Opinion: Satoshi would be ashamed of Bitcoin Maxis in 2022

What would Satoshi Nakamoto think of the Bitcoin community in 2022? Chris Williams addresses the elephant in the room.

Satoshi and the Immaculate Inception

When Satoshi Nakamoto shared the white paper for what would become the world’s most important invention since the Internet, they presented the concept of “a peer-to-peer electronic cash system.” First teased to a group of cypherpunks on the Cryptography Mailing List on the back of the Great Financial Crisis of October 2008, Bitcoin was Satoshi’s answer to the failures of governments and central banks worldwide.

Until their sudden disappearance in December 2010, Satoshi never made a secret of their disdain for the traditional financial system. They pointed out problems with trusting banks on the Bitcointalk forum, pushing Bitcoin as the world’s first decentralized option. On Bitcoin’s Genesis block, they embedded a message taken from the front page of The Times newspaper on the same day. It read “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.”

Bitcoin quickly developed into a small community of Internet geeks who believed in freedom and self-sovereignty. Many early Bitcoiners were Libertarians who shared Satoshi’s distrust of authority. The first mainstream use case, occupying a niche corner of the Internet in its early years, was on Silk Road, a darknet marketplace that became an eBay equivalent for illegal drugs.

Bitcoin grew thanks to its passionate community of believers, but it eventually became clear that had changed since Satoshi introduced it as “a peer-to-peer electronic cash system.” Where Bitcoin’s early adopters were happy to spend dozens of coins on eighths of the grass on Silk Road, they now chose to “HODL,” crypto slang for sitting on your holdings and waiting for the price to go up.

Is the Bitcoin Narrative Dying?

Bitcoin’s supply is limited to 21 million coins. It does provably little, unlike fiat money that banks can print on a whim. That’s part of the reason Bitcoin has seen astonishing growth over the past 13 years, rising from fractions of a cent at launch to $69,000 by the end of 2021 (it trades closer to $23,000 today). As the price of Bitcoin has risen, it has been adopted as a “digital gold”. Its biggest proponents often point to the limited supply in response to money printing and high inflation rates, but it failed to act as an inflation hedge when the Federal Reserve raised interest rates in 2022. Bitcoin and the crypto market now trade in close correlation with stocks. and other global markets; when the Fed turned hawkish to curb inflation, it suffered badly along with virtually every other asset class.

Some Bitcoiners have tried to help the top crypto evolve beyond the digital gold task, but none of the developments have been a notable success. Blockstream, a company led by some of Bitcoin’s most ardent advocates, developed a Liquid sidechain to offer faster settlement times than the Bitcoin network’s 10-minute block times. Hardly anyone uses it. The Layer 2 Lightning Network has become Bitcoin’s first realistic shot at creating the cash system that Satoshi envisioned, but it has also failed to gain meaningful traction because it requires people to spend their coins. There are also ways to make money from Bitcoin today, but you usually have to trust a custodian with your coins. Many of Bitcoin’s most prominent voices have previously supported centralized custody services like BlockFi, then deleted their tweets when BlockFi imploded due to the firm’s irresponsible management. Some major Bitcoin advocates such as Anthony Pompliano stood behind Terra’s controversial CEO Do Kwon when he committed to accumulating billions of dollars worth of Bitcoin to stabilize his flawed UST stablecoin in early 2022; they fell silent when Terra crashed to zero and Kwon faced multiple lawsuits on charges of fraud and misleading investors.

Beyond holding coins without doing anything with them and encouraging others to help push prices up by buying in, much of what Bitcoin is trying to do to improve already exists in a better format on smart contract networks like Ethereum. That’s partly why so many Bitcoiners hate Ethereum and its competitors. Smart contracts make use cases like earning returns and using dollar-pegged stablecoins possible, while technologies like Zero-Knowledge Rollups, a nascent scaling development that leans on cryptographic zero-knowledge proofs, promise to offer quantum leaps in scaling and dirt-cheap transaction costs.

Ethereum, the second largest cryptocurrency after Bitcoin, has been a better investment than Bitcoin since its launch; one BTC cost around 1500 ETH in 2014, while today one BTC is worth only 14 ETH. Bitcoin purists have a problem with any crypto-asset that threatens Bitcoin’s dominance, but it’s Ethereum they hate the most. In May 2011, the recipient of the first Bitcoin transaction, Hal Finney, wrote a message arguing that “any successful replacement of the Bitcoin blockchain will forever undermine the credibility of any successor.” Bitcoin’s cult-like following often points to the post to justify its toxic maximalism.

Since it became clear that DeFi would be more useful to the world than digital gold, some have tried to rebrand Bitcoin. One of them is Jack Dorsey, whose TBD initiative is currently trying to build “a decentralized web platform” similar to those launched on Ethereum five years ago. Dorsey has marketed his Bitcoin DeFi effort as “Web5,” a direct jab at the rapidly evolving Web3 ecosystem that Ethereum is synonymous with.

Another of Bitcoin’s most notable developments in the past year was the attention it received from major corporations and nation-states amid a heated crypto market frenzy. Michael Saylor’s MicroStrategy famously accumulated 174,000 Bitcoin during the cycle, while El Salvador became the first country to adopt Bitcoin as an official currency. The Latin American country’s president, Nayib Bukele, has since spent millions of dollars buying Bitcoin top for the government’s coffers, at times bragging about buying dip from his iPhone (El Salvador also forced businesses to accept Bitcoin when it introduced it as a legal tender, raising questions about support for crypto’s freedom-based ideals). Although Bitcoin was created in a backlash against governments and El Salvador’s move led to nationwide protests, rich Bitcoin whales like Max Keiser, Stacy Herbert and Samson Mow have decided it’s their duty to cozy up to Bukele to help El Salvador and other developing countries buy into their “Hyperbitcoinization” thesis.

Toxic maximalism

Bitcoin’s community has become increasingly toxic in recent years, perhaps because its top thought leaders are so visible on social media apps like Twitter. There are many early adopters who dropped out as toxicity intensified and new innovations emerged—people like Erik Voorhees, Meltem Demirors and Nic Carter—and they were labeled “shitcoiners” by the Bitcoin cultists.

Another major factor behind the rise in hate has been the remarkable development taking place in Bitcoin-adjacent ecosystems. Bitcoin doesn’t just have to deal with weak price performance against virtually every other crypto asset in the 2021 bull run– It also falls short in terms of development compared to many of its predecessors. The most notable of these developments is Ethereum’s upcoming “Merge” event, which will see the blockchain abandon the Proof-of-Work consensus mechanism similar to the one Bitcoin uses in favor of Proof-of-Stake. Bitcoin’s Ethereum critics say that Proof-of-Stake will make the network more centralized because whales will earn more rewards by staking more ETH, ignoring the point that mining is a zero-sum game where the small fish are priced out by bigger players with bigger mining rigs.

Now that Ethereum is in the home straight against Proof-of-Stake, the market has decided to go bullish and the Bitcoin purists have directed more hate at it. Arguably the most desperate move has been the Bitcoin community’s ongoing discussions about ETH’s possible security status. Saylor has insisted that ETH is a security on several occasions, while Natalie Brunell, another Bitcoin-only HODLer who entered the space just two years ago, appeared on Fox Business over the weekend to repeat Saylor’s mantra.

The frequent calls to regulate ETH date back to Ethereum’s initial coin offering where the Ethereum Foundation raised $18 million worth of Bitcoin in an ETH crowdsale. Critics claim that ConsenSys, the Ethereum software company behind the ubiquitous Web3 wallet MetaMask, raised millions of dollars in ETH and now controls the token supply. After the Ethereum ICO, Gary Gensler suggested that ETH could be classified as a security at an MIT lecture. In 2018, then-SEC Director of Corporations William Hinman declared that neither Bitcoin nor Ethereum were securities, but Gensler reignited the debates last month when he said Bitcoin was crypto’s only commodity. The SEC also labeled nine Ethereum-based tokens as securities in an insider trading case against a former Coinbase employee (the SEC is reportedly investigating the exchange over its listings). Some have pointed out that appealing to the SEC head to regulate ETH is about as anti-crypto as it gets, but that hasn’t stopped the so-called “community” from doubling down on its calls to the US agency.

While Ethereum is about to undergo a major change, so far there is little evidence to suggest that it will be classified as an unregistered security after the merger. Whatever the update brings, it’s hard to escape the problems it has revealed in the oldest cryptocurrency community. Ready to attack the competition and run to a government agency for help in preserving Bitcoin’s supremacy, the community is lost and fading into irrelevance by 2022. If Bitcoin is to thrive, its believers must eschew Bitcoin maximalism and support all genuine efforts to strengthen the sovereignty of individuals. Because in its current state, Bitcoin is starting to look like a pet rock led by a community that even Satoshi would be ashamed of.

Disclosure: At the time of writing, the author of this piece owned ETH and several other cryptocurrencies.