Don’t believe the ‘maximalists’: bitcoin can’t be separated from crypto

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If you have ever dared to direct crit­i­cism at the world of cryp­to, the chances are you will have received some charm­ing rebukes. You are like­ly to have been told to “have fun stay­ing poor” as you’re “nev­er gonna make it”; your crit­i­cisms have prob­a­bly been dis­missed as mere “FUD” (fear, uncer­tain­ty and doubt); and you may well have been informed that you are in fact noth­ing more than a “salty no-coiner”. 

But there is anoth­er slight­ly more sophis­ti­cat­ed flavour of counter-crit­i­cism find­ing its way into my inbox with increas­ing reg­u­lar­i­ty these days. It usu­al­ly starts with some­thing designed to appease — some kind of agree­ment that cryp­to is immoral, a scam, or some ver­sion of a Ponzi scheme. But then it quick­ly changes course, to explain that none of this applies to bitcoin. 

Bit­coin, the bit­coin­ers tell me, is not cryp­to. And, you under­stand, cryp­to bad, bit­coin good. Very very good. 

Bit­coin is a life­line for so many peo­ple around the world,” one altru­is­tic bit­coin hold­er said to me recent­ly. “Please stop lump­ing it in with cryp­to, which is moral­ly reprehensible.”

I recent­ly sug­gest­ed that one way of prac­tis­ing the art of “intel­lec­tu­al humil­i­ty” is to “steel­man” your oppo­nents’ posi­tion — that is, rather than find­ing their weak­est points and argu­ing against those, you present the strongest ver­sion of their argu­ment pos­si­ble. And so I’m going to try to apply this tech­nique here, before explain­ing why I believe they are wrong. 

Why do the “bit­coin max­i­mal­ists” — the purists who argue that bit­coin is the only cryp­tocur­ren­cy that has val­ue — make this claim? They state that the organ­ic way that bit­coin came into being can­not be repli­cat­ed and that, while bit­coin can be copied, it will always have a first-mover advan­tage and thus can­not be unseated. 

They point out, too, that there was no mar­ket for bit­coin when it was invent­ed, and so the net­work was main­tained not for prof­it but by peo­ple who believed in the val­ue of the sys­tem — unlike lat­er coins, some of which were issued by big cor­po­ra­tions. Bit­coin arose not as a way to make mon­ey, but out of a lib­er­tar­i­an inter­net sub­cul­ture that believed tech­nol­o­gy, specif­i­cal­ly cryp­tog­ra­phy, was key to dri­ving social and polit­i­cal change. 

Max­i­mal­ists also say that bitcoin’s incen­tive mech­a­nism, the ener­gy-inten­sive “proof of work” min­ing process that rival Ethereum just last week moved away from, is the only way of ensur­ing a tru­ly decen­tralised system. 

But while you can see why bit­coin­ers might be keen to dis­tance them­selves from the pletho­ra of scams and fail­ures that have occurred in cryp­toland, their argu­ments don’t stand up. 

First, it doesn’t mat­ter what bitcoin’s ori­gins were — the peo­ple who push it now have the same finan­cial incen­tives as those push­ing any oth­er cryp­to token. Satoshi Nakamo­to, the cre­ator of bit­coin, might have intend­ed it to be used as mon­ey, but that does not make it so — it ful­fils none of the nec­es­sary cri­te­ria, and instead oper­ates in a pyra­mid-shaped struc­ture that relies on con­stant­ly recruit­ing new members.

Sec­ond, bit­coin is not in fact decen­tralised — not only do min­ers group togeth­er to form “min­ing pools” but wealth is also huge­ly con­cen­trat­ed. On Tues­day, MicroS­trat­e­gy announced that it had bought anoth­er 301 bit­coins, mean­ing this com­pa­ny alone now holds almost 0.7 per cent of the entire supply. 

Third, a “first-mover advan­tage” does not always last. Oth­er cryp­to tokens already have var­i­ous fea­tures that bit­coin does not, and there has been renewed talk of a “flip­pen­ing”, in which Ethereum’s val­ue over­takes that of bit­coin due to the former’s switch to a less car­bon-inten­sive form of mining.

Final­ly, there is not even agree­ment on what bit­coin is. For the vast major­i­ty it is the dig­i­tal coin also known as “BTC”, cur­rent­ly chang­ing hands at around $19,000. But there are oth­er ver­sions that have split off, such as the one pro­mot­ed by Craig Wright, the man who claims to be Satoshi and who says BTC is a scam. 

The real rea­son bit­coin max­i­mal­ists want to sep­a­rate bit­coin from the rest of cryp­to is to cre­ate the illu­sion of scarci­ty in a world where there is none. Coin­Mar­ket­Cap now lists more than 21,000 dif­fer­ent cryp­to tokens, which bit­coin max­i­mal­ists call “shit­coins”. Of course they do — if there is infi­nite sup­ply, how can there be any val­ue? This is still the core prob­lem of cryp­to, and bit­coin can­not solve it.

This is not to say that there aren’t some cryp­to projects and tokens that are bet­ter than oth­ers. But a spade, no mat­ter how shiny, is still a spade. And bit­coin, I’m afraid, is still crypto.

jemima.kelly@ft.com

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