This is an opinion editorial by Stephan Livera, host of the “Stephan Livera Podcast” and CEO of Swan Bitcoin International.
Financial Times columnist Jemima Kelly He published an article today titled “Don’t Believe the ‘Maximists’: Bitcoin Can’t Be Separated from Crypto” and I’d like to share some reactions from a Bitcoiner perspective. The text quoted below is all from Kelly’s article.
“If you’ve ever dared to criticize the crypto world, chances are you’ve received some lovely rebuffs. Chances are you’ve been told to ‘have fun being poor’…”
For what it’s worth, I think the “have fun staying poor” meme is meant primarily as a joke and not as a serious statement of ill intent towards another person. Because? Because popularly we saw it Bitcoiners tell Elon Musk, the world’s richest man at the time, to “have fun staying poor” as he pulls back from his public support of Bitcoin. Obviously, this is not meant as a serious rebuke.
“But there’s another, slightly more sophisticated kind of counter-criticism that lands in my inbox with increasing regularity these days. It usually starts with something designed to appease: some sort of agreement that cryptography is immoral, a scam or some version of a Ponzi scheme. But then he quickly reverses course, to explain that none of this applies to bitcoin.”
Herein lies my main disagreement with this article. I and many other Bitcoiners believe that we it should draws a line of distinction between Bitcoin and “crypto”. Bitcoin is unique in many ways:
- It has no pre-mine or “tax debt” to enrich the founder or founding team.
- It has a culture that actually prioritizes the decentralization of the ecosystem.
- It allows cheap blockchain validation and participation (ie, it’s relatively easy to run a fully validated Bitcoin node), while maintaining a robust, open, scalable, and trust-minimized system.
- It has a very strong preference for soft-forking and maintaining forward and backward compatibility for those running older Bitcoin node software.
- It is continuously growing in acceptance and shared mind throughout the world. Of course, this waxes and wanes with bull and bear markets, but zoomed out, bitcoin liquidity and acceptance only goes one way: up.
Once you really explore these points, you will find it not more Bitcoin meets these criteria. Many altcoins tend to hard fork, which is an indicator that they have some level of centralization in their development and community. Other altcoins do things that simply wouldn’t scale if scaled to the level of Bitcoin and the number of bitcoin transactions. Other altcoins do things that are more permissioned and therefore not open system like Bitcoin.
You could even argue that a specific altcoin does one specific thing better than Bitcoin, but are any of them making significant improvements overall? I don’t think so, which is why Bitcoin is rightly in a category of its own. There is also the question of whether Bitcoin it should to have these supposed other features or things, as this may also cause negative trade-offs in one of the other worthwhile qualities of the system (robustness, decentralization, scalability, verifiability, etc.).
Kelly seems to believe that Bitcoin’s “arguments” don’t hold up, as he opposes any financial incentives. For example:
“First, it doesn’t matter what bitcoin’s origins were: the people who push it now have the same financial incentives as those who push any other crypto token.”
How is a justified attack on Bitcoin promotion? Imagine that you are an investor in a company and you openly promoted that company without hiding the fact that you are an investor. Is there a problem with this?
Now, imagine that there are fraudulent competitors who pretend to be “in the same industry”. Advocate for people to use your non-fraudulent company’s product. Where is the ethical issue? How would that “disprove” you? It just doesn’t, unless you’re clutching at straws.
Of course, Bitcoin is not a company. But in any case, Bitcoin’s promise isn’t that “no one will come in cheaper than you,” which is an absurd and impossible standard to meet. Bitcoin’s promise is an open, decentralized, scarce, robust and programmable monetary system without rulers. The product does what it proverbially says on the tin and Kelly’s criticism falls flat.
“Second, bitcoin is not in fact decentralized; not only do miners group together to form ‘mining pools’, but wealth is also highly concentrated.”
Kelly does not correctly summarize the relationship between miners and pools. Miners are separate entities from pools and can re-point their hashrate to a different pool quickly. And so, even though there may be a comparatively smaller amount of pools, individual miners can and do switch between them, as it is a brutally competitive market. See this screenshot from September 23, 2022 of the Braiins dashboard, showing how pools are based in different countries around the world:
source
Also relevant is the recent news from Poolin, which saw the company suspend withdrawals. With this in mind, many miners noted their hash rate far from Poolin. Notice how Poolin’s overall share of the bitcoin mining hashrate has gone from 12% previously, to around 4% at the time of writing.
“On Tuesday, MicroStrategy announced that it had bought 301 more bitcoins, meaning that this company alone now has almost 0.7 percent of the entire supply.”
Kelly claims to be “beyond the argument” in this article, but unfortunately, he does a poor job of steeling the issue of bitcoin ownership. If you understood the libertarian and cypherpunk ethos of Bitcoin, you would understand that the point is to create a monetary system without coercing people. So, of course, with that in mind, there are going to be some people who get it before others. Those who succeed will buy, earn or mine coins before others. The fact that one company owns 0.7% of the circulating supply of bitcoins is not a problem.
Therefore, Bitcoin remains much more decentralized than “crypto” currencies.
“Third, a ‘first mover advantage’ does not always last.”
This is true in a general business context, but to understand why Bitcoin is different, we need to understand why and to what extent it outperforms the alternatives, be it fiat money, gold or altcoins. In general, to displace another product, you have to come up with something ten times better. But with Bitcoin, it’s doubtful that ten times better is even possible. Here, I’ll quote my friend Gigi his recent Twitter feed:
The design space of money is limited and a tenfold improvement in the monetary properties of Bitcoin is simply not possible. You can marginally improve one thing, but only by drastically worsening the trade-offs in other ways (verifiability, scalability, robustness, accessibility).
Kelly writes again about the incentive of 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? If they are
Bitcoin is properly distinguished from altcoins, but it just takes a lot of research and reading to understand why. Unfortunately, Kelly has not done the required research and presents only a shallow surface level misunderstanding.
This is a guest post by Stephan Livera. The opinions expressed are entirely my own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
