What Could’ve ฿een

When I read the Bitcoin whitepaper sometime in early 2013, Bitcoin fever had already struck in Silicon Valley. My thought at the time was that the technology was incredibly interesting distributed systems technology, but that what Satoshi had gotten wrong was what his technology would be used for.

I assumed at the time—and continue to believe—that while Satoshi had succeeded in building a fascinating digital asset/ledger/protocol, the prescription of the technology as a currency was a mistake that would look obvious as interesting use cases emerged.

I was a newly minted VC at the time, and I began to talk to Bitcoin companies. While I invested in a couple companies in the space (Tradehill, BTCJam), I was generally bored by companies that looked more like religions than businesses. I joked at the time with friends that my first question for any bitcoin company was, “how do you feel about the Fed.”

Over time this first wave of currency companies came and went, and I would argue that entrepreneurs and venture capitalists have realized that there just aren’t many businesses to be build around expensive-to-transact e-gold. Most of the excitement, as far as I can tell, has rightly moved to “blockchain companies.” The world only needs so many new commodity exchanges.

Which brings us up to today.

I’ve been watching with some interest developments in Ethereum. While I see some issues with ICOs and the technology is immature, I am a believer that there’s potential to create new kinds of distributed networks on blockchains and that project has the right focus. This is a frontier tech mentality.

I highly recommend listening to this interview with Olaf Carlson-Wee for hist take on “digital assets” and how they’re investing at Polychain. I tend to share much of his perspective on what’s exciting in the space.

By contrast, take a listen to this discussion around Bitcoin’s scaling problems and what should be done about them. I think Jeff Garzik’s perspective is quite reflective of where I think the broader community is at.

To be clear, Jeff is smart and thoughtful and I don’t meant to pick on him. His position is completely reasonable. But as he discussed the case against SegWit, and concerns around both the years of vetting the technology would require and the risks to the economics of Bitcoin (apologies if I’ve mischaracterized, please listen yourself), I could not help but be struck by the sense of conservation. E-gold *is* the killer app, it’s already happened, and now they just need to keep it from collapsing.

I see this as the legacy of Satoshi and wonder what might have been had he called Bitcoin a digital asset or commodity (descriptive) vs a currency (prescriptive). Perhaps calling it a currency was necessary to get any adoption at all, but I am more and more convinced that calling Bitcoin a currency has directly led to a community that sees Bitcoin as a successful-but-as-yet-not-fully-adopted currency, as opposed to a promising-but-yet-proven distributed systems technology.

I now believe that this is quite possibly the only path for Bitcoin. Perhaps it will become a digital gold, valuable because its valuable. This is entirely possible. It has a small market cap relative to gold, and this is not unprecedented. The great irony here being that this is entirely a faith-based exercise, completely detached from any fundementals that might drive intrinsic value, much like the fiat currencies community members often disparage.

Meanwhile, I can’t help but wonder if experimentation on the frontier may lead to a different outcome. While the Bitcoin community more and more loudly attacks the insecurity and experimentation of the Ethereum network (et al), these communities seem to implicitly acknowledge that mistakes are cheap when 99.9% of the value will be created in the future.

So while Bitcoin advocates point out that the network is currently the most mature in terms of code and secure by virtue of the compute power dedicated to it, I tend to think that this advantage is illusory. We are one killer app away from an alternate network exploding in popularity and driving both hardening of code and growth in network compute. What would happen in this event?

That may be messy and as we saw with the DAO, it may result in some tears along the way. But every new idea tried on alternate blockchains that can’t be tried on the Bitcoin network is one more opportunity for Bitcoin to become the good idea that came before the right idea.