Having introduced SegWit2x Chain Split Tokens earlier this month, Hong Kong cryptocurrency exchange Bitfinex is now introducing new Chain Split Tokens (CSTs) that will allow traders to trade on the the potential activation and mining of the Bitcoin Gold consensus protocol. The company is designating these CSTs as BG1 (Incumbent Bitcoin Blockchain) and BG2 (Bitcoin Gold).
The CSTs will trade against BTC and USD pairs, initially without financing capabilities. Users will be able to create or destroy these new CSTs in any amount using the Token Manager located in the Order Type drop down menu of the sidebar order ticket, or in the menu at the top of the UI. Upon creation by a user, the BTC will be debited from the user’s account, and an equivalent amount of BG1 and BG2 will be credited. Users will also be able to reverse this process at any time, trading in equal numbers of BG1 and BG2 to extract BTC.
These CSTs will provide pricing continuity through the Snapshot Event and, in particular, the order books for the BG2 trading pairs will become the order books for the Bitcoin Gold trading pairs. Bitcoin Gold will use “BTG” as its ticker symbol and carry a description of “Bgold” on the platform to avoid any confusion with Bitcoin.
Bitcoin Gold and Financed Positions
With respect to the Bitcoin Gold CSTs, Bitfinex stated they will be following the general methodology outlined in its recent Statement Regarding Upcoming Segwit2x Hard Fork. Specifically, and subject to the company’s terms and conditions, when the designated block is mined (491407), Bitfinex will take a snapshot of all relevant balances and positions. Lenders will receive both BTC and BTG. Any user that is short BTC/USD or long any BTC trading pair (ETH/BTC, LTC/BTC, etc.) will owe BTG to the financing counterparty, effectively making the user short BTG. An exception is being made where BTC is borrowed but is not in use as financing collateral. In that case, BTG will accrue to the lender. Users that are financed long BTC/USD or short any BTC trading pair will receive BTG. Bitfinex will only be assigning BTG to balances greater than or equal to 0.01 BTC.
It’s important for financing recipients to understand that while their P&Ls may climb during a hard fork event, they will have offsetting BTG liabilities that will be applied to their accounts, though perhaps not immediately. At the moment that the snapshot block is mined, Bitfinex will immediately freeze all movements for all currencies for any borrower of BTC. Deposits and withdrawals for BTC will be briefly halted around the Snapshot Event.
This freeze will last until the BTG accounting can be adequately prepared and addressed. Bitfinex expects the process to be quick and automated, but it cannot guarantee that it will be immediate. BTC borrowers can hedge or estimate this liability with newly listed CSTs.
Trading and Withdrawals
Bitfienx will support the BTG/USD and BTG/BTC trading pairs until such time that withdrawals become safe and possible on the BTG blockchain. Anyone with a negative balance resulting from being a BTC borrower at the time of the fork will need to buy back into BTG within 3 days or risk having the system do it for them. Once all negative balances have been settled, Bitfinex may, at its sole and absolute discretion, delist BTG and make withdrawals only available for a limited time. Bitfinex said they while it chooses to make such forks available to customers, its limited and temporary support for them is not and should not be construed as support for any particular project.
Adjusting Existing CSTs
CSTs with overlapping contract periods and other forking events may need to be adjusted to reflect the correct economics. Bitfinex noted they are aware the BCC/BCU CSTs need retroactive adjustments to reflect BCH, as well as BTG, after the event tomorrow. Similarly, BT1/BT2 may need to be adjusted to reflect any BTG that accrues to the locked up BTC. Bitfinex says they have a plan for this and may not be able to implement it immediately, but it is fair to users and will be applied retroactively in a non-intrusive way.