Who Cares About Bitcoin Maximalism – Bitcoin Magazine
This is an opinion piece by Shinobi, a self-taught Bitcoin educator and tech-savvy Bitcoin podcast host.
What is Bitcoin Maximalism? People won’t stop asking this question, either to defend it as a virtuous label, or to attack it as a symbol of everything wrong and rotten in this ecosystem. This question is as pointless in my opinion as asking:
- “What is a liberal?”
- “What is a conservative?”
- “What is a Christian?”
No one is going to have the same definition or the same perception. These labels will always mean completely different things to different people. They will be associated with different identities, different behaviour, different morals and values. No matter what a dictionary or definition says in the strict sense, there will never be consensus around them.
It is completely and utterly pointless in a discussion of a topic like this to fixate so much on labels, trying to apply them universally to everyone, instead of focusing on the actual conceptual core of the conversation. The root of this problem has nothing to do with labels and everything to do with behavior. So let’s talk about the behavior.
One of the core behaviors commonly associated with maximalism is a focus on bitcoin. Bitcoin is the longest running project in this ecosystem. It is the loudest system compared to anything developed so far, and is extremely conservative in its approach to changes and upgrades. While everything in this area in terms of assets is highly speculative in nature, bitcoin is the longest running and most consistent market performer, maintaining the top spot in terms of total market capitalization throughout the history of every asset in it. room. Approaching things from this reality, focusing on bitcoin over all other assets in this ecosystem is a perfectly rational economic decision. Yes, like everything else, investing in bitcoin is still speculation, but relative to the financial risk involved, Bitcoin is the least volatile asset trading in this area. Most people are not day traders, they are not financial experts, and the further away from bitcoin you go in terms of investments, the more skill and understanding these activities require to not burn yourself out. The vast majority of projects in this area have their one exhaust pump, crash and never recover. There is absolutely nothing wrong or toxic about sticking to bitcoin given that reality, and trying to inform people of that reality is in no way unethical.
Another core behavior is the criticism of other technologies in this space, especially with the goal of demonstrating a lack of decentralization, or more specifically, misrepresenting the degree to which something is decentralized. Bitcoin is the only system in this area that has demonstrably demonstrated an extreme degree of decentralization. It has fought a number of attempts by developers to change the core of the system, as shown when Mike Hearn and Gavin Andresen were still involved and pushed to increase the block size to the limit. It fought the later attempt by most of the major companies involved in the New York Agreement/UASF debacle to do the same. It survived the implosion of the only major interchange when Mt. Gox went under, the Bitfinex hack, the bust of Silk Road and even massive nation states like China slowly creeping towards banning it, culminating in restricting all mining activity. Bitcoin has stood strong and continued to perform in the face of everything that has been thrown at it so far.
Compare this to platforms like Ethereum. The DAO was launched as the first massive experiment in decentralized coordination of financial activity on the platform, with the promise of “code is law.” This blew up in their faces due to poor engineering that allowed funds locked in the DAO contract to be drained by what were supposed to be unauthorized users. However, the code allowed it, “the law” as it were.
In response, the Ethereum Foundation and development team adopted a fork to reverse what was legitimately happening according to the rules of the system on the blockchain. In particular, they did this because of a conflict of interest in the form of many people connected to them being invested in the DAO and losing money. They fork multiple times to push the difficulty bomb, a feature that makes mining harder and harder until it’s effectively impossible, a feature specifically implemented to force them to switch to proof-of-stake. They have clapped to change the financial issuance policy. The development plan has fluctuated drastically more times than I can count based solely on Vitalik Buterin’s changing ideas about how to improve the system.
Pointing out these differences is again completely rational and legitimate behavior. It is very real criticism, based in reality, with very real consequences. The less decentralized something is, the more susceptible it is to sudden massive changes, which has very real consequences for the value and usability of the system. This is perfectly demonstrated by the recent events with Tornado Cash. Yes, the contract is still there, yes, in theory you can still use it, but in reality every major API provider and wallet backend that is dominant used has blacklisted interaction with that contract. The website was seized and shut down through DNS registrars. Interacting with that contract required technical knowledge beyond many users of the system, because most ways of interacting with the system were highly centralized. Pointing to these dynamics is perfectly rational and legitimate.
What is the basic motivation behind these behaviors? In the case of focusing on Bitcoin and conveying to people why that decision was made, to give realistic expectations of how you will do in a market. Also to correct the illusion in most people’s minds that they will magically figure out how to time the market, ride the pump and make out like a bandit; because most people don’t want to. In correcting misrepresentations of the level of decentralization in other projects, it is to allow people to make rational decisions when interacting with them, and to make people aware of the potential consequences and risks that different degrees of decentralization expose them to.
We’ve gone over some positive behaviors – let’s look at some negative ones.
Constantly preaching as if you are a priest in the church, speaking directly from the Holy Gospel that predetermines Bitcoin’s success in consuming the entire world’s financial system and currency markets as a guaranteed divine security. Stock-to-flow was a perfect example of this type of behavior. In reality, all that model is is a somewhat interesting backtest. By backtest I mean that it is a model that can verify that a market has followed a certain behavior in the past. It has no predictive power, and no ability to model things going forward. It literally does not have the data in the model necessary to do that, i.e. the demand variable to account for changes in demand for bitcoin. The movement around the model was absolutely absurd cult-like behavior. It had no rational basis at all, and yet became a dominant narrative pushed across the room. This did not inform people, or give people realistic expectations or reasons to invest in or use Bitcoin. The projected appearance of a cult.
Or take for example, in exactly the same dogmatic way, calling something a fraud without actually being able to provide a reasoned argument or criticism. An example is the ICOs of Ethereum and EOS. Tons of individuals constantly rail against these systems almost solely on the basis of being a scam because they centrally issued tokens before launch. There is almost no mention of real technical errors. In EOS’s case, it’s a concept called “virtual RAM”, which limits how many smart contracts are allowed to exist and run on the system. Virtual RAM usage is a scarce financial resource that you have to pay to own, while EOS block signers have total control over its supply. This allows the block signers to buy RAM, sell it as it increases in value, then create more to crash the price, buy low and repeat. The incentives of the entire system are completely gameable by block signers to rent out and extract maximum value from users in a manipulative way. Another example, one of the biggest value propositions of Ethereum currently, is its use as a platform for decentralized finance, i.e. building exchanges and trading platforms on the chain to allow people to trade peer-to-peer. A requirement for it to work is a smart contract that anyone can interact with themselves, which automatically handles the facilitation of a trade. Anyone able to engage in that interaction, combined with the fact that miners (or stakers) choose which transactions that interact with the contract to happen first, allows them to get ahead of all use and soak up all the profits that can be achieved by doing so. The incentives are broken.
The vast majority of people, at least that I see, who criticize other projects articulate criticism more along the lines of: “It was an ICO, scam!” rather than, “the RAM market, or MEV, fundamentally breaks the incentives of block makers.” Such behavior is not at all constructive, informative or something that will actually convince people to reconsider their opinion of a project. “It’s a scam,” without supporting argument isn’t convincing at all, and it doesn’t inspire self-reflection or re-evaluation. It creates a perception of jealousy over a potential for greater profit.
Now consider the “left/right” categorization of political positions versus the four-quadrant categorization. That’s what happens, a complex reality with many different behaviors is oversimplified into “left/right” categories. It’s not productive, it’s not constructive criticism or feedback, it’s binary oversimplified tribal thinking. It doesn’t change people’s minds, it doesn’t equip people to make informed decisions, it doesn’t do anything constructive.
Think of all these behaviors, and then think of all the people you know in this room who display them. Can you draw a black and white line to divide them into groups? I doubt it. So why is the entire conversation focused solely on labels and groups, rather than individuals and behaviors? You are completely disruptive, divisional and unproductive in every way. The other is rational, potentially unifying and productive.
Labels are ultimately nothing more than vague and shallow social signaling. Virtue signaling. At the end of the day, behaviors and their effects are what really shape and change things. If there is any discussion to be had, this is the one that should be had. Not one over labels, but actually significant behavior and rational arguments. Who cares about the label “Bitcoin Maximalism.”
This is a guest post by Shinobi. Opinions expressed are entirely their own and do not necessarily reflect the opinions of BTC Inc or Bitcoin Magazine.
