The Crypto Market and Bitcoin's Monetary Policy: A Deep Dive
Bitcoin Comparison
Cryptocurrencies have been a topic of much debate and speculation since their inception, with many people questioning their legitimacy as a form of money. Bitcoin, the first and largest cryptocurrency by market cap, has been subject to particular scrutiny, with some referring to it as nothing more than a Ponzi scheme. However, it's worth noting that many widely used forms of money could also be characterized as bubbles that haven't yet popped. The similarities between money, bubbles, and Ponzi schemes can be confusing for those who are new to the crypto market.
What's clear is that when it comes to acting as a money or savings mechanism, none of the other cryptocurrencies in the market can compete with bitcoin. To be considered a reliable form of savings, a currency must have predictability, security, longevity, and a monetary policy that's set in stone. Bitcoin is the only cryptocurrency in the market that satisfies these criteria.
The Credibility of Bitcoin's Monetary Policy
One of the factors that sets bitcoin apart from other cryptocurrencies is its monetary policy, which is highly credible. The rate at which new bitcoins are issued over time will not change, which gives the market a clear understanding of what to expect in the future. This is even more important than the often-mentioned cap of 21 million bitcoins, as it is the unwavering nature of the issuance rate that provides stability.
Holders of bitcoin know what they're getting into when they first invest in the cryptocurrency, and they don't need to worry about outside factors such as the potential inflation in traditional fiat currencies caused by central bankers or supply shocks that lead to changes in the prices of commodities in the physical world.
Recently, the CEO of JPMorgan Chase, Jamie Dimon, claimed that Bitcoin creator Satoshi Nakamoto could reappear one day and inflate the bitcoin supply on a whim. However, this is not possible due to the design of the system. While Satoshi could offer a code change, it would need to be accepted en masse by the operators of full nodes on the Bitcoin network, which is a difficult process, as illustrated by the conclusion of the block size wars in 2017.
It's worth noting that one of the main criticisms of bitcoin's monetary policy is that it may need to be changed in the future if transaction fees alone don't offer enough income to miners. However, the general response to this criticism is that if people are not using bitcoin enough to support the system on transaction fees alone, it will have already failed as a form of money.
Different Strokes: Money vs Tech
When it comes to cryptocurrencies, the most successful projects outside of bitcoin have acted more as tech stocks than money. For example, Ethereum and other platforms like BNB Chain, Tron, and Polygon make different tradeoffs in terms of features, centralization, security, and other factors, compared to bitcoin. While bitcoin is designed to be the best possible form of money, these other platforms are designed to be the best possible platform for the development of decentralized applications. This tends to weaken the credibility of the system's issuance policy and increase centralization, which can harm the utility of these cryptocurrencies as reliable forms of savings.
For example, in these platforms, transaction fees effectively become dividends for stakers of the underlying cryptocurrency, which can lead to increased competition among layer-one blockchains that want to be platforms for decentralized applications. Additionally, there is a question of whether it makes sense to publish this sort of activity on a public blockchain in the first place, as there are concerns about centralization and a lack of credibility in monetary policy when using these cryptocurrencies for long-term savings.
In conclusion, while there are many other cryptocurrencies in the market, none of them come close to the credibility and stability of Bitcoin's monetary policy. Bitcoin was designed specifically as a money and savings mechanism, with a clear understanding of its rate of issuance over time, making it a reliable form of savings. On the other hand, other cryptocurrencies like Ethereum, BNB Chain, Tron, and Polygon, focus on being platforms for decentralized applications and their credibility as a form of savings is weakened due to factors like centralization, security, and uncertainty in their monetary policy. The crypto market is competitive and diverse, with different players trying to serve different purposes, but when it comes to long-term savings, Bitcoin stands out as the best option due to its unwavering monetary policy.