, the rub…
As one BCH token returns 100 WHC, if the value of a single WHC ever reaches more than 1% of a BCH, then, it is in the BCH holders economic interest to exchange a BCH for 100 WHC.
Let us for example say that BCH is trading at $600 USD and a WHC is trading at $6.25 USD. You own 50 BCH.
If you sell your 50 BCH to gain the 5,000 WHC as any arbitrager will immediately do, you now have $6.25 x 5,000 value in WHC. That is, $31,250 or a $ 1,250 USD profit. The 50 BCH would see to USD for $30,000. But as a swap, your 50 BCH become 5,000 (50x 100 WHC). 5,000 x $6.25 USD = $31,250 so, a $1,250 gain.
You could immediately trade this for BCH if you wanted BCH and have more and this will continue until the price equalises. The issue is that BCH is being forced down in value in this exchange. As more and more BCH is burnt, there is less on the market.
BCH has no value as a mere digital asset, it has value as cash, so, with the supply retarded, the value of BCH decreases more and more until, all we have is WHC which then moves on to leech off BTC and other PoW coins one by one.
Why would WHC go up?
The changes in progress add value to WHC and reduce the value of cash.
Money is not made more valuable as there is less of it. So, the HODL myth will not add value. If BCH is altered to make WHC function, the aim is to destroy BCH. WHC is not cash, it is a doppelganger designed to take the life from BCH and then move on to the next victim.
One thing to consider…
`the best way to burn bch is to send them to OP_RETURN output, it can be pruned and therefore does not put unnecessary burden on nodes`
The way that Bitmain seeks to send BCH to a possible “Theft address” posing as a burn address also increases the UTXO set. So, they are actively sending transactions that do nothing good and yet burden nodes forcing them to increase the amount of memory required and at the same time are not scaling BCH.
The best way is not to burn — as you do not peg anything by destroying it.
Note
In the Yours article on Wormhole, we have a blatant lie:
Based on known cryptography theory and engineering practice and research, nobody owns the private keys of the address bitcoincash:qqqqqqqqqqqqqqqqqqqqqqqqqqqqqu08dsyxz98whc. And no one used this address in the history of Bitcoin Cash blockchain before we started working on the development of Wormhole protocol.
The fact is, this is a valid Bitcoin address and hence, there are keys to it. Saying (in effect), trust me, I do not have the keys is itself a reason to distrust Bitmain. The key is a vanity address and is not all ones. There is not reason to believe this was not created with a valid key.
Saying you have an address and that others cannot find the private key is not the same as creating a public key that looks interesting.
WHC could use all q’s for the address and ignore the checksum. To some, this may seem bad or wrong, but remember, that this would stop anyone accidentally sending to a WHC address (and this has happened) without having a WHC issued formally.
The Bitcoin Checksum is simply a part of the wallet and is not needed as a part of the burn address. This is a UI function. Bitmain could have used a process where you send to an address on the WHC wallet as BCH first, then, you move to the WHC and are minted. This would be no hindrance to the user as they must follow this form of process now to have a WHC issued, but it would stop all accidental burning of BCH. As such, we can also say this loss is a part of the aims of the Wormhole in consuming BCH — this way, Bitmain gains as BCH are destroyed for nothing as well.