October 22, 2020

The road to Bitcoin maximalism

There are a few things I want to clarify right away. I somehow posted a tweet in which a simple mention of bitcoin maximalism caused a lot of emotions in people. In this article, I will explain how I came to Bitcoin Maximalism and what it means for me personally.

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But first, a few caveats:

  1. This is my personal story. I am not evaluating your point of view, I am not saying what is right and what is wrong, and I am not going to talk about any particular cryptocurrency.
  2. People understand Bitcoin maximalism in different ways. For me, the gist of it is that Bitcoin is money. This statement is the opposite of the idea that the Bitcoin blockchain should only perform the functions of the blockchain, that is, handle all decentralized settlements.
  3. I disagree with some ideas of maximalism, andthis is normal. The cryptosphere sometimes gets too ideological (especially on Twitter), but you don't have to completely agree or disagree with anyone. If you do not doubt everything that you are told, then you may not think critically enough. I believe that some Bitcoin maximalists are too radical and alienate those around them. But it's not for me to tell them how to behave.

Now let's continue.

I don't remember the exact date, but I'm interestedI started cryptocurrency around mid-2017, just a few months before the Bitcoin Cash fork. I remember talking with friends about the impact of the fork on the cryptocurrency world.

I've heard of Bitcoin before, but only as "money on the Internet." He practically didn’t interest me, so I don’t even remember when I first heard about him.

I will not dissemble. Like many young people in search of easy money, I began to take an interest in this area, primarily to earn money.

But it wasn't just the quick money that attracted me. I was intrigued by something, but what I realized only after a long time. It was this intrigue that made me descend deeper and deeper into the rabbit hole.

At that time, bitcoin had been in a bullish rally for a year and a half, and its price had risen from $ 200 to over $ 1000.

I had absolutely no knowledge in the field of economics, finance and investment. Besides, I had the lion's share of ignorance and over-optimism and believed in really stupid things.

I had no idea how the market worked and thought I would be making five times the profit ad infinitum. My mania lasted six months, and nothing could change my mood.

Overall I'm a curious person, so I triedto delve into the topic as much as possible: read articles, listen to podcasts and watch videos on YouTube. But finding rationality in an irrational market is almost impossible.

Everyone around quickly and simply "made money"so it was easy to fall into the trap - the loss of profit syndrome took possession of me. I felt like an idiot when friends and work colleagues received incredible income from investments in an incomprehensible ICO, and I did not.

It annoyed me how difficult it was to find reliable and reliable information about the crypto industry. So I created a website that collected the best resources on a variety of topics.

That's when I started doubting Bitcoin.

I've done enough research on its scalability issues, but I didn't get caught in the Bitcoin Cash ideology of "big blocks are better." However, I realized that Bitcoin has problems.

It seemed that new protocols were about to start emerging with faster transactions, lower fees, and infinite scalability.

When Bitcoin's blockchain began to delay processing for several hours due to the transaction queue, and fees exceeded $ 40, such alternatives began to make sense.

I agreed that Bitcoin could become the analogue of MySpace in the cryptosphere, that it would inevitably be replaced by a new, more technically advanced alternative.

I lost my faith in Bitcoin and was ready to sell all my savings.

After a few months, I decided to spend moredeep analysis of Bitcoin for publication on your website. I wanted to create a selection of the best honest and unbiased cryptocurrency reports so that people can make their own decisions.

But even six months later, I didn't see the end of Bitcoin's rabbit hole. I have a new thought.

This did not happen immediately, but the grain was sown just then.

The more I studied, the more I found evidence for my idea that Bitcoin is the only cryptocurrency that makes sense.

Why Bitcoin

I believe several factors play a key role.

1. Monetary policy

Bitcoin is the best money invented by humanity. I will write more about this in another article, since this idea cannot be revealed in a nutshell.

Suffice it to say for now that the two most important aspects of bitcoin's monetary policy are the fixed timeline for the creation of new bitcoins and the clearly limited supply of all bitcoins.

This means that in a few years, bitcoin will become the most scarce commodity that humans have ever produced. Therefore, bitcoin is the best way to store funds for a long time.

Opponents of bitcoin say that thiscryptocurrency is not suitable for payments. Now it really is. Bitcoin is slower than some other cryptocurrencies. It is not as easy to use as PayPal and a credit card. But now no one needs it.

The payment function will appear in due course.

Some people think that first you need to create a super-fast and easy-to-use currency, and then it will gain massive popularity.

But this is a mistake.

To use something as money, it must be authentically scarce, of value. Users must be confident that this money will have value in the future.

Gradually, the payment function will become more popular than the accumulation function. But value always has the highest priority.

Such a scheme works with all new money, and it is according to it that Bitcoin develops.

2. Decentralization + motivation

Bitcoin is the most decentralized cryptocurrency today in terms of nodes and miners. True decentralization motivates all participants in the system to be honest.

Checks and balance between the three groups of participants- miners, developers and users - can be compared to the relationship described in the US Constitution between the legislative, executive and judicial branches of government. They have other functions, but the principle of division of forces plays the main role for us.

No group can take over the other two.

The constitution is enforced by law, and the Bitcoin protocol by motivation.

Compare the motivation on the Bitcoin network with the motivation on most altcoin and ICO networks, where there is little to no decentralization and protocol security. Their success depends on a group of individuals.

In such an environment, motivation does not have a clear distribution in the system (according to game theory), and the main participants can simply run away with all the money, which constantly happens with many projects.

3. Security

Bitcoin hashrate is bigger than all otherscryptocurrencies combined. Therefore, Bitcoin is the most reliable digital system in existence. A hacker who manages to break the Bitcoin protocol will receive billions of dollars. But due to the large hashrate of Bitcoin, hacking is almost impossible.

Bitcoin became the first cryptocurrency in the world. It had an initial advantage in terms of hashrate.

Also, Bitcoin uses consensusproof-of-work (PoW), which requires miners to spend real resources - electricity - to keep the network safe. Bitcoin is the most secure system.

4. Network effects

Earlier I wrote about how I once considered Bitcoin to be the analogue of MySpace in the cryptosphere, that it would be overthrown by some Facebook.

This theory was flawed for two reasons:

  1. MySpace lost to Facebook mainly due to thethat it was bought by News Corp, which failed to manage social media. MySpace's failure is also linked to the child safety scandal in late 2006. It was he who raised Facebook's rating, not technical glitches.
  2. Bitcoin and social media depend on digitaleffects. Each new user increases the usefulness of the network to the rest of its members through a positive feedback loop. However, some of the network effects of Bitcoin are different.

During the competition, social networks offeredalmost the same functionality. Therefore, users chose the social network in which their friends were sitting. They did not make a choice in favor of any functions, so the costs of switching to another social network were low.

When MySpace started having problems, users could easily switch to Facebook without losing anything. The more people left, the easier it was for the rest to go.

Bitcoin has different network effects.

Bitcoin has the same network effects as social media - the more buyers and sellers there are in the system, the easier it is for users to buy and sell. But Bitcoin has other network effects as well.

Miners spend millions of dollars on hardwaresoftware designed specifically for Bitcoin. Therefore, they are extremely interested in staying online and recouping the cost of technology. The more miners in the network, the higher its protection. And the higher the protection, the more people want to use the network, which creates another feedback loop.

In addition, make changes to the protocol withopen source isn't easy. Therefore, by choosing one protocol, users abandon all others. Anyone can copy the Bitcoin code and try to make their own system, but so far no such project has been successful (e.g. Bitcoin Cash, SV, Gold, etc.) and most likely will not.

There are only two ways to change Bitcoin: suggest a code update and reach consensus, or start from scratch. If you start over from the beginning, the system will lose all accumulated network effects. In order to lure users away, a new competitor must have significant advantages over Bitcoin.

Bitcoin has too many upsides and the transition to another network takes too much effort to compare Bitcoin to MySpace. Bitcoin will live.

Variety of Bitcoin Maximalists

Bitcoin maximalists consider themselves to be people of completely different views.

First talked about bitcoin maximalismEthereum creator Vitalik Buterin. He called those who were only interested in Bitcoin. Since then, this term has been used both in a positive and negative sense, and maximalists adjust it to suit their interests.

Some maximalists are just ridiculouswhile others believe that maximalism means giving up the practicality of all other cryptocurrencies, but many people react to bitcoin maximalism in a rather primitive way.

Both sides of the discussion are showing their worst sides.

Just hours after Iposted a tweet saying that I consider Bitcoin to be the only decent cryptocurrency, I was accused of being brainwashed, narrow-minded, being in an echo chamber, in a cult, being a victim of propaganda and radicalization.

I am writing about this not to complain, but to emphasize how much emotion this topic evokes.

It seems that many cryptocurrenciesInvestors react negatively to Bitcoin maximalism because they have incurred huge sunk costs (in the form of money and energy spent), so it is easier for them to turn away from such thoughts.

I am sure that many maximalists do the same: they leave projects with potential due to cognitive biases associated with betting on Bitcoin.

At all times, a person has difficulty in thinking clearly, rationally and discerningly. The situation gets worse when large sums of money are at stake.

Self-righteousness allows a personexpect big accomplishments, so we try to hold on to our beliefs even harder and tell ourselves that we have all the answers. But this approach creates a minimum of inconvenience.

People prefer a sense of security to insecurity and doubt. The simplest thing is not to challenge yourself.

The feeling of self-righteousness is incredibly pleasant, because a person considers himself the smartest and he does not need to prove something to others.

I struggle with this feeling all the time.

However, I believe that many Bitcoin maximalists have arrived at their conclusions despite the tendency to hold on to beliefs stronger.

To fully understand Bitcoin (if at allperhaps), you need to do serious work, study a large number of different disciplines, from economics and finance, computer science and cryptography to world history and sociology.

There's an incredible amount of information to digest. From my own experience I know that a single picture begins to form highly slow.

But if you manage to absorb such a volume of information, then most likely you will collect it not from one source, but will study different points of view.

This approach helps to form your own view of things, and not just spoon-feed one or two biased YouTubers.

I do not believe that all maximalists have exceptional rationality, are omniscient and can see the future.

But I'm sure that through a sincere desirefinding unbiased sources of information and the desire to get to the roots of all problems, a person is likely to come to the conviction that Bitcoin, or almost only Bitcoin, is the only cryptocurrency worthwhile.

Here's what I think about Bitcoin Maximalism.

I do not believe that all other cryptocurrenciesdisappear. Perhaps there will be more than one winner. There are different types of cryptocurrencies in the Pareto distribution. Bitcoin can take up 80%, while other currencies like Litecoin, Monero, etc. take the remaining 20%.

I doubt that even non-monetary cryptocurrencieswill exist for a long time. Blockchains need a token to motivate users to secure the network and come to consensus. A token, be it Ethereum, IOTA, EOS, or another non-monetary cryptocurrency, needs good monetary policy.

If a token has a non-fixed emission schedule or its creators can influence its monetary policy, then its ecosystem is unreliable.

Of course, these are just reflections on the topic, and I'm still puzzling over this question.

Only time will tell how things really are.

One thing is clear: we are living in one of the most serious shifts in history. The events of the next 10-20 years could affect hundreds of years of the future.

To prepare for such a journey, you need to arm yourself with as much knowledge and wisdom as possible.

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