How the Bitcoin/Cryptocurrency Community Lost Its Way, and How We Can Find It Again.
I begin with an allegory: In the Old Testament, Moses was the spiritual leader of the Israelites. According to scripture, he ascended Mount Sinai to speak with God, who gave him the 10 commandments.
But when Moses did not soon return from the mountain, the people became anxious and impatient. Disoriented, they constructed their own idols (including a golden calf), invented their own rituals, and turned away from God and his teachings, with dire repercussions.
The story of those starting with good intentions but inevitably losing their way repeats endlessly throughout history. And we’re no exception. The cryptocurrency community has already wandered far from the original ideals and vision held by the early (2009–2012) Bitcoin community.
The Original Bitcoin Whitepaper
Satoshi Nakamoto’s original paper, entitled Bitcoin: A Peer to Peer Electronic Cash System isn’t “scripture”, but it is a very powerful seminal document.
Those that understand and espouse the Bitcoin whitepaper are commonly attacked with out-of-context arguments such as:
- You must be engaging in an appeal-to-authority fallacy.
- Technology evolves. You are dogmatically clinging to the past, unwilling to assimilate the latest information.
Those attackers are usually missing the point on multiple levels.
One of the Greatest Inventions of All Time
Bitcoin is a monumental breakthrough of the highest order. The challenge of creating an electronic cash system that’s fully peer-to-peer, with no trusted third party is one that has befuddled the world’s greatest computer scientists, cryptographers, and economists for decades.
Like fire, or the wheel, you cannot really improve on the essence of a basic discovery. Some of the “improvements” to Bitcoin are as foolish and misguided as trying to improve the wheel by adding more angles, or improving fire by adding hot water.
Granted, there is obviously a difference between the basic idea of the blockchain and the implementation details. But what’s really important here? What’s the essence? It boils down to one simple thing:
Anyone can send money to anyone else in the world, quickly, cheaply, reliably, and without permission.
This one function is a nuclear explosion of value to the world. Even positive advancements in blockchain technology are relatively insignificant upgrades when compared to the quantum leap achieved by Bitcoin itself.
The Benefits of Bitcoin
Bitcoin, (and I’m talking about the peer to peer electronic cash system described in the Satoshi whitepaper) is light-years beyond government issued fiat money.
Governments can’t inflate it. Banks can’t confiscate it. Counterfeiters can’t copy it. Middlemen can’t exploit it, and thieves can’t burglarize it (if properly secured).
It’s cheap, fast and easy to move, store, hide, and transfer… plus its scarce, durable, divisible, and requires no one’s permission to use.
Bitcoin (BTC) vs. Bitcoin Cash (BCH)
The Great Scaling Debate of 2013–2017 is a tiresome affair that concluded with Bitcoin (BTC) soft-forking to enable a complicated and controversial modification known as Segregated Witness (“SegWit”).
The conclusion also birthed Bitcoin Cash (BCH) via a hard fork block size increase, a simple approach that was recommended by Satoshi and expected by the early bitcoin community.
The BCH fork follows the Satoshi whitepaper much more closely but the BTC fork has the majority of hashpower and most accumulated Proof-of-Work.
Bitcoin (BTC) has an artificially restricted capacity that only allows about 3–6 transactions per second, and has historically suffered from congested full blocks with out-of-control fees.
Bitcoin Cash (BCH) now supports about 100 transactions per second — well above peak demand and comparable with PayPal. Thus, transactions on BCH are fast, cheap, and reliable.
With a restricted capacity of 3–6 tx/sec, BTC cannot achieve widespread adoption, but its supporters hope to solve this problem with “second layer solutions” such the Lightning Network (LN).
LN is currently difficult to use and is still in development. It is unclear when exactly it would be able to fulfill its scaling promises.
But the timeline is just one concern. The real trouble with the Lightning Network is that it destroys the peer-to-peer, permissionless quality of Bitcoin.
Why the BTC crew would take such a hardline stance against any blocksize increase is a mystery. Perhaps incompetence, perhaps malice, perhaps both.
Just to put things in perspective, Bitcoin Cash currently allows 32MB blocks. The Gigablock testnet is attempting to run gigabyte blocks. The terab project claims that terabyte blocks are feasible both technically and economically, which is ONE MILLION times bigger than a megabyte.
Bitcoin Core refused to increase to even 2MB and has put all their faith in the Lightning Network roadmap — an unproven, nascent ‘solution’ which appears to incontrovertibly compromise the best properties Bitcoin has to offer.
The Larger Cryptoverse
Most people are unaware of what’s really going on between BTC and BCH. But the problem is bigger than that.
The early Bitcoin adopters were principled libertarians. Some have forgotten the original idea of Bitcoin, the great benefits, and just how awesome and world-changing it could be.
Those who joined the community later invariably have little scope of understanding or care for such things. They are opportunists who came to ride bull trends and generate profits. There’s nothing wrong with chasing opportunities, but is it any surprise there’s so many lost noobs and low-value ICOs?
Most projects have no legitimate need to create their own token. Moreover, there is little value in having 1000 different public blockchains. The value of Bitcoin and similar projects stems from having a network effect of a huge number of users.
Inevitably, as in any market, there will be a few big winners. Fortunes will be won and lost. The successful speculators will be those that invest in solid projects. The hype driven bubble of 2017 is over.
A Tale of Two Conferences
Last week, Coingeek.com held a conference in Hong Kong called “bComm” (blockchain commerce). Bitcoin Cash was at the heart of it for nearly every speaker.
No one can say with certainty that BCH will be a success. There is fierce competition from other blockchains.
But our hat is in the ring. We recognize what Bitcoin has to offer… what it really means to have a peer to peer electronic cash system. We’re focused, passionate, and positive. We’re aggressively building the ecosystem and growing adoption.
Contrast this to another conference that happened simultaneously in New York City: “Consensus 2018”.
Reviewing the agenda, we find topics such as “how governments use the technology”, “the token economy”, “layer 2”, “blockchain governance”, “enterprise investments”, “financial infrastructure”, and “the wall street digital gold rush”.
My impression? An uninspired blend of regulatory sycophants, institutional investors, and corporate opportunists… lost minions worshiping the golden calf.
Oh, and they didn’t even offer tickets for purchase in cryptocurrency.
Bitcoin’s Ultimate Incentive Alignment
One of the most incredible aspects of Bitcoin is that it aligns the intentions of opportunists with those who truly want to see a better world.
If everyone uses Bitcoin, then both groups win. The world gets peer to peer sound money, and the price will go to the moon. So what happened?
Well, the price did go to the moon in 2017. But it was mostly a speculative bubble. Actual usage plateaued, thanks to the blocksize limit.
Meanwhile, other projects grew. Many aware of the situation profited by making alternative investments. They were all too happy to see Bitcoin stagnate and become less competitive.
BTC has painted itself into a corner by refusing to scale the blockchain. If Bitcoin Cash (BCH) is a true contender to become a globally used payment system, the same incentive structure arises again.
Blockchain’s Killer App Is Still Money
So what happens now?
We as a community still haven’t capitalized on the original promise of Bitcoin. The “lie” is that we already have blockchain-based money and we now need to develop the next killer apps.
Sure, anyone is free to use a blockchain like BCH, but the real benefits will only come when the user base is large. That would have happened with BTC had it been allowed to grow, but so far, this hasn’t happened yet with any coin.
Like a modern day Tower of Babel, the cryptocurrency community has been splintered and scattered into 1000 blockchains. We can find our way to the promised land by re-uniting through a truly permissionless form of peer to peer electronic cash, perhaps Bitcoin Cash.