This is an opinion piece by Stephan Livera, host of the “Stephan Livera Podcast” and Managing Director of Swan Bitcoin International.
Financial Times Columnist Jemima Kelly posted an article titled “Don’t Believe The ‘Maximalists: Bitcoin Can’t Be Separated From Crypto’ earlier today and I’d like to share some reactions from a Bitcoiner perspective. The text quoted below is taken entirely from Kelly’s article.
“If you’ve ever dared to criticize the crypto world, chances are you’ve received some lovely reprimands. You’ve probably been told to “have fun staying poor”…”
For what it’s worth, I believe the “have fun staying poor” meme is primarily meant as a joke and not a serious statement of malicious intent towards another person. Why? Because we have seen popularly Bitcoiners tell Elon Musk, the richest man in the world at the time, to “have fun staying poor” as he backs away from his public support for Bitcoin. Obviously, this is not intended as a serious reprimand.
“But there is another slightly more sophisticated flavor of counter-review that finds its way into my inbox with increasing regularity these days. It usually starts with something designed to appease – some sort of deal that crypto is immoral, a scam, or some version of a Ponzi scheme. But then it quickly changes course, to explain that none of this applies to bitcoin.
Therein lies my main disagreement with this article. Me and many other Bitcoiners believe that we should draw a line of distinction between bitcoin and “crypto”. Bitcoin is unique in many ways:
- It has no pre-mine or “dev. tax” to enrich the founder or founding team.
- It has a culture that prioritizes the decentralization of the ecosystem.
- It enables cheap blockchain validation and participation (i.e. it is relatively easy to run a fully validated Bitcoin node), while maintaining a robust, open, scalable, and trusted system minimized.
- It has a very strong preference for soft forking and maintaining backward and forward compatibility for those running older Bitcoin node software.
- It is increasingly accepted and shared around the world. Sure, it comes and goes with bull and bear markets, but zooming out, bitcoin liquidity and acceptance only goes one way: up.
Once you have truly explored these points, you will find that only Bitcoin meets these criteria. Many altcoins regularly hard fork, indicating that they have some level of centralization in their development and community. Other altcoins do things that simply wouldn’t scale if scaled at the level of bitcoin and the number of bitcoin transactions. Other altcoins do things that are more allowed, and therefore they are not a open system like bitcoin is.
You could even say that a specific altcoin does a specific thing better than Bitcoin, but does any of them provide significant improvements overall? I don’t think so, and that’s why Bitcoin is rightly in a category of its own. There is also the question of whether Bitcoin should having these supposed other characteristics or things, because that can also lead to negative trade-offs in any of the other interesting qualities of the system (robustness, decentralization, scalability, auditability, etc.).
Kelly seems to believe that the “Bitcoin arguments don’t hold water” as she disputes any financial incentive whatsoever. For instance:
“First, it doesn’t matter bitcoin’s origins — the people pushing it now have the same financial incentives as those pushing any other crypto token.”
How is this a justified attack on Bitcoin promotion? Imagine that you are an investor in a company and you openly promote this company without hiding the fact that you are an investor. Is there a problem with that?
Now imagine there are fraudulent competitors claiming to be “in the same industry”. You’re advocating for people to use your non-fraudulent company’s product instead. Where is the ethical question? How would that “refute” you? It just isn’t, unless you’re hanging on to straws.
Of course, Bitcoin is not a business. But in any case, Bitcoin’s promise is not that “there was no one cheaper than you”, which is an absurd and impossible standard to meet. The promise of Bitcoin is an open, decentralized, rare, robust and programmable monetary system without rules. The product does what it proverbially says on the tin, and Kelly’s review falls flat.
“Second, bitcoin is actually not decentralized – not only are miners banding together to form ‘mining pools,’ the wealth is also extremely concentrated.”
Kelly does not properly summarize the relationship between miners and pools. Miners are separate entities from pools, and they can quickly redirect their hash rate to another pool. And so, while there may be relatively fewer pools, individual miners can and do switch between them, as it is a brutally competitive market. See this screenshot as of September 23, 2022 of the Braiins Insights dashboard, which shows how pools are based in different countries around the world:
The recent Poolin news, which saw the company suspend withdrawals, is also relevant. Considering this, many miners pointed their hash rate a way by Poolin. Notice how Poolin’s global share of the bitcoin mining hash rate has dropped from 12% previously to around 4% at the time of writing.
“On Tuesday, MicroStrategy announced that it had purchased an additional 301 bitcoins, which means that this company alone holds almost 0.7% of the total supply.”
Kelly claims to “steelman the argument” in this article, but unfortunately, she does a poor job of bitcoin ownership. If she grasps the libertarian and cypherpunk ethos of Bitcoin, she would understand that it is about creating a monetary system without forcing people. So, of course, given that, some people will get it before others. Those who get it will buy, earn or mine coins before others. The fact that a company owns 0.7% of the circulating bitcoin supply is not a problem.
Thus, Bitcoin remains much more decentralized than “crypto” coins.
“Third, a ‘first mover advantage’ doesn’t last forever.”
This is true in a general business context, but to understand why Bitcoin is distinct, we need to understand why and how well it beats the alternatives, be it fiat currency, gold, or altcoins. Generally, to replace another product, you have to find something ten times better. But with Bitcoin, ten times better is doubtful. possible. Here I will quote my friend Gigi in his recent Twitter feed:
Money’s design space is limited, and a tenfold improvement in Bitcoin’s monetary properties is simply not possible. You can improve one thing slightly, but only by making the tradeoffs much worse in other ways (verifiability, scalability, robustness, accessibility).
Kelly then writes again about the incitement of the maximalists:
“The real reason bitcoin maximalists want to separate bitcoin from the rest of crypto is to create the illusion of scarcity in a world where there is none.”
It’s fair to say that bitcoin maximalists have an incentive and want to distinguish bitcoin from “crypto”. But the real question is: are they right? Yes they are.
Bitcoin rightly stands out from altcoins, but it just takes a lot of research and reading to understand why. Unfortunately, Kelly has not done the necessary research and presents only a superficial misunderstanding.
This is a guest post by Stephan Livera. The opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.