Bitcoin maximalism against cryptocurrency

Let us continue with the second major problem of Bitcoin, which is its lack of confidentiality. In Bitcoin, the transaction register is not anonymous, but pseudonym: bitcoins are transferred between public addresses held by users, so that in principle we cannot know what belongs what. However, because of the multiplication of identification procedures (KYC/AML) by exchange platforms and chain analysis (notably carried out by Chainalysis), this relative confidentiality is clearly called into question, and this as much as the bad portability of Bitcoin pushes people to go through third -party services.

The avalanche blockchain under fire of criticism

The Crypto Leaks site has published a file noting that the team behind the Blockchain Avalanche (Avx) would have concluded an agreement with a business lawyer, Kyle Roche. The latter would have been responsible for attacking competitors’ projects in the blockchain.

The Crypto Leaks file offers around thirty video extracts. In the files, we see the business lawyer, Kyle Roche, filmed without his knowledge, discuss with interlocutors presented by the source as members of Ava Labs.

People appearing in the videos would have concluded a “secret pact” with the lawyer to benefit from legal services promising to put Avalanche opponents in difficulty in difficulty. In exchange, the lawyer would have received a certain amount of AVAX token and Ava Labs shares. Note that AVA LABS oversees community management and the development of AVAX.

Latest news, Ava Labs and the law firm have denied their involvement in this secret pact. According to them, this rumor would aim to attack rival crypto projects and harm the industry. Coimarketcap reports that the founder of Ava Labs, Emin Gün Siress, described the publication of the site as a “Cymnious items” on a website “Not recommendable”. He pointed out that his blockchain company has never “Directed Roche [law firm] in its selection of cases”, and that the cabinet is completely independent. For the little anecdote, Emin Gün Siress, is the face at the origin of the proof-of-work, proof of work in French. To find out more about this blockchain blockchain validation validation system, it’s here.

Following these revelations, the price of the avalanche fell to reach 19.43 euros. The Avx token first lost 11% yesterday, then the cryptocurrency resumed more than 10% today.

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Bitcoin maximalism against cryptocurrency

THE Bitcoin maximalism is a moral doctrine considering that Bitcoin is the only viable cryptocurrency system, that he must occupy a monopoly position in the cryptochuric sphere, and which therefore aims to discourage the formation and development of alternative cryptocurrencies, in particular by the repeated attack on other projects on social networks.

In the previous article, We have seen that this doctrine was based on the fact that Bitcoin formed a complex economic system, whose security and monetary qualities depended on its financial health, and that it was therefore highly desirable that the dominance of Bitcoin was the greatest possible. We have thus observed that the maximalists presented themselves as the cells of the Bitcoin immune system, whose duty was to culturally regulate the community and to repel social attacks from other actors.

Today we are going to examine the reasons why this doctrine is wrong, both from a monetary and technical point of view, and why it has a negative impact on the ecosystem.

Note that in this article we will talk about Bitcoin as a currency intended to be used by all, a world peer-to-world-peer money, which is the position generally adopted by the maximalists, especially when they describe the upcoming advent of Bitcoin certainty. It would be possible to adopt a more prudent position considering that Bitcoin is technically limited and that it will never reach generalized use (“Bitcoin is what it is”), but this is not the subject here.

Is Bitcoin unbeatable ?

It is common for maximalists to present bitcoin as the king of cryptocurrencies who will remain dominant because of his network. However, this network effect is not as powerful today as it seems to be and Bitcoin is in my opinion not unbeatable, although he may keep his position for some time.

First of all, the clear symptom of the fragility of the Bitcoin network effect is the existence of maximalism itself : If Bitcoin was not endangered by his competition, the maximalists would simply not exist. We have also already noticed that maximalism had initially developed between 2014 and 2015 when the Bitcoin price was at the lowest and its network effect was starting to weaken.

Then it should be noted that the ecosystem of cryptocurrencies is still tiny From a financial point of view if we compare it to currencies fiat Or to gold: its current market capitalization is $ 250 billion, far from 15,000 billion of the M3 money mass of the dollar and the 7500 billion of the value of global gold stock. In addition, this financial value must be considered with caution since it is mainly resulting from speculation around an emerging technology, and not from the effective use of this technology. This means that nothing has yet been established and that there can still be quite fast reversals.

Maximalists like to compare Bitcoin to the Internet because the sequence of TCP/IP protocols was the first in this way to see the light of day and was able to become a standard thanks to this advantage, despite the tough competition from the OSI model launched later. But it is not necessary to generalize and there are many counterexamples to the advantage of the precursor: French has long occupied the status of international diplomatic language before falling into disuse in favor of English; Google was not the first search engine; Facebook has supplanted MySpace as a social network, etc.

Finally, and this is undoubtedly the most important reason, the fact is that Bitcoin has major faults and that we cannot remedy it. Indeed, the bitcoin of the maximalists will not be able to change significantly because of their absence of compromise 1: if Bitcoin changed without their approval, then he would become, according to their terminology, an alternative cryptocurrency. Thus, this resistance to change makes obsolete the main argument that could be made in favor of the existence of a single cryptocurrency, namely the fact that it can integrate all the improvements of its competitors since everything is in open source.

Bitcoin is a bad currency

According to the maximalists, bitcoin is a healthy currency, a currency freely chosen by the market which is immune to state interference. But for it to be chosen by people, Bitcoin should have the qualities of a good currency. However, it is not the case.

Mint is the intermediary of exchange par excellence. What makes a good used as a currency is called its stopping (German Absatzfähigkeit, Translated into English by Saleability Or salarity), that is to say the ease with which this property can be exchanged on the market As soon as its holder wishes and by incurring the least loss of value as possible. This concept, described in 1892 by Carl Menger in his test On the Origin of Money, is therefore close to the concept of liquidity, which means that many people define currency as The most liquid good : This is why we talk about “liquid money” in French.

A good currency must have a high termination which adapts to the circumstances of economic exchanges. First, the currency must be transferable through space: it must be portable, that is to say that the energy or the cost to move it must be less. Then, its termination also needs to be done in time: the value of the currency must be stable and for that it must be sustainable And rare. Finally, the currency must have a cessability which adjusts to the scale: the property used must be divisible And fungible, That is to say, it must be possible to divide it into small units and that one should not discern one unit of another. This triple adaptation to space, time and scale is found in the three functions of money: intermediary in exchanges, reserve of value and unit of account.

The problem is that the maximalists, and unfortunately many bitcoiners, tend to focus on Bitcoin value reserve function, which comes in particular from its sustainability and its rarity, while neglecting its other functions. Strangely enough, they imagine that the currency first acquires its status as a reserve of value and then become an intermediary in the exchanges and finally a unit of account.

In this, they forget that the currency, whose unique role is to serve as an indirect means of exchange on the market, obtains its status as money 2, not by acquiring each of these functions individually, but rather in a simultaneous and progressive way , the three functions complement each other. As writes Ludwig von puts in his Theory of money and credit Published in 1912:

Mint is a property whose economic function is to facilitate the reciprocal exchanges of goods and services. [. ] [Its secondary functions] can all be deducted from the role of money as a common means of exchange.

The means of exchange function is therefore inseparable from the value reserve function, and this is the reason why most people save their wealth in fiat currency despite inflation: because they can have direct access , immediate and friction to other goods and services. This is all the more true for Bitcoin which, unlike gold, has (almost) no non -monetary value, and therefore depends on its exchange function to keep its price.

Thus, to become the healthy currency so much rented, bitcoin should not only be a rare and unbeatable good, but it must also have a problem that adapts well to space and scale, things that make it sorely default.

The two Bitcoin problems

Bitcoin suffers from intrinsic problems which have harmful consequences on its nature of monetary system. In particular, two major problems impact Bitcoin: its lack of portability, which is characterized by transaction costs and high confirmation times, and its lack of fungibility, resulting from the low confidentiality of its channel.

The first major problem of Bitcoin is its lack of portability which is directly linked to the problems of passing on the scale of its protocol. As we have seen in the previous article, the transactional capacity of the network is artificially limited by a limit size of the blocks in order to preserve a maximum decentralization of the network. This limitation has caused periodic congestion of the Bitcoin network since 2017: transactions awaiting confirmation accumulate in the memory area of ​​nodes (” mempool ), Which increases the transaction costs by a successive auction phenomenon. Users are then forced to wait for congestion to pass (which can take several days), or to pay larger costs for their transaction to be confirmed.

This quota phenomenon is seen as necessary by the maximalists: for them, it contributes to creating a fees To pay for Bitcoin safety. But it has the consequence of considerably lessen the portability of Bitcoin, especially during periods of speculative enthusiasm as in December 2017 when median transaction costs reached $ 30, or in last summer when they exceeded $ 3.

The maximalists tend to believe that the scalability problem will be solved by (miracles) solutions as the Lightning network and the side chains, but in my opinion it will not be sufficient. First, these solutions have their own faults and limitations: the Ligthning network for example, has inherent problems of safety, scalability and liquidity. Then, since the growth of the costs will make the block of blocks unusable for many people, the decentralization of these upper layers will be considerably impacted by the economic impossibility of returning to the basic layer. Thus, without an increase in the transactional capacity of the Bitcoin protocol as recommended Thaddeus Dryja (one of the Co-Conceptors of the Lightning network), the lack of portability of Bitcoin could last.

Let us continue with the second major problem of Bitcoin, which is its lack of confidentiality. In Bitcoin, the transaction register is not anonymous, but pseudonym: bitcoins are transferred between public addresses held by users, so that in principle we cannot know what belongs what. However, because of the multiplication of identification procedures (KYC/AML) by exchange platforms and chain analysis (notably carried out by Chainalysis), this relative confidentiality is clearly called into question, and this as much as the bad portability of Bitcoin pushes people to go through third -party services.

There is a method of anonymization directly applicable on Bitcoin: it is the Parts mixture (called Corner) which allows users to blur the tracks by sending their funds to a common transaction. But Bitcoin scalability problems could make this method quite unreliable and very expensive for small amounts, which contrasts directly with the massive use made by Dash (Private) or by Bitcoin Cash (Cashshuffer), cryptocurrencies offering low costs in an almost permanent manner. In addition, other protocols have better confidentiality by exploiting cryptographic techniques: ZCASH uses evidence with zero knowledge disclosure to increase the opacity of certain transactions, and Monero is based, among other things, on circle signatures to obtain A high level of general anonymity.

To return to monetary characteristics, this lack of confidentiality directly impacts the fungibility bitcoin. Indeed, the absence of anonymity makes it possible to differentiate the parts of Bitcoin and to assign them distinct values. Witness in particular the development of the trade of “virgins bitcoins”, that is to say freshly mined bitcoins, not being “salis” by illegal transactions and which would sell 20 % above the market price. This lack of fungibility poses an important problem for a property that wants to be a currency: to accept bitcoin, the merchant should first ensure that the paid bitcoins are not stolen or have not been involved in criminal cases, this which would deeply increase the exchanges. Worse: if a state banned Bitcoins detention or threatened to do so, insufficient confidentiality would impact all the more the termination of bitcoin in the country concerned.

Finally, as to whether bitcoin is the only one who can be sustainable and rare, and if other cryptocurrencies cannot reach the same degree of immutability, this is an open question in my opinion. As has been said in the previous article, the possibility of running a node of the network and the deflationary monetary policy of Bitcoin are guaranteed by the unalterability of consensus rules, and this unalterability is guaranteed by a Strong cultural standard, A schelling point whose maximalists are the first defenders (“Any attempt to change Bitcoin is a scam ! »). To this, I will reply that the cultural standard defended by the community may not concern all the rules in the same way: certain aspects of the protocol, whose monetary policy, would be maintained by the absence of compromises, while others, Like the limit size of the blocks, could be less well defined and depend on technological advances. Thus, in my opinion cannot be excluded the possibility that, over time, other cryptocurrencies can become good reserves of value.

Whatever the other cryptocurrencies, the bitcoin of the maximalists is far from constituting the ideal currency that they are constantly praising, and its almost absolute rigidity in the face of change, which gives it its current strength, could become, in the long term , the largest of its weaknesses.

Other uses of distributed registers

Cryptocurrency is not that currency, and the use that can be made of a cryptocurical protocol is not limited to the simple transfer of value. Indeed, two other categories of uses exist: Notarial use, That is to say the guarantee of data authenticity, and “contractual” use passing through Autonomous contracts (Smart Contracts), that is to say computer programs whose execution is done through a chain of blocks and therefore does not require the intervention of a trusted third party. It is the creation of Bitcoin which, by providing a register deemed unchanging and a possibility of programming the currency, allowed these additional uses to see the light of day.

However, Bitcoin is necessarily limited, in particular by its security model which requires that the size of the data and the number of operations remain low enough. This is why we have seen other protocols, making other compromises and having different security models, specializing in these uses. Ethereum is undoubtedly the best example: the ether has indeed been created in order to serve mainly as a fuel to the platform (Vitalik Buterin speaks of ” cryptofty »), And no real currency like Bitcoin. Notary and contractual uses being less sensitive than money, Ethereum can afford to be less decentralized and more flexible than Bitcoin.

Satoshi Nakamoto himself was not hostile to this idea, and, in one of his last messages in December 2010, he had given his opinion on the Bitdns project, which was going to become Namecoin in 2011:

Stacking all quorum systems by proof of work in a single database does not go to scale. Bitcoin and bitdns can be used separately. [. ] Networks need to have different destinies. BitDNS users could be completely tolerant of the addition of features to process bulky data since few domain name registrars would be necessary, while Bitcoin users could become more and more sectarian to About the limitation of the size of the chain so that its access remains easy for many users and for small devices.

But this is not the opinion of the maximalists who reject all the cryptocurical models other than Bitcoin, and therefore make an uncompromising criticism of the “technology blockchain », The term used by the media to designate all consensus technologies on distributed systems. In fact, they are so inflexible that they have managed to transform the fallacious motto ” Blockchain not bitcoin “, Popularized by Blythe Masters in 2015, in the opposite proposal which is even more surreal:” Bitcoin Not Blockchain »». Indeed, according to their doctrine, the only use one can make of a chain of blocks is monetary use, and the only chain able to achieve it is that of Bitcoin. This is why many maximalists go so far as to insult Andreas Antonopoulos, convinced bitcoiner, famous speaker and author of Mastering Bitcoin, which shares the vision of a varied ecosystem and which supports Ethereum.

It is hard to judge the relevance of Ethereum, but everything indicates that its use is doomed to grow and that ether will retain its long -term value. Like Bitcoin, Ethereum enjoys a network effect as a precursor in its category, which gives it a significant advantage compared to other platforms of the same type, despite its changing and hazardous nature.

Thus, in the future, it is likely that we will see a diversity of protocols of registers distributed to emerge, and that each of them will have their own compromises to best adapt to the targeted use.

Maximalism is toxic tribalism

Maximalism is a toxic tribalism that seeks to crush alternative cryptocurrencies to bitcoin. The maximalists seem to have become the ideological leaders of the Bitcoin community and, like missionaries in charge of spreading the good news, they disseminate their propaganda wherever they can: on social networks, in the most general media and even in Children’s books 4 !

Among their practices, we find the injunction to accumulate bitcoins, which most often materializes by the repetition of short sentences in English as ” Buy Bitcoin “(Buy bitcoin) or” Stack Sats »(Pile up the Satoshis) and by the development of the Bitcoin value reserve function. And when the price of this “value reserve” collapses with the volatility we know it, these are the expressions ” BUY THE DIP “(Buy the drop) and” Hodl 5 »that come out. The reality is that this injunction contributes directly to the valuation of bitcoin, therefore to the health of the whole system, and that this is why the maximalists call for the accumulation as much. Moreover, one of the four truths of Giacomo Zucco that I mentioned in the first article, was that “any attempt to push someone to spend bitcoin [was] a scam”, who implies that the one who spends his bitcoins would give them to someone else who could sell them at low prices and lower the lesson.

But the most detestable practice of maximalists is undoubtedly Free attack on different cryptocurrencies and against the services that accept these other cryptocurrencies like Coinbase and Bitpay. Firstly, this attitude is directly harmful inside the ecosystem (people invested in “without interest” projects will not return to Bitcoin because a maximalist told them that they were shitcoiners, On the contrary), and even within the Bitcoin community. Secondly, it gives an execrable image of bitcoin and cryptocurrencies outside our microcosm: the maximalists make bitcoiners appear like sectarian and closed people, speculators interested only by the price (” Number Go Up ), Which constantly repeat that bitcoin is a digital gold that should not move, which clearly dissuades the arrival of new users wishing to use it as a means of payment.

Thus, this tribalism of the maximalists directly harms the concept of peer-to peer-to-peer cash which is supposed to represent Bitcoin. In other words, Maximalism is toxic to cryptocurrency. To cite the words of Ferdous Bhai, a bitcoiner deeply annoyed by maximalism:

If we continue to keep users away by taking extreme and absurd positions, then the Bitcoin network effect will stop growing, and alternative currencies with a healthier ecosystem will end up winning. [. ] I want to see Bitcoin win, and I will continue to build and support companies that make Bitcoin better, stronger and more accessible. In this process, we must never lose sight of our goal. Bitcoin is not the final objective; It is a way to achieve the objective of a denationalized currency, without permission and resistant to censorship, that we can choose to use or not use voluntarily, without coercion, social engineering or threat of violence.

The coexistence of cryptocurrencies

Maximalism is therefore an ideology defending a monopoly of bitcoin in the cryptocurrency ecosystem, through continual propaganda aimed at strengthening the Bitcoin network effect. For maximalists, the coexistence of cryptocurical systems seems not only useless but deeply harmful to Bitcoin. However, as we have seen here, Bitcoin is not the healthy currency so much rented and Bitcoin is not a good platform adapted to all uses, and it is therefore inevitable that competitors appear.

Bitcoin-BTC represents the most conservative protocol of the ecosystem: because of the ossification phenomenon, it is very hard to integrate new features, and when it is done all the same, the process is slow and painful, which is not necessarily a bad thing. The problem is that the maximalists are continuously haraling that Bitcoin is the only viable cryptocurrency system and that all the others are doomed to disappear. In this, they seem to neglect the Hayekian notion of the competition as a discovery process. The ecosystem is indeed still emerging and all cryptocurical protocols, including Bitcoin, can still be qualified as uncertain experiences. It is therefore very reasonable to think that the peaceful coexistence of the different systems is beneficial for cryptocurrency in general, in the sense that better models could be discovered and where the errors of certain protocols would give indications on what should not TO DO.

In addition, it is possible that in the long term the possibility of accessing live exchange rates and being able to exchange a cryptocurrency for another in an almost instantaneous and decentralized manner (atomic exchanges, interoperability), could maintain a coexistence of cryptocurrencies having different characteristics. Just as silver was used alongside gold for centuries because of the latter’s divisibility problem, various systems could develop in parallel with Bitcoin to compensate for its potential defects.

At any rate, We all continue the same ideal of monetary freedom and disinterest of the financial system. Rather than attacking the alternatives to Bitcoin constantly, passionate bitcoineurs would better concentrate calmly on their cryptocurrency, or even encourage the use of cryptocurrencies in general. The idea is not to fall into the opposite excess: there are certainly digital tokens without interest which are supported and sold by dishonest and fraudulent people. But it would be profitable to communicate in a benevolent and argued way rather than adopt a toxic and sterile attitude.

Finally, like Satoshi Nakamoto when it was still active, we should behave in an exemplary way so that future contributors and users see in us models to imitate and that they too work at the boom free currency.

Notes

1. ↑ The only changes in the protocol tolerated by the maximalists are the retrocmpatible modifications which restrict the rules of consensus, which are improperly called Soft Forks. These modifications are upgrades of the protocol which do not oblige non -mining nodes and other infrastructures to update, which thus makes it possible to keep the Bitcoin network effect. However, all soft forks are not acceptable because it is technically possible to change the monetary policy of Bitcoin or to increase transactional capacity by this method of update. To find out more, you can read My article on this subject.

2. ↑ The currency does not really have a status, and there is no clear distinction between a currency and a non-money. According to Hayek in For real competition from currencies ::

What we observe is much more a continuum in which goods with different degrees of liquidity, or whose values ​​fluctuate independently of each other, partially merge by the degree they can be used as a currency.

This is how we can consider that there are a multitude of currencies (called “currencies” by some), and that cryptocurrencies can be designated under this name in the sense that they actually serve as an exchange intermediary within their respective communities, although their liquidity is very below that of traditional currencies.

3. ↑ Since the activation of Segwit, the size limited by the protocol is the weight of the blocks, which cannot exceed 4 million units. This limit theoretically authorizes the actual size of the blocks to approach 4 MB, but in practice it would rather be around 2 MB in the best of cases. The graph below shows the evolution of the average weight of the blocks between 2013 and 2019, calculated retrospectively. The congestion of the network generally takes place during periods when the weight of the blocks reaches the limit of 4 million units repeatedly.

4. ↑ Bitcoin Money: A Tale of Bitville Discovering good money is a small book written by Michael Caras which tells the appearance of money within a childhood society and which praises Bitcoin. Towards the end of the book, children create their own copies of Bitcoin, presented very caricaturedly as currencies that ask to trust the people who created them, like the currencies fiat.

5. ↑ “Hodl” is a spelling deformation of the word ” hold “Which means here” keep [your bitcoins], do not sell “. This meme comes at the origin of a user of the BitcoinTalk forum who had, probably tricky, created a subject entitled “I am Hodling” following a drop in the course to explain that it was a bad trainer and that he had to change his strategy. Five years later, questioned by Coindesk, this man declared that he was disappointed with what his expression had become. To quote it:

I like Bitcoin himself but I am not particularly a Bitcoin maximalist. [. ] The reason why Bitcoin had value, in my opinion, was because it was a currency escaping from the borders, a currency that could be transferred between any two people, at any time and for almost no fees.

Sources

Friedrich Hayek, For real competition from currencies (The Dationalization of Money), October 1976.
Vitalik Buterin, We bitcoin maximalism, and currency and platform network effects, November 19, 2014.
Saifdean Ammous, The Bitcoin Standard: The Decentralized Alternative To Central Banking, March 2018.
Sal the agorist, The Economics of BTC Maximalism, August 25, 2019.
Arthur Breitman, We supply Caps, September 2, 2019.