Bitcoin is separate from crypto – Bitcoin Magazine
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 published 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’s perspective. The quoted text below is all from Kelly’s article.
“If you’ve ever dared to criticize the crypto world, chances are you’ve received some charming reprimands. You’ve probably been told to ‘have fun being poor’…”
For what it’s worth, I think the “have fun staying poor” meme is mostly meant in jest and not a serious statement of ill intent towards another person. Why? Because we looked popular Bitcoiners tell Elon Musk, the richest man in the world at the time, to “have fun staying poor” as he pulls back from his public support for Bitcoin. It is clear that this is not meant as a serious rebuke.
“But there’s another slightly more sophisticated flavor of counter-criticism that finds its way into my inbox with increasing regularity these days. It usually starts with something designed to please — some sort of agreement that crypto is immoral, a scam, or some version of of a Ponzi scheme. But then it quickly reverses course to explain that none of this applies to bitcoin.”
Here is where my main disagreement with this article lies. I and many other Bitcoiners believe that we should draw a distinction between Bitcoin and “crypto.” Bitcoin is unique in many ways:
- It has no pre-mining or “dev. tax” to enrich the founder or founding team.
- It has a culture that actually prioritizes decentralizing the ecosystem.
- It enables cheap blockchain validation and participation (ie it is relatively easy to run a fully validating Bitcoin node), while maintaining a robust, open, scalable, trust-minimized system.
- It has a very strong preference for soft forking and keeping backward and forward compatibility for those running older Bitcoin node software.
- It is continuously growing in acceptance and opinion sharing around the world. Of course, this waxes and wanes with the bull and bear markets, but zoomed out, bitcoin liquidity and acceptance only go one way: up.
When you really explore these points, you will find it just Bitcoin meets these criteria. Many altcoins regularly hard fork, which is an indicator that they have some level of centralization in their development and community. Other altcoins are doing things that simply wouldn’t be scalable if scaled up to the level of Bitcoin and the number of bitcoin transactions. Other altcoins do things that are more permissive, thus they are not one open system that Bitcoin is.
You could even argue that a specific altcoin does one specific things better than Bitcoin does, but do any of them make meaningful improvements at all? I don’t think so, which is why Bitcoin is rightfully in a category of its own. There is also the issue of Bitcoin should have these assumed other functions or things, as this may also cause negative trade-offs in one of the other valuable properties of the system (robustness, decentralization, scalability, verifiability, etc.).
Kelly seems to think Bitcoin’s “arguments don’t stand up,” as she takes issue with any financial incentive. For example:
“First, it doesn’t matter what bitcoin’s origins were – the people pushing it now have the same financial incentives as those pushing other crypto tokens.”
How is this a justified attack on Bitcoin promotion? Imagine 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 pretending to be “in the same industry”. You are advocating that people use your non-fraud company’s product instead. Where is the ethical question? How would this “disprove” you? It simply doesn’t, unless you grab a straw.
Of course, Bitcoin is not a company. But in any case, the promise of Bitcoin is not that “no one came in cheaper than you”, which is an absurd and impossible standard to live up to. The promise of Bitcoin is an open, decentralized, small, robust, programmable monetary system with no rulers. The product does what it says on the tin, and Kelly’s criticism falls flat.
“Secondly, bitcoin is not actually decentralized – not only do miners group together to form ‘mining pools’, but the wealth is also hugely concentrated.”
Kelly does not summarize the relationship between miners and pools correctly. Miners are different entities from pools and they can quickly point their hash rate to another pool. And while there may be relatively a smaller number of pools, individual miners can switch between them as it is a brutally competitive market. See this September 23, 2022 screenshot from Braiins Insights Dashboard, which shows how the pools are headquartered in different countries around the world:
Source
Also current is the latest Poolin news, which saw the company suspend withdrawals. Given this, many miners pointed to hash rate gone from Poolin. Note how Poolin’s global share of bitcoin mining hash rate has gone from 12% previously, down to around 4% at the time of writing.
“On Tuesday, MicroStrategy announced that it had purchased an additional 301 bitcoins, meaning that this company alone now holds nearly 0.7 percent of the entire supply.”
Kelly claims to “steelman the argument” in this article, but unfortunately she does a poor job of steelmaning the issue of bitcoin ownership. If she understood the libertarian and cypherpunk ethos of Bitcoin, she would understand that the point is to create a monetary system without forcing people to do so. So, of course given this, there will be some people who get it before others do. Those who get it will buy, earn or mine coins before others do. The fact that one company owns 0.7% of the circulating supply of bitcoin is not a problem.
So, Bitcoin remains far more decentralized than the “crypto” coins.
“Third, a ‘first-mover advantage’ does not always last.”
That’s true in a general business context, but to understand why Bitcoin is different, we need to understand why and how far it beats alternatives, whether fiat money, gold or altcoins. Generally, 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 will quote my friend Gigi his recent Twitter thread:
The design space for money is limited, and a tenfold improvement in the monetary properties of Bitcoin is simply not possible. You can improve one thing marginally, but only by dramatically worsening trade-offs in other ways (verifiability, scalability, robustness, availability).
Kelly then writes again about the incentive 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 separate bitcoin from “crypto.” But the real question is: Are they right? Yes they are.
Bitcoin is rightfully different from altcoins, but it just takes a lot of research and reading to understand why. Unfortunately, Kelly has not done the research required and presents only a shallow, surface-level misunderstanding.
This is a guest post by Stephan Livera. Opinions expressed are entirely their own and do not necessarily reflect the opinions of BTC Inc or Bitcoin Magazine.
