In the very beginning, there was Bitcoin.
Satoshi’s creation was the first piece of technology to overcome the ‘double spend’ problem and achieve digital scarcity. Thus the idea that decentralized networks could accrue value to token holders was born. 5 years later, the creation of Ethereum made it significantly easier to launch crypto tokens and set off a tokenization frenzy. Today, there are hundreds of coins out there, many of which came to life during the ICO bubble of 2017-2018.
Back then, projects realized that they could raise capital through the novel Initial Coin Offering (ICO) mechanism. Investors who got into these ICOs early were handsomely rewarded as the market caught on.
However, ICOs crashed just as spectacularly as they rose, causing millions of dollars worth of losses. Retail investors who were drawn to the glitz and glamour of ICOs by promises of revolutionary innovation were sorely let down. They had to face up to the fact that, having raised large sums with no more than a whitepaper, the teams behind them no longer had any incentive to build.
Throughout the ICO bubble, a group known as ‘Bitcoin maximalist’ were eager to point out the flaws in the hot new coins popping up each day, also known as altcoins, claiming that the sole proven use-case of blockchain was Bitcoin. Altcoins are still down significantly from their lofty highs, while Bitcoin continues to fulfill its narrow-but-crucial function in a reliable manner. This has given renewed ammunition to the ‘maxis,’ who can also point to Bitcoin’s growing profile amongst large institutional investors
In this article, we’ll outline the key talking points that are driving the conversation around Bitcoin maximalism. We’ll start by showing how some widely-held challenges to Bitcoin’s dominance are actually shows of strength.
“It’s Not Fast Enough, Innovative Enough, Evolving Enough“ they said
One of the criticisms leveled against Bitcoin is that it does not innovate fast enough. While other blockchains are constantly pushing the envelope with new developments, Bitcoin tends to a little move slower. It still lacks smart contract functionality that would extend its utility beyond simply sending and receiving currency.
Yet, Bitcoin’s deliberate updates process is a feature, not a bug. Mark Zuckerberg described Facebook’s motto as ‘Move Fast and Break things,’ capturing the spirit of rapid innovation that has prevailed across tech. Many projects in the crypto space have adopted a similar mentality, valuing the quick releases of products and updates even if it comes at the expense of thorough review. Bitcoin is different. Bitcoin cannot afford to push any update without ensuring that it is both technically sound and widely accepted. As a technology that aims to establish itself as a non-sovereign, global money system, Bitcoin must be more careful when making changes.
Nonetheless, Bitcoin has managed 20 protocol-level updates since its inception, pushing a new update roughly once every 6 months.
Another argument that is often heard is the fact that Bitcoin is too slow. When compared to Visa’s capacity to handle tens of thousands of transactions per second (TPS), Bitcoin’s limit of 4 TPS is indeed slow. However, this argument overlooks two main points:
- No blockchain has managed enterprise-level scale. Ethereum’s capacity, for example, is around 12 transactions per second. Innovation on Bitcoin’s second-layer is booming, with projects such as Lightning Network and Liquid working to extend Bitcoin’s throughput while preserving its unique characteristics.
- Bitcoin is first and foremost a store of value similar to gold, and that utility does not require Visa-level scale. According to data from Unchained Capital, 62% of all Bitcoin in existence has not moved in over a year, signifying that most holders view the asset as a long-term investment and not a short-term transactional currency.
Bitcoin’s reign as the undisputed king coin continues uninterrupted, 10 years since Satoshi first dropped the code on a cypherpunk bulletin board.
The Case For Bitcoin
Decentralization is the holy grail that all crypto projects strive for. From Ethereum, to Binance, to DeFi platforms like Compound, these networks start off under the centralized control of a select few that gradually relinquish their power to a wider community. Yet, all of these networks still depend heavily on the input and direction of their founding team. Bitcoin, on the other hand, has managed to achieve true decentralization as a result of its immaculate conception. When Satoshi saw that Bitcoin had reached a level of self-sustaining maturity level, he disappeared from the scene. The absence of its leader makes Bitcoin more decentralized and an extremely difficult target for regulators to come after.
Unassailable Lead in Brand Recognition & Network Effects
In traditional industries, a company’s brand is usually something external to their product. It is helpful in boosting the company’s profile and driving revenue from customers, but it isn’t the essence of their business. When it comes to crypto networks, branding touches the heart of what makes them valuable. The value of a network is directly proportional to the square number of nodes connected to this network. Each additional node increases the number of potential connections exponentially, making the network more valuable. This theory, first devised by Ethernet Co-Founder Robert Metcalfe, highlights the fact no other network comes close to the size and diversity of Bitcoin’s ecosystem. Bitcoin’s first-mover advantage has created a bandwagon effect that has drawn in a wealth of investors, developers, large companies and indie studios.
Bitcoin has never been hacked. In an industry that has suffered several setbacks at the hand of malicious actors, Bitcoin’s record remains unblemished for 10 decades straight. Not all blockchains have been so fortunate. In July 2016, Ethereum infamously experienced an attack that drained 3.6 million ETH, the equivalent of $70 million at the time, from the DAO smart contract. The fallout of the hack caused a split in the Ethereum network, and serves as a cautionary tale as to the consequences of insecure innovation. Furthermore, not only has Bitcoin never been hacked, it has never suffered any downtime since 2013. In total, Bitcoin has been functional for 99.98% of its life, producing block after block with dependable consistency.
What The Fork? I’m the Real Bitcoin!
One of the more confusing aspects of Bitcoin is that there seems to be so many of them, including esoteric titles like Bitcoin Post-Quantum, Bitcoin King and Bitcoin Lambo. The reason for this lies in Bitcoin’s open-source nature. Anyone can use Bitcoin’s open source code to create their own spinoff cryptocurrencies based on the original coin. In fact, 3 of the top 10 cryptocurrencies by marketcap are Bitcoin ‘spinoffs’, also known as forks.
In order to understand how these Bitcoin clones come to be, we must first look at the difference between hard and soft forks.
A hard fork occurs when several nodes on a blockchain splinter off to form a different chain. The new chain shares a history with the old chain, including the account balances of token holders, up until the point of the fork. Forks will often change part of the code that they copy. Such was the case during 2017, when Bitcoin experienced its most dramatic fork yet.
At the time, increased adoption was making it slow and costly to send transactions on the Bitcoin blockchain. With usage having grown, the Bitcoin community had to find a way to scale beyond its current capacity. One segment of the community advocated for increasing the block size from 1MB up to 2MB. A block is essentially a list of transactions, and so doubling the block size would double the number of transactions that could be processed. However, the majority did not share this view. According to them, doubling the block size would mean doubling the resources (storage and processing) that it would take to run a node. This would lead to centralization of Bitcoin in the hands of a few elites that could afford powerful machines, going against the ethos of Bitcoin.
Those advocating for bigger blocks forked off to form Bitcoin Cash. Ironically, Bitcoin Cash itself would later fork into two competing chains - Bitcoin ABC and Bitcoin SV.
Not all forks must be hostile. Sometimes a change must be introduced into the blockchain through a fork. In such cases, a soft fork is such an upgrade that is backward-compatible, which means that upgraded nodes can communicate with nodes using the previous version of the software.
Innovate - But Thread Carefully
Innovation should be encouraged, wherever it comes from. However, the tokenization frenzy of 2017 caused too many retail investors to get hurt when the waves came crashing down. Many projects promised flashy innovations in their whitepapers, only to take ages to deliver - if they delivered at all. New is not always better, and even if you don’t agree with the view of Bitcoin maximalists, it's best to exercise caution when evaluating crypto tokens.