Who Cares About Bitcoin Maximalism – Bitcoin Magazine

On Aug 28, 2022

This is an opinion editorial by Shinobi, a self-taught educator in the Bitcoin space and tech-oriented Bitcoin podcast host.

What is Bitcoin Maximalism? People will not stop asking this question, either to defend it as a virtuous label, or to attack it as a symbol of everything wrong and rotten in this ecosystem. This question is as meaningless in my opinion as asking:

“What is a liberal?”
“What is a conservative?”
“What is a Christian?”

No one is going to have the same definition, or same notion. Those labels will always mean completely different things to different people. They will be associated with different identities, different behaviors, different morals and values. No matter what a dictionary or definition says in the strict sense, there will never be consensus around them.

It is completely and utterly meaningless in a discussion on a topic like this to fixate so much on labels, attempting to universally apply them to everyone, instead of focusing on the actual conceptual core of the conversation. The root of this issue has nothing whatsoever to do with labels, and everything to do with behaviors. So let’s talk about the behaviors.

One of the core behaviors commonly associated with Maximalism is a focus on bitcoin. Bitcoin is the longest running project in this ecosystem. It is the most sound system compared to everything developed thus far, and is extremely conservative in its approach to changes and upgrades. While everything in this space in terms of assets is highly speculative in nature, bitcoin is the one with the longest running and most consistent market performance, and has maintained the top spot in terms of overall market value through the entire history of every asset in this space. Approaching things from this reality, focusing on bitcoin above all other assets in this ecosystem is a perfectly rational financial decision. Yes, like everything else, it is still speculation to invest in bitcoin, but in terms of the financial risk that entails Bitcoin is the least volatile asset trading in this space. Most people are not day traders, they are not financial experts, and the further away from bitcoin you go in terms of investments the more skill and understanding of those activities is required to not burn yourself. The vast majority of projects in this space have their one blow-off market pump, crash and then do not recover. There is absolutely nothing wrong or toxic with sticking to bitcoin given that reality, and attempting to inform people of that reality is in no way unethical.

Another core behavior is the criticism of other technologies in this space, particularly with the goal of demonstrating a lack of decentralization, or more specifically misrepresentation of the degree to which something is decentralized. Bitcoin is the only system in this space that has demonstrably shown an extreme degree of decentralization. It has fought off numerous attempts by developers to alter the core of the system, as shown when Mike Hearn and Gavin Andresen were still involved and pushing for block size increases to an extreme. It fought off the later attempt by most of the major corporations involved in the New York Agreement/UASF debacle to do the same thing. It survived the implosion of the only sizable exchange when Mt. Gox went under, the Bitfinex hack, the bust of Silk Road and even massive nation states like China slowly creeping towards banning it, culminating in restricting all mining activities. Bitcoin has stood strong and continued functioning in the face of everything thrown at it so far.

Contrast this with platforms like Ethereum. The DAO was launched as the first massive experiment in decentralized coordination of financial activity on the platform, with the promise “code is law.” This blew up in their faces due to poor engineering that allowed funds locked in the DAO contract to be drained by what were supposed to be unauthorized users. The code however allowed it, the “law” as it were.

In response to this the Ethereum Foundation and development team enacted a fork to walk back what legitimately occurred according to the rules of the system on the blockchain. Specifically, they did this because of a conflict of interest in the form of many people associated with them being invested in the DAO and losing money. They have multiple times forked to push forward the difficulty bomb, a feature that makes it more and more difficult to mine until its effectively impossible, a feature specifically implemented to force them to switch to proof-of-stake. They have forked to alter the economic issuance policy. The development plan has pivoted drastically more times than I can count based solely on Vitalik Buterin’s changing ideas about how to improve the system.

Pointing out these differences is again, completely rational and legitimate behavior. They are very real criticisms, based in reality, with very real consequences. The less decentralized something is, the more prone to sudden massive changes it is, which has very real consequences to the value and usability of the system. This is perfectly demonstrated by the recent events with Tornado Cash. Yes, the contract is still there, yes, you can in theory use it still, but in reality every single major API provider and wallet backend that is dominantly used has blacklisted interacting with that contract. The website was seized and shut down through DNS registrars. To interact with that contract requires technical know-how beyond many users of the system, because most of the ways to interact with the system were heavily centralized. Pointing these dynamics out is perfectly rational and legitimate.

What is the root motivation behind these behaviors? In the case of focusing on Bitcoin and conveying to people why that decision was made, to provide realistic expectations of how you will do in a market. Also, to correct the illusion in most people’s heads that they will magically figure out how to time the market, ride the pump and make out like a bandit; because most people won’t. In the case of correcting misrepresentations of the level of decentralization in other projects, it is to allow people to make rational decisions when interacting with them, and to make people aware of the potential consequences and risks varying degrees of decentralization expose them to.

We’ve gone through some positive behaviors — let’s look at some negative ones.

Constantly preaching like you are a priest in church, speaking directly from the holy gospel that preordains Bitcoin’s success in consuming the entirety of the world’s financial system and currency markets as a guaranteed divine certainty. Stock-to-flow was a perfect example of this type of behavior. In reality, all that model is, is a somewhat interesting backtest. By backtest, I mean it is a model that can verify that a market has followed some particular behavior in the past. It has no predictive power, and no ability to model things going forward. It literally does not have the data in the model necessary to do so, i.e., the demand variable to account for shifts in demand for bitcoin. The movement around the model was completely absurd cult-like behavior. It had no rational basis at all, and yet became a dominant narrative pushed all over the space. This did not inform people, or give people realistic expectations or reasons to invest in or use Bitcoin. It projected the outward appearance of a cult.

Or take for instance, in the exact same dogmatic manner, calling something a scam without being able to actually provide a reasoned argument or criticism. One example are the ICOs of Ethereum and EOS. Mobs of individuals constantly rail against these systems almost solely on the basis of being a scam because they centrally issued tokens before launch. There are almost no mention of real technical faults. In EOS’s case, there is a concept called “virtual RAM,” which limits how many smart contracts are allowed to exist and run on the system. Use of the virtual RAM is a scarce economic resource you have to pay to own, while at the same time EOS block signers are in total control of the supply. This allows the block signers to buy RAM, sell it as it appreciates in value, and then create more to crash the price, buy low and repeat. The incentives of the entire system are totally gameable by block signers to rent-seek and extract maximum value from users in a manipulative fashion. Another example, one of the biggest value propositions of Ethereum currently is the use as a platform for decentralized finance, i.e., building exchanges and trading platforms on-chain to allow people to trade peer-to-peer. A requirement for that to work is a smart contract that anyone can interact with by themselves, that automatically handles facilitating a trade. Anyone being able to engage in that interaction, in combination with the fact that miners (or stakers) choose which transactions interacting with the contract occur first, allows them to front-run any use and soak up any profit able to be made doing so. The incentives are broken.

The vast majority of people, at least that I see, criticizing other projects articulate criticisms more along the lines of, “It was an ICO, scam!” rather than, “The RAM market, or MEV, fundamentally breaks the incentives of block producers.” Such behavior is not at all constructive, informative or something that will actually convince people to reassess their opinion of a project. “It’s a scam,” with no supporting argument is not convincing at all and it does not inspire self reflection or reassessment. It creates the perception of jealousy over a potential for greater profit.

Now think about the “left/right” categorization of political positions versus the four quadrant categorization. That is what is occurring, a complex reality of many different behaviors is being over simplified into “left/right” categories. That is not productive, it is not constructive criticism or feedback, it is binary over-simplified tribal thinking. It does not change people’s minds, does not equip people to make informed decisions, it does nothing constructive.

Think about all of these behaviors, and then think about all the people you know in this space who exhibit them. Can you draw a black and white line to divide them into groups? I doubt it. So why is the entire conversation focused entirely on labels and groups, instead of individuals and behaviors? One is completely disruptive, divisionary and unproductive in every way. The other is rational, potentially unifying and productive.

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