Why Bitcoin Transaction Capacity Doesn’t Really Matter
Jimmy Song

I enjoy your essays but I have a few little quibbles here and one big one, so let me focus on the big one. It’s a mistake to try to make Bitcoin a great store of value at the expense of its use as a medium of exchange. The reason is the third potential catastrophe you omit: getting Myspaced. In technical terms (ie, disregarding network effects), most cryptocoins have what it takes to be a good SoV, whereas being a good MoC is technically hard. If some other coin becomes materially easier-cheaper-faster-more reliable to spend & send than Bitcoin, its use will pick up. Enough MoC users will spur demand that pushes up the price. And once market cap and familiarity approach Bitcoin’s, what’s Bitcoin’s advantage? In the long term, the SoV crown will go to the coin(s) that builds the largest user base, and that means working well as a MoC.

This is not a theoretical point. 2 years ago Bitcoin had effectively no cryptocoin competition as either MoC or SoV. Now its usefulness as MoC is significantly degraded, and not coincidentially its dominance of the SoV (market cap) table, while still considerable, is reduced and shrinking.

In cryptography you can be happy that your proof is correct and your tool works. But when pioneering an industry it’s not enough that it works. You have to beat your competitors. Linus understood this, which is why Linux isn’t Minix. I worry that many Bitcoiners don’t.

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