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Maximalism Hinders Adoption And Hurts Everyone

Published 6.5.2024

Michael Saylor has expressed his belief that no spot ETF for Ethereum or any other cryptocurrency including Cardano will receive approval. He further asserted that it will soon be evident that all cryptocurrencies, except for Bitcoin, are unregistered securities. According to him, Wall Street recognizes only Bitcoin as a legitimate investment crypto asset.

Satoshi Nakamoto, the creator of Bitcoin, would be the last individual who showed concern about whether Wall Street would buy BTC or how governments classified Bitcoin. The first block of the Bitcoin blockchain contains the text: ‘The Times 03/Jan/2009 Chancellor on brink of second bailout for banks’. This is often interpreted as a critique of the traditional banking system and the government policies that rescued failing banks.

Bitcoin was conceived as an alternative to banks and governments. Saylor, along with other Bitcoin maximalists, are pleased that Bitcoin has entered the mainstream financial world. They are keen for regulators to prohibit competing cryptocurrencies. In doing so, they essentially undermine the ideals of Satoshi and the principles upon which Bitcoin was founded. Maximalists fail to realize that they have positioned themselves on the opposing side of the barricade.

The World Is Not Black And White

Nakamoto was critical of the traditional banking system and Wall Street. He believed that the ‘root problem with conventional currency is all the trust that's required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust’.

Probably the only thing that Nakamoto and Saylor would agree on, as well as most crypto fans, would be that the banking system is dysfunctional. However, I believe that on many other matters, Satoshi's views would differ significantly from Saylor's.

In essence, Saylor is a speculative investor who appears to be appealing to the government to safeguard his investments. The prohibition of competing cryptocurrencies could potentially enhance the market value of his holdings.

Satoshi aimed to address the issue of trust, specifically to eliminate superfluous intermediaries. Satoshi perceived the path to success in self-custody and peer-to-peer transactions. Spot ETFs represent a stark contrast to what is required for blockchain technology to thrive.

Indeed, one could argue that Satoshi's views were too steeped in cyberpunk ethos and not entirely applicable to mainstream scenarios. A more fundamental issue is that Bitcoin, from a technological standpoint, may not be fully equipped to realize Satoshi's vision. The high volatility of all cryptocurrencies compels individuals to continue using fiat currencies as a medium of exchange, even if they would prefer to use BTC.

Bitcoin is unlikely to lead to the collapse of the banking system or the downfall of governments. What we can anticipate in the coming decades is a gradual transformation of the financial system. The regulation of cryptocurrencies and the influx of investment capital will be integral to this evolution. Satoshi may not have approved of this, but it's fair to say that he may have been somewhat naive about the trajectory of Bitcoin adoption.

Furthermore, Saylor's assertion that Bitcoin is the only viable solution to the dysfunctional financial sector is not necessarily accurate. Following the fourth Bitcoin halving, we are aware of Bitcoin's limitations and there may be concerns about its economic sustainability. We must question whether we can address these limitations and whether they have been resolved in another project. If we aim to maintain intellectual honesty and not ignore the issues, we must acknowledge the numerous achievements of certain blockchains.

It is fair to say that Bitcoin lags technologically behind the competition in many ways. Efforts to introduce DeFi into the Bitcoin ecosystem make these shortcomings even more visible.

Maximalists Inhibit Adoption

The most challenging aspect of cryptocurrency adoption appears to be altering people’s mindsets. In many countries globally, there’s still a relatively strong trust in their governments and banking systems, particularly in developed nations. In contrast, in developing countries lacking a robust banking system or experiencing high inflation, any alternative, including blockchain, is deemed suitable.

Individuals like Saylor have influenced people to primarily view cryptocurrencies as an investment, and only secondarily as a technology with the potential to disrupt the financial sector. The human tendency towards greed often prevails, with the desire for wealth outweighing the ambition to change the world. Influencers should not feed greed, but rather a desire for change. Sometimes, however, the boundaries can merge into one.

Denying the tangible technological progress in numerous blockchain projects not only harms these projects but also, paradoxically, Bitcoin itself. There are several examples to illustrate this.

Bitcoin can process only 7 transactions per second. When transaction demand surpasses the protocol’s maximum throughput, fees rise, rendering Bitcoin essentially unusable for those who need it the most, such as individuals in developing countries. Despite the Lightning Network (LN) being under development for nearly a decade, it appears not to be the optimal solution. Most users are compelled to use this network in a custodial manner, which contradicts Satoshi’s visions. Only a negligible portion of BTC coins is locked in LN.

In the absence of competition between blockchain projects, people could today transfer BTC to each other through dozens of other existing L1 and L2 solutions. It might come as a surprise to some that significantly more BTC coins are locked in competing blockchains than in LN. Thus, the market demonstrates that individuals are best at finding the most suitable solution for themselves.

Speaking of numbers, only about 4,700 BTC are locked in LN while 156,000 wrapped BTC are minted on Ethereum. I am talking about a single project.

If one were to tally all the transactions per second (TPS) across all Layer 1 and Layer 2 solutions in the crypto industry, the total might reach several hundreds of TPS. The Bitcoin ecosystem, inclusive of the Lightning Network, accounts for approximately only a 5% share of all transactions in the crypto industry. In terms of user activity on the blockchain, Bitcoin is certainly not the mainstream.

Stablecoins represent up to 70% of all transactions in the crypto space, a sector from which Bitcoin is entirely excluded. Satoshi could express surprise upon discovering that there are individuals who desire the introduction of stablecoins in the Bitcoin ecosystem, a notion that is fundamentally at odds with the original philosophy of Bitcoin.

Long-term BTC holders sought consistent income from their assets. In the previous cycle, numerous influencers enticed them towards centralized services akin to Celsius. This resulted in many Bitcoin enthusiasts losing their coins. Had they utilized the decentralized financial services (DeFi) on various smart contract platforms, they might have avoided such losses. Many BTC owners have been practicing this for years. Maximalism obstructs the utilization of demonstrably safer services, a concept that would likely align with Satoshi’s ideals.

Satoshi placed significant emphasis on decentralization. Regrettably, we can’t ascertain his thoughts on Bitcoin’s current level of decentralization. He might be disheartened to learn that over half of the blocks are mined by merely two dominant pools and that a handful of dominant miners control more than half of the hash rate.

What would Satoshi’s opinion be on Cardano’s decentralization? While Bitcoin has a Nakamoto coefficient of 2, Cardano’s stands at 58. Would Satoshi advocate for a government ban on Cardano, or would he be more inclined to draw inspiration and modify the Bitcoin protocol to achieve similar levels of decentralization? It’s plausible to assume he would favor decentralization.

Many maximalists often disregard Bitcoin’s shortcomings and dismiss competing projects. Concurrently, today’s competition has surpassed Bitcoin in nearly all aspects, barring market capitalization. Maximalists have thus idolized market capitalization while resigning themselves to the technological advancements of the protocol.

If competition on a technological level has been already lost, it becomes necessary to compete on a narrative level. This leads to rivalry and attacks on competitors. Some Bitcoin maximalists have even lobbied officials to outlaw Proof-of-Stake consensus or made other similarly unreasonable demands.

However, it appears that what can be legally suppressed will be all custodial solutions. In the context of Bitcoin, this refers to the Lightning Network or potentially even pools. In both instances, the intermediary holds the private keys of BTC coins that belong to someone else.

Failure in El Salvador

El Salvador made history in September 2021 by becoming the first country to adopt Bitcoin as legal tender.

How are Salvadorans doing after 3 years of using Bitcoin?

A nationally representative survey of 1,800 Salvadoran households found that usage of digital payments and Bitcoin is low, concentrated, and has been decreasing over time. More than 60 percent of early downloaders of the government's digital wallet, Chivo, have not made a transaction after spending the free Bitcoin that came with the account, and 20 percent have yet to spend the bonus.

Despite free Bitcoin and discounted gasoline for those downloading and using the cryptocurrency app, downloads have stalled and use in daily life is not widespread.

Bitcoin technology was supposed to be used for remittances. Although Chivo is used by a negligible part of the population, stablecoin USDC has started to be used for the same purpose.

One of the reasons why the people of El Salvador have not adopted Bitcoin is its high volatility. Although Bitcoin had support from the government and competing solutions were rejected, some people found their way to stablecoins.

It can be said that maximalism discourages the people of El Salvador from a solution that is more suitable for them than Bitcoin. It turns out that in poor regions, people are starting to use USD-backed stablecoins.

I understand that people would like to see Bitcoin as the dominant payment network. However, the medium of exchange must be stable in the short and medium term. Maximalists should understand that Bitcoin is not suitable for everyone.

Technological Progress Cannot Be Banned

Individuals like Saylor seem to overlook the fact that technological advancement cannot be suppressed. As soon as a novel technology, such as blockchain, emerges, people begin to refine and innovate it. The Bitcoin community has chosen to update the Bitcoin protocol conservatively, which is why it’s unsurprising that other projects have taken the lead in innovation.

Newer projects like Cardano are backed not only by superior technology but also by vast communities. Maximalists might be taken aback to discover that many people prefer decentralization or that they utilize multiple projects simultaneously. They might also be surprised to learn that many individuals who were once Bitcoin enthusiasts have become fans of other projects for various reasons. It's silly to judge people for their choices. We should just accept that people can form their own opinions and that diversity of opinions and preferences is beneficial.

Consider what it would be like if Ford wanted the government to ban competing car manufacturers, or if Microsoft demanded a ban on competing operating systems. A monopoly does not benefit the market. Why aspire to monopolize money? Why not have multiple competing cryptocurrencies?

The competitive environment has already yielded tangible results in the form of greater decentralization, programmability, long-term economic sustainability, and scalability than Bitcoin. Without competition, DeFi would not exist. And do you know what part of the Bitcoin community wants to build? DeFi, the same DeFi services they see elsewhere.

Let Proof-of-Work blockchains be coexisting with Proof-of-Stake blockchains. Let new concepts emerge. The development of any complex technology has never ceased. Even money has a rich history of innovation. It’s naive to believe that the evolution of money will conclude with Bitcoin.

What if the best form of money could be programmable? What if the new money didn’t require custodians? What if governance could evolve around the new money? And why wouldn’t we want to experiment to determine which form of money is the best? Why should we be satisfied with the fact that miners, i.e., a few large mining companies today, will decide on innovations in Bitcoin?

There are many questions for which we don’t have answers. The only option is to continually build and not fear technological progress that can bring about changes.

Saylor fears technological progress because he fears change. If he ceased to be a Bitcoin maximalist, he might risk losing some of his reputation. The good news is that neither Saylor nor governments can halt technological progress.

Bitcoin embodies a mechanism of liberty. It should remain indifferent to opinions, whether they come from banks or governments, and whether they advocate for its support or prohibition.

Satoshi bestowed upon us this instrument of freedom. Figures like Saylor are transforming Bitcoin into a tool of absolutism. Maximalists attempt to segregate society into the Bitcoin elite and the rest. Saylor, who owns 1% of the total supply of Bitcoin, might harbor aspirations to emerge as a new global leader.

The lack of an alternative equates to a lack of freedom. Being devoid of other choices and being compelled to conform to the existing state of affairs impedes societal development and technological advancement.

Conclusion

Saylor is a darling of many maximalists, actually just because he keeps buying BTC. However, his views differ in many ways from Satoshi's vision. To identify with Saylor is essentially to agree with the prohibition of competition and technological progress.

ETF approval must not be the final station for Bitcoin and other crypto projects. So should we resist approving, say, the Cardano ETF because it's not in line with Satoshi's vision? ETFs will simply be part of cryptocurrency adoption and there is no point in resisting it. Let all projects have the same conditions for success. Blockchain projects must compete with each other on a technological level. However, people should not become fighters for a particular project and turn it into a religion. People should choose a cryptocurrency like a car or an operating system. The preferred properties for a specific use should be the decision factor. The range is wide, from monetary properties to decentralization, cash flow, programmability, tokens, DID, security, etc.

It is sometimes said that Cardano will finish what Satoshi started. To a large extent, it can be perceived as such, as Cardano has a Nakamoto-style consensus, a capped number of coins, uses the UTxO model, and the scripts differ in many ways from Ethereum smart contracts. In addition, Cardano has ambitions to implement on-chain governance and have a project treasury, and the IOG team has a plan to significantly increase the scalability of L1.

But it's not just about the technology. Community is also an important aspect. People have to align themselves with the main point of view of the community and its ideals. In this regard, Saylor is a problem for the Bitcoin community, as not everyone shares his views. In any large community, a power struggle will begin and different groups will begin to differ in opinion. However, the community should remain attractive to new members.

Cardano is the existing proof that it is possible to achieve significantly higher decentralization in which literally every coin holder can participate. If the Ouroboros Leios can be delivered, it will be proof that it is possible to increase the scalability of the Nakamoto Consensus. The native assets feature is a beautiful example of how to have tokens in the UTxO model. The Plutus platform is proof of how to achieve a high level of programmability.

The Bitcoin community can take a lot of inspiration from Cardano. It is foolish to ignore technological progress, hope that no one notices it, or even demand that governments ban it. People are smart. They will appreciate technological progress sooner or later. The teams of several Cardano projects are trying to apply their experience with the UTxO model in the Bitcoin ecosystem. It is positive to see Bitcoin and Cardano starting to interconnect. Cardano can become a smart contract layer for Bitcoin.

There is no point in being a Bitcoin maximalist just as there is no point in being a Cardano maximalist, or an Ethereum maximalist. It is necessary to discuss problems and their solutions together. Market cap, ETFs, Wall Street, bans, and discouragement of using competing protocols are holding back the true adoption of cryptocurrencies. Saylor is harming the Bitcoin ecosystem and has no chance to stop competition or get governments to ban it.

Sometimes I come across the opinion that everyone just wants to speculate, so technological progress is irrelevant. It doesn't make sense, because the growth potential has to be exhausted at some point and it pays for everyone to speculate on something else, for example, a competing blockchain. The basis for stability and sustainability is direct network effect and utility. This cannot be achieved without the most suitable technology.

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