Bitcoin Maximalists: Why you shouldn't be one

in bitcoin •  2 years ago

Many people seem to be convinced that the only cryptocurrency that really matters is Bitcoin. For every altcoin with a good idea, some developers are working on creating something which can overlay or otherwise use the Bitcoin protocol. For example, for Ethereum, building smart contracts and purchasing processing power, there is Counterparty and Rootstock. For Steemit, cryptocurrency-driven social media, there is (or will be) Yours. And so, the argument goes, why would we possibly need anything else when Bitcoin is already there and functioning, and we can build on top of it? Here are a few reasons.

Bitcoin Supremacy?

The problems with Bitcoin

Growing pains - the block size debate and unconfirmed transactions

One problem with that argument is, that Bitcoin has certain technical limitations. The first thing that is very obvious to those who use Bitcoin frequently, is the block size problem, which otherwise might be known as "the unconfirmed transactions problem". The limited amount of data in a block, means that there can only be a limited amount of transactions. When the amount of unconfirmed transactions goes into the tens of thousands, people must wait days for their transactions to complete. That is a level of inconvenience that Bitcoin was supposed to solve, and was touted as solving. But now we see that, at its worst, Bitcoin can be just as inconvenient as the traditional banking system, or even more inconvenient.

There appears to be little movement on the block size debate with the development team. One proposed solution to solve this problem was the adoption of Bitcoin Classic. I thought that miners would adopt Bitcoin Classic, and the problem would be solved. Unfortunately, Bitcoin Classic has less and less support over time.
Bitcoin Classic nodes over time
Source - coin.dance

Every month that goes by without resolving it reduces faith in Bitcoin as a system. If this (relatively simple) problem cannot be solved, what will happen if there is a serious problem with the protocol?

In contrast, when the Dash team realised that there might be a problem with their block size, they took a vote over the network, and every holder of Dash had the ability to have their say. The crowd voted yes, and the block size was increased within 24 hours. The Bitcoin block size debate has persisted for more than 18 months.

Centralised decisions

centralisedvsdecentralisedc0ab9.png
That leads me to another problem. The system changes are largely decided by the developers, and secondarily, the miners and noders. What is in the interest of the developers, miners and noders isn't necessarily in the interest of the Bitcoin users, which presents a problem. A central point of failure such as a development team means that the system can potentially be manipulated by shadowy interests, bribing or even threatening the developers, or for those of you less willing to speculate about conspiracies, a team can be subject to interpersonal conflict. For a Bitcoiner who is not mining, running a full Bitcoin node provides no economic returns, and is essentially an act of charity, and this makes it more likely that the amount of full nodes will diminish over time.

Of course, those are also potential problems with just about every altcoin which has been developed so far. However, a constant flow of new altcoins, with several new currencies with various features, at different levels of development and penetration, does give us a decentralised system, because if a grave problem with Bitcoin or any other coin were to occur, there would always be alternatives; there are always different places to put our money.

Block times

The next problem is, certain technical limitations which are built into the protocol. A block time of ten minutes may be suitable for many transactions, but not for certain types of transactions which involve large amounts of calculations. I've read about the idea of a decentralised poker network, but not even Ethereum has a small enough block time to provide that service satisfactorily, as people would have to wait 14 seconds at a time for each action to be processed. Perhaps there are some off-blockchain solutions to this issue, waiting to be discovered or released.

Addressing the case for Bitcoin

Network effect

Bitcoin has the largest ecosystem, the largest market cap in the crypto space, the most penetration, and it's the easiest to spend - but that's not necessarily guaranteed to be the case within a year or five years. Bitcoin is mostly accessible for tech nerds and financial nerds, and trying to convince regular people that it's something valuable or useful isn't the easiest task, as laypeople don't spend a lot of time thinking about how development or acceptance of new technology will change the world.

"Can I spend at the market?" Not really. "How about the supermarket?" Not likely. "Can I pay my rent with it?" Possibly, but probably not. "Then why the hell do I want it?"

A system similar to Steemit, a social medium platform, a medium which more than a billion people are familiar with and enjoy using, has a much larger potential for growth, if you look beyond what's happening today. For someone who knows nothing about cryptocurrency, Bitcoin is confusing and unnecessary, however, Steemit and similar applications are almost immediately appealing, and have a much easier path to capturing a much wider market, much more rapidly. Assuming linear growth of Steemit at 2,000 accounts per day, it could have more penetration than Bitcoin within a few years. Assuming exponential growth, it could be a matter of months.

A new kind of money

bunch of rolled up 20 dollar notes
Reading through some articles about Bitcoin maximalism, I found this little nugget.

Bitcoin created a new sub-category of commodity money: /money/commodity money/digital. Due to the nature of Bitcoin being a money innovation, and the fact that commodity money has a very particular way in which it can come to be accepted as a money (the mining or work process in extracting and preparing the commodity for use) this essentially means that a lot of technologists are wasting their efforts in trying to build better versions of it because they only see it for its technological implementation. If they only realized what many of us with financial backgrounds have realized, which is that Bitcoin is a new money, then they would be more likely to better spend their efforts building technology on top of this new money network, instead of trying to build their own version of it.
Wall Street Technologist

That's like saying that, once gold is discovered as money, silver shouldn't be used as money. We've already discovered commodity money which is a metal, so we obviously don't need another type of metallic commodity money with any. Or, when the Diner's Club card was released, other financial institutions should have said "This is the new type of money, so we shouldn't develop new versions of it, but instead, build on top of this network," and Visa and Mastercard should have never attempted to create their own infrastructure, because this is money, not just technology.

The fact that Bitcoin is money doesn't preclude it from being technology, nor from having the qualities of technologies, nor from the possibility of improving it or developing the technology for more specific needs. If people accept the Wall Street Technologist's argument, it will hold back countless innovations.

First mover advantage

Having a first mover advantage is good, but it doesn't provide any guarantees. Diner's Club had the first mover advantage too, and they enjoyed the benefits, but now Visa and Mastercard run the credit card game. How long can Bitcoin get by on that title?

Of course, a first mover advantage is a real phenomenon, but so is a second mover advantage. If the first mover doesn't fully capitalise on its opportunities - for example, if a piece of software doesn't have a user-friendly interface which is easy to understand for the masses - then it opens the gate for a second mover to swoop in and claim victory.

We can do those things with Bitcoin

Yes, you can do a lot of things with Bitcoin, strapping on sidechains and adding layer after layer. You can also strap a lawnmower engine to a wheelchair, but that doesn't necessarily make it a good idea. A purpose-built device may serve your purposes even better. Or maybe it won't - this is a new area of human endeavour, and nothing is certain.

The market cap

To give you an idea of how much the market capitalisation of Bitcoin means, here are a few companies with a market cap in a ballpark similar to Bitcoin:

  • Best Buy Co. Inc. $9.99 B
  • Trip Advisor $8.55 B
  • Expedia $16.32 B

These companies offer a lot of great services, but nobody would claim that their market cap alone would keep them growing, or sustain them. Nobody would claim that, their market cap alone means that they are going to be around in five or ten years.

To further put it into perspective, $9 B is about the amount that Nintendo stock increased with the release of Pokémon Go, and also the approximate amount that Target stock went down when they changed their bathroom policy.

Just a few short months ago, the market cap of BTC was under $3 B, and just a couple of months ago, the market cap of ETH rose to $1.5 B. The fact that an altcoin can have such a comparable market cap might indicate that Bitcoin could be knocked off its podium in years to come.

A market cap definitely means something, but for an enterprise to continue to be successful, it also requires other things, for example adaptability, responsiveness to the market. It takes much more than a market cap to maintain growth, and that brings me to my next point.

The combination of fruit flavours

The combination of having quite a high market cap, having a large scale functional blockchain, its potential flexibility to other projects, and having the first mover advantage in a disruptive industry, definitely gives Bitcoin a few legs to stand on when it comes to longevity. Nevertheless, it doesn't negate the possibility that other coins may run in parallel, fulfilling different niches through their well-designed structures.

Conclusion

I love Bitcoin. I love what it does, what it has done, I love what it represents, I love that it has brought wealth to so many wonderful people, that it inspired so much innovation, that it has disrupted our very idea of what money is, and lead us to higher questions. Bitcoin is by all accounts, a very fascinating and useful technology. However, that is no reason to feel loyalty to it.

There is no reason that other services cannot run in parallel to Bitcoin, fulfilling different functions to which Bitcoin is not suited. Furthermore, if you expect the banking industry to be disrupted, then you must also expect Bitcoin to be disrupted. The only question is: when, and by what.


If there are any important points I've missed, or if I'm just plain wrong, please let me know how and why, and I will be eternally grateful. And remember to have a great day!


If you enjoyed this article, please check out some of my others

Steemit's New Economic Paradigm: Why Steemit might just work
Steemit is not about luck: Principles of successful Steemians
The Steemit Ponzi scheme discussion: Some common questions

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Great post! The Bitcoin network simply isn't sufficient to process all the transactions in the world quickly enough. I hope that eventually all forms of currency will be diversified and more and more of the economy becomes blockchain based. If we were to put the whole world economy onto the blockchain, no way having only bitcoin would suffice. We would need far more successful cryptocurrencies than available today. This is why I believe that we are still in the infancy of the cryptocurrency revolution and even this year, we will probably more cryptocurrencies taking off to serve specific market niches.

Gone are the days of currencies being tied to specific governments. I think we will see more and more cryptocurrencies based on specific industries instead, for example, Steemit captures the social media industry.

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Great comment. I think it would be kind of amusing to see a bunch of governments around the world, scrambling to put their national currency on the blockchain. @josepimpo was talking to the Central Bank of Mexico to talk about making a digital peso, and I'm curious to see if that will play out. Critics say that if a central bank is talking about that, that means they don't understand what decentralisation means.

Then there was this curious news that came out the other day, Hilary Clinton publicly declaring her support for blockchain tech. In that case, we can say for sure that Clinton doesn't understand what blockchain tech could mean for government transparency.

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LOL the irony is too strong. I almost want to see Clinton shoot herself in the foot on a public blockchain. :D

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Who cares about Hillary. She goes where the money goes

Some maximalists forget that Bitcoin's blockchain was NOT intended to do everything. Satoshi said it himself. It doesn't scale if you try to put in there every dataset. There is no need, in this phase, for Bitcoin to be burdened by contracts, forums, dns records, distributed storage, intellectual property registration etc etc. It can barely handle economic transactions as it is.

https://steemit.com/bitcoin/@alexgr/bitcoin-maximalists-remember-what-satoshi-said

Great article but did you explain the case on why Bitcoin Maximalists are so firm on their supremacy?
I really wonder why the rest of the altcoins havent really boom like bitcoin did in 2013 when it went from a mere 15 dls to 143 dls. This wasnt by far the biggest boom of bitcoin, but it was a big mark of it's evolution. Something no crypto has really experienced again.
I really hope Bticoin keeps groing to the mythical 10,000 but even if it doesnt go that far, I am good for being at upper 500 price. I dont care if it level out and keeps going at this rate. But I really wish at least more altcoins reach an upper 100s.
Granted price is not everything and market volume might be more important to some people but even then, I dont think the adoption has been as good for most altcoins. Right now most conversations are just a duopoly of Ethereum and Bitcoin, which Ethereum by far has been filled with drama while bitcoin has been sort of stable.

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Thanks Alex. I tried to address why they're so firm, but maybe I missed something. Do you have some other important points which people should be aware of?

I suppose one thing to remember is, it's still kind of early for most altcoins. Litecoin has been battling it out for a while, but I don't think people are likely to ever get quite as excited about Litecoin as they have about Bitcoin - except for that time when Max Keiser hyped it up and it went to around $50. Litecoin just isn't that different from Bitcoin, so it ain't that sexy. Ethereum might do that though, providing the drama isn't too crazy. Or one of the other smart contract coins such as NXT or NEM.

It's more important to look at the market cap, compared to the value of the individual unit. There are five times as many ETH as there are BTC, so when it went up to around $20, it was actually really close to getting the kind of crazy gains you're describing.

What if Bitcoin stays as digital gold?
Like years ago the dollar was backed by gold. No one used gold to make payments but it always kept its value. Only in large transactions by central banks gold was used.
In the same way we need a new Bitcoin backed cryptocurrency for all those millions of small payments each minute. Bitcoin might stay for the large transactions and because its deflationaire by design it will keep its value.

Being the most known deflationary currency in the world, makes it far superior to steemit for example. As there can only exist 21 million bitcoins and no more. Eventually we're going to run out. But we can't run out of steem.

This is another great article. Thank god for the follow button!

I think you pretty much hit the nail on the head. One thing that I dont think you've put enough emphasis on is Bitcoin's trust level. Which is weird to speak of in a trustless industry. But having been around for 7 years gives it a feeling of security. I feel that Bitcoins days are numbered. Lack of governance has caused its development to stall. We always knew Bitcoin could only be out done by Bitcoin 2.0 we just didnt expect that to happen so soon!

Ethereum is NOT Bitcoin 2.0, Ethereum is for apps, same as NXT/SUPERNET/WAVES/LISK or whichever you choose. But Dash is simply Bitcoin evolved and by 2018 it will have surpassed Bitcoin. My bold prediction!

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@cryptosi looks like your prediction is more or less on track.

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Hmmm, Bitcoin has definitely lost dominance, but Dash has also not grown at the speed i expected and it has also developed it's own governance issues. Have a look at this post I made, Seems Iconomi and Melon have already built one of the predictions for new DAOs .... https://steemit.com/dao/@cryptosi/5-interesting-business-areas-for-daos-in-2017

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I haven't heard much about Dash's governance issues. Can you tell me more or point me to some resources? A lot of the information that I get about Dash is paid by Dash... which is good for marketing and everything, but there's obviously a bias. And I notice a lot of the critics harp on with the same tired points, so I got tired of listening to them. So if you've got a fresh perspective that would be much appreciated.

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Yes, that's very important. Bitcoin has survived so long, and so people have faith that it will continue.

I'm holding a bit of Dash... I might have to get a bit more.

One clarification regarding DASH...it's not every holder of DASH that has a say. Only the masternode operators vote on resolutions. Each masternode needs to place 1000 DASH in a special transaction, basically putting it into escrow.

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Ah I see. Thanks @kevin-ancap, that's an important distinction.

For 7 years we went through all Gartner hype cycle and now are at plateau of productivity. I don't need to be BTC maximalist, because I just live for BTC for several months. I get payments for my works in BTC. But there'll be great challenge for Bitcoin in the nearest future if its devs wouldn't agree at last.

Thank you for sharing your point of view @churdtzu, although i've invested so many resources into making a profit in bitcoin/blockchain/mining/halving. I'm actually really scared that Bitcoin price continues to keep stable or drop. This is due to many people actually believing in me and investing also in bitcoin... I wouldn't want for them to lose their hard-earned money. What do you think on this matter? Will the price will actually go up?

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It's very hard to say; your opinion is as valid as mine. I'm pretty sure Bitcoin is reasonably stable for the moment, for all the positive reasons I listed in the article. I bought a little more BTC around $650, thinking that was the valley before it went crazy again, but I was mistaken.

If we look at the last halving, it wasn't until 5 months later that we saw an explosive rise. However, it's possible that most of the price rise because of the halving has already been factored in, considering how aware people were. Then the Bitfinex hack put a spanner in the works, so if it was going to rise, that would knock it down a bit. Nevertheless, BTC seems to be steadily rising over the last few days.

I don't know if it will go up... but I'm not selling yet.

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Also during the last halving there wasn't 20-30 other well developed altcoins for people to invest in. I think if all the brains in Crypto were rallying around Bitcoin like they were in the early days, then better UI would be produced, more features would be implemented and the blocksize debate would of probably been solved with some sensible governance. People who have left Bitcoin have created all these things in other coins.

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Yes, excellent points.

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Yes, we're all still holding on. Good to know i'm not the only one. Guess we'll have to endure a little bit longer.

I was your hundredth vote. Do I get a prize? Great article man I completely agree with everything you said. There is too much focus on Bitcoin in general. Everyone needs to chill out and let the crypto-space grow.

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Ding ding ding. I don't know, maybe a free hug or something.

Thanks!