From: Max Grünberg <[email protected]>
Subject: The State of Bitcoin
Date: 10 July 2021 at 11:59:00 am GMT+2
https://kim.hfg-karlsruhe.de/the-state-of-bitcoin/
<https://kim.hfg-karlsruhe.de/the-state-of-bitcoin/>
n June 8 2021 a supermajority in the national congress of El Salvador approved
president Nayib Bukele’s proposal to make Bitcoin legal tender, making it the
first national government betting on the continuation of Bitcoin’s triumphal
march in replacing the allegedly rotten monetary system. Unsurprisingly this
news was ecstatically received by the wider crypto community. But it is more
than ironic that legal tender, which has been so heavily attacked by their
thought leaders in the past as a compulsory interference into the economic
freedom of individuals, ultimately becomes the salvation as soon as it works in
their favor. It is not only that citizen can pay their tax in Bitcoin, from now
on Article 7 of the Bitcoin Law
<https://twitter.com/nayibbukele/status/1402442597235310596> forces all
economic agents in the state’s territory to accept Bitcoin as payment. Every
street vendor in this corroded economy is now obliged to accept this highly
volatile asset unless they are unable to provide the digital tools necessary to
facilitate the transaction.
Why should a government have any interest in separating money from state
control? First of all, El Salvador does not have an own currency. Since 2001
the country’s official currency is the U.S. dollar. In a decree addressed to
congress, we get some more insight into the president’s counterintuitive
rationale. There he states that ‘In order to promote the economic growth of the
nation, it is necessary to authorize the circulation of a digital currency
whose value answers exclusively to free-market criteria.’ The young president,
who has been a successful entrepreneur in his earlier life, is certainly right
that the only forces driving Bitcoin’s price action today are supply and
demand. Leaving the staggering capital concentration within the Bitcoin network
and the concomitant market manipulation aside for one moment, president Bukele
seemingly does not realize that he betrays the gospel of free markets with the
introduction of another compulsory law as he intervenes with its underlying
principle, which is competition. When the Austrian economist Friedrich Hayek
wrote Denationalisation of Money in 1976 as a treatise against the state
monopoly over money and a call for a legislative framework to foster a
competitive environment between private currencies, he argued that legal tender
laws are an interference and unnecessary exploitation of state power as they
would reduce the freedom of choice. Contract law would suffice to regulate the
use of money between economic parties. A policy true to the free market
ideology would have to abolish all legal tender laws, and not extend them.
Throughout his lifetime Hayek was haunted by the fear of the devaluation of
currencies induced by despots and other incompetent government actors, which
was undoubtedly caused by the trauma he experienced through the Austrian
hyperinflation in his youth. The same fear of inflation became today a central
puzzle piece in the rhetoric around the usefulness of Bitcoin. Hayek’s solution
to the problem of inflation was the introduction of competing private
currencies. An abolition of legal tender laws would ultimately result in a
level playing field. In his view, this competition was staged around one
central property, which is price stability. According to Hayek, economic actors
desire nothing more than stable currencies as a basis for exchange and
accounting. After millennia of state-led currency debasement, price stability
would ultimately pave the path to mass adoption for private money and drive out
the bad government money for good and lead society into a bright future with
accurate price signals. But for him, this process of determining the most
stable currency can only be achieved through competition and can never be known
a priori. As for everything else, feasible currencies cannot be designed but
can only manifest themselves within the spontaneous order of markets.
Although most Bitcoiners see themselves in a direct lineage to Hayek, he would
have despised Bitcoin for its price volatility and would have even rejected to
call it money in the first place. And in fact, many Bitcoiners like Michael
Saylor, founder of Bitcoin investment firm MicroStrategy, have stopped calling
it money themselves, and shifted to other properties of money, and focus more
on the aspect of a store of value by advertising it as digital gold. Without a
doubt, Bitcoin has been probably the best performing asset of the last decade
thanks to the artificial scarcity and deflationary nature which is embedded in
the Bitcoin protocol and the cypherlibertarian rhetoric surrounding it. When
conceiving Bitcoin, its mysterious founder Satoshi Nakamoto, took the exact
opposite route for the creation of the first decentralized digital currency
than Hayek as he believed that mass adoption of a currency would need a strong
incentive structure. And what is a better incentive than strongly rewarding
early adopters? The rewards that are handed out to the miners in return for the
work they put in to secure the network, increase in value the more people buy
into the system. It is therefore not surprising that many observers call out
Bitcoin to be driven by the bigger fools theory and that it is nothing more
than a pyramid scheme. But to be fair doesn’t this logic of rewarding early
investors apply to all assets? Despite the speculative boom and bust phases,
until now Bitcoin did not turn out to be a Ponzi scheme. Even after the worst
crashes the price of Bitcoin did not only recover and reclaimed past alt time
highs but also spiraled further up into new dizzying heights, drawing in ever
more capital into its gravity well. The future will tell whether Bitcoin has
more steam in the tank.
From a technological standpoint, it is highly questionable whether Bitcoin will
ever be able to replace our current financial system and become the global
financial settlement layer. For years critics argued the 7 transactions per
second the Bitcoin network is able to process will not suffice for mass
adoption and even with off-chain scaling solutions like the Lightning Network
<https://lightning.network/> protocol it is uncertain whether the routing
between nodes will be feasible when the network grows into millions or billions
of users, who would like to use a reliable and cheap financial infrastructure
for microtransactions in their everyday life. At the same time, these solutions
are already being deployed and tested in the real world. In 2019, an anonymous
American donor funded the largest Bitcoin experiment
<https://www.bloomberg.com/news/features/2021-06-17/world-s-biggest-bitcoin-experiment-is-a-surf-town-in-el-salvador>
yet at the pacific coast of El Salvador in the surf village El Zonte,
transforming the local economy to run on Bitcoin’s Lightning Network. In what
became known as Bitcoin Beach, the cryptocurrency was introduced as a form of
payment two years prior to El Salvador’s bitcoin laws. While some share the
story of enthusiastic users, others point towards the exorbitant transaction
fees to exchange Bitcoins back to stable coins on central exchanges, which
makes the technology useless for the local population unless they hold onto
their Bitcoin. At least president Bukele promises to provide a national wallet
called ‘Chivo’ with the option to convert Bitcoin automatically to US Dollars.
As approximately 70% percent of the population does not have access to
traditional financial services, this would bank those without access to the
legacy banking system without exposing them to the volatility of Bitcoin price
movement. The critical question is how high the fees will be.
One who certainly believes that Bitcoin still has a long way to go is Nayib
Bukele. Like the investors before him, he bets that a relatively early entry,
in case other countries follow, will allow him to suck off the wealth of the
future latecomers who will drive the price even higher. In a tweet, he declared
that ‘It [Bitcoin] will bring financial inclusion, investment, tourism,
innovation and economic development for our country’. By abolishing the capital
gains for crypto assets, he hopes to attract wealthy individuals and companies
to set up their operations in his country. One day after Congress approved his
proposal, this man of action revealed his strategy of using geothermal energy
produced by volcanos to supply energy for future mining operations, which would
make El Salvador the first governmental actor officially participating in the
validation of the transaction history in the Bitcoin network. Since the target
difficulty of the Proof of Work consensus mechanism increased to a level, where
mining was not profitable any longer on consumer devices, huge mining
facilities and whole industries providing necessary specialized hardware,
so-called Application-specific integrated circuits (in short ASICs), spawned
everywhere around the globe at places where energy is cheap enough. To run a
profitable mining operation, the cost per kilowatt-hour must be below three
cents. This concentrated Bitcoin mining where energy can be easily stolen or
exists in abundance, for instance near hydroelectric dams in the Sichuan region
in China, where, in the dry summer months, miners also had to rely heavily on
energy that is produced in coal plants, around gas fields in Siberia controlled
by Gazprom, or in Iranian mosques, which do not have to pay for electricity.
In their power struggle for global financial supremacy, China recently doubled
down with restrictions on cryptocurrencies. This has a couple of reasons. First
of all, they want to increase capital controls to make their citizen invest
within the country. The second, and arguably the most important one, is to
strengthen the position of the digital yuan, one of the first central bank
digital currencies, to ultimately supersede the US dollar as the global reserve
currency. Surely, the communist party must have been fed up with the ongoing
overloads of the energy grid through mining operations as well. After banning
Bitcoin numerous times, this time Chinese authorities seem to pull through.
Over the last months, Chinese banks and payment companies were ordered to cut
all ties with clients involved in mining, trading, clearing, and settlement for
cryptocurrency transactions. This provoked a massive exodus of mining
operations throughout the country. As over sixty-five percent of Bitcoin’s hash
power was located in China, this resulted in a drastic 50% drop in the hash
rate of the Bitcoin network. Images and videos surfaced online of miners
closing down their operations in panic, who now look for new locations to make
use of their equipment. Several governmental actors worldwide competing now to
attract the capital to create Bitcoin hubs within their territory. With his
volcano publicity stunt, the promise to grant Salvadoran permanent residence in
return for 3 Bitcoins, and the reduction of the crypto tax burden to zero,
Bukele certainly is one of these state actors, who is in the race to secure a
share for his country.
While for some Bukele appears to be a visionary, his actions resemble more a
desperate family father who is at the brink of defaulting on mortgage payments,
after receiving a shady insider tip, he pawns the family jewels and car to put
in one last bet at the horserace as the last way out of the family’s misery. As
the cards are stacked against the people of El Salvador, the president’s
decision is even comprehensible in some ways. Remittances, money sent home from
abroad, make up around 20% of El Salvador’s gross domestic product (GDP).
According to Bitcoiners, the parasitic intermediates controlling transnational
money transfers like Western Union drain this capital inflow further with
outrageous transactions fees. However, the data shows
<https://sites.krieger.jhu.edu/iae/files/2021/06/Bukeles-Bitcoin-Blunder-Final.pdf>
that it is even more expensive at the moment to do these transactions via the
Bitcoin network because of the high costs of Bitcoin ATMs. With or without this
money from abroad, the economic outlook for El Salvador is grim. A near
stagnant economy, persistent corruption, and the neocolonial doctrine of free
markets let the country amass a public debt to global financial institutions
totaling over 70% of GDP in 2019. Battered by the Covid pandemic this number
shot up to 90% last year. Under given circumstances, it would need a wonder to
pay back this debt. And for Bukele this wonder is Bitcoin, it is the last
resort, the national lottery ticket for a better future.
Elected with the promise to bring economic prosperity and clean up corruption
and violence in El Salvador, president Nayib Bukele enjoys astonishing approval
ratings of up to 90%. But the president is far from being an unproblematic
figure. When we lift the sheets of El Salvador’s politics, we discover the free
market being in bed again with another authoritarian leader. It seems after the
countless coups in Latin America in the name of freedom and open markets,
history repeats itself. In 2020, he first drew international attention when he
ordered the military into the chamber of national congress as intimidation to
push for the approval of funds for another government security to fund police
equipment for his Territorial Control Plan to crack down on the country’s
rampant gang violence. Since his landslide victory in February 2021, the
dynamic and charismatic president, who knows how to play the digital media
game, controls 56 of 84 seats in the legislative assembly. Shortly after the
election one of the last checks on Bukele’s power crumbled when he used this
majority to replace the attorney general and five top judges in the supreme
court with loyalists and unified every branch of the government under his
scepter. It seems we have witnessed yet another autogolpe, a coup by democratic
means, as the people in this run-down country are yearning for a strong man
with a vision. Let’s hope for them that their despot turns out to be a
benevolent ruler and uses his power in their interest.
While Bukele faces no more noteworthy resistance for his policy from the
inside, the pressure from the outside intensified in the last weeks.
Unsurprisingly, the empire strikes back as the World Bank, International
Monetary Fund (IMF) and other global authorities are opposed to the country’s
decision to grant Bitcoin the status of legal tender. After the Salvadoran
Finance Minister Alejandro Zelaya sought technical assistance from the World
Bank for the technical implementation, a bank official responded to Reuters
<https://www.reuters.com/business/el-salvador-keep-dollar-legal-tender-seeks-world-bank-help-with-bitcoin-2021-06-16/>:
‘While the government did approach us for assistance on bitcoin, this is not
something the World Bank can support given the environmental and transparency
shortcomings.’ Also, Gerry Rice, an IMF spokesman, raised his concerns:
‘Adoption of bitcoin as legal tender raises a number of macroeconomic,
financial and legal issues that require very careful analysis’. While these
diplomatic statements do not sound too confrontational at this point, a more
serious warning
<https://www.fitchratings.com/research/banks/bitcoin-could-increase-regulatory-aml-risks-for-el-salvador-banks-25-06-2021>
for Salvadoran banks comes from Fitch, one of the ‘big three’ credit rating
agencies: ‘The lack of adequate regulations to manage banks’ balance sheet
exposure would be a credit negative based on a recent Basel prudential
consultation. This would effectively fully deduct open positions from banks’
regulatory capital.’ With plummeting credit ratings due to the risk assessment
of rating agencies and increased interest rates for these banks, an
acceleration of the downward spiral of the El Salvadorian economy would be
inevitable. We can be certain that the global financial institutions will make
use of their full arsenal to punish El Salvador and do everything in their
power to set a precedent to discourage other countries to follow.
Meanwhile, at this year’s Bitcoin conference, between countless apologetic
lamentations on Bitcoins resource and energy consumption, the news about El
Salvador’s new monetary policy was publicly announced in a pathos dripping
presentation <https://www.youtube.com/watch?v=_59hrgTiRJU> under the frenetic
applause of the audience. Who wondered how it would look like when some frat
bros and conspiracy theorists receive funding to create a social movement,
might find answers at this ethnographic goldmine. At this cultish ceremony,
where vocal spokespersons like RT host Max Keiser shared their paranoid
worldviews, several insights on the wider Bitcoin community were imposed on the
viewer. The first of these insights is the crude economic views these people
hold. Nick Szabo, inventor of smart contracts and early contributor to the
Bitcoin project, once famously tweeted
<https://twitter.com/nickszabo4/status/977035747713675264?lang=en>: ‘An
economist or programmer who hadn’t studied much computer science, including
cryptography, but guesses about it, cannot design or build a long-term
successful cryptocurrency. A computer scientist and programmer who hasn’t
studied much economics, but applies common sense, can.’ Except for certain
outliers, the event displayed that the community’s common sense is in a
defective condition. So Bitcoin is freedom? All there is to see is a community
free from the ability to develop critical economic thought.
Now, Bitcoiners are certainly right in that Satoshi Nakamoto chose the more
successful game-theoretical approach compared to Hayek concerning adaptation.
History speaks for itself. This strategy however came at the price of Bitcoin
ceasing to be money. Unable to estimate the price of Bitcoin in the future,
only a madman would sign a contract depicted in Bitcoin. Before the Euro,
economic actors in all European countries resorted to the most stable
currencies for long-term contracts, which they found in the Swiss Frank or
Deutsche Mark because even their national currencies were too volatile. But it
is not only the volatility that impedes mass adoption due to a lack of rational
planning certainty. It is also the deflationary nature of Bitcoin that
contradicts its use as a medium of exchange on a macro scale. For a community
that stresses the importance of game theory so much, it is surprising they do
not see a problem in deflation. In an interview on the Great Depression
deflation Hayek once said ‘I agree with Milton Friedman that once the Crash had
occurred, the Federal Reserve System pursued a silly deflationary policy. I am
not only against inflation but I am also against deflation.’ If money and debt
increase in value over time, it incentives consumers and producers alike to
take fewer loans and to hold on, or hodl, a typo which became an inside joke
and now stands for ‘hold on for dear life’, to the money they have, as they
would get more for it in the future. Bitcoiners always emphasize the importance
of delayed gratification when it comes to savings. But what might be beneficial
for the individual in the short term, can be disastrous for the economy as a
whole. As less is bought, less is produced, and fewer wages are being paid,
surely this would lead the economy to spiral downwards. The productive delayed
gratification of capitalists, who acquire more fixed capital instead of
squandering it on personal consumption, is fundamentally different from the
unproductive delayed gratification of Bitcoiners, as their capital lays dormant
as long as they are hodling it. Withdrawing purchasing power by encouraging the
citizen of El Salvador to not spend their money but to hodl Bitcoin in hope, it
becomes the global reserve currency might turn out to be the death blow to the
country’s economy. Moderate inflation on the other hand fuels the capitalist
economy. By eroding the value of cash and offering cheap credit it encourages
consumers to spend. As producers are incentivized to accelerate capital
turnover, production cycles are shortened, thus more workers find jobs and
spend their wages on commodities again, resulting in capitalist reproduction on
an extended scale as Marx would have put it. Hayek, however, would have
certainly disagreed with this positive aspect of inflation, as he believed that
inflation cannot be controlled by a central authority and sooner or later
central bankers would face running inflation like we are seeing in Turkey right
now or an even worse deflation as a result of incompetent countermeasures, for
him, the optimal currency had to be price stable, which can only be achieved
through competing private currencies.
So when looking at Bitcoin from a macroeconomic perspective, it turns out to be
even untrue to Austrian economics, as for Hayek deflationary money is rat
poison squared, to use Warren Buffet’s words here. Now some Bitcoin evangelists
would certainly reply, that this does only apply to the transition phase and we
will gain price stability in the future. If their wishful predictions end up
being right and in 50 years the demand side would reach a natural limitation
after absorbing the whole financial system and every value on this planet is
expressed in Satoshis, the smallest unit of the bitcoin currency, the value of
Bitcoin would still grow. Even though the total supply of Bitcoin will increase
until May 2140 every 10 minutes by a fixed amount that halves all four years,
we will never see the promised 21 million Bitcoin in circulation because each
year about 4% of the available supply is irretrievably lost due to careless
owners losing access to their private keys. Some projections
<https://news.bitcoin.com/analyst-1500-bitcoins-lost-every-day-less-than-14-million-coins-will-ever-circulate/>
go as far, that we are past the maximum circulating supply already, and from
now on fewer Bitcoins are generated in the mining process than lost by those
suckers who fail to fulfill the puritan ideal of radical self-reliance. These
can be unfortunate individuals like the desperate Brit, who still has not given
up on his wallet holding 7500 Bitcoins that he believes to be buried under tons
of trash on a landfill site in Newport, South Wales. But it can also hit larger
companies like the Israeli cryptocurrency company Fireblocks, which lost
approximately $75 million worth of cryptocurrencies it was entrusted with
because an employee failed to back up data and deleted the keys by accident. As
long as there will be human errors or other catastrophes like houses that burn
down, keys will be lost and these tragedies will result in a steady decline of
the circulating supply. But what is a loss for some, is benefitting the
survivors as the coins they still have access to increase in value. Those who
are stupid enough to get phished or are mentally weak paper hands, who panic
sell their holdings at a loss to whales when the markets are crashing, simply
do not deserve their spot in paradise according to the Bitcoin community. We
have seen this all before, it is rugged individualism at its best.
As there is no value created by Bitcoin, only existing value is redistributed,
countless people have to take a loss for a Bitcoin millionaire to be born. By
dumping their bags on those retail investors, who jumped in too late in the
bull run, the smart money creates enough liquidity to increase their Bitcoin
position again when prices hit the bottom, while the retailers capitulate and
sell-off. There is no reason why this dynamic should suddenly change in the
future. Despite, or perhaps precisely because the Bitcoin network provides
rules without rulers, no checks in power are put into the way of individuals
with the ability to exploit their market position by manipulating the price
action of the asset, which will ultimately result in an even less egalitarian
distribution of wealth like we have today in the legacy system. For Bitcoiners,
the only answer is to toughen up and hodl. What they don’t tell is the toll,
which has to be paid on one’s mental health by constantly being exposed to this
emotional rollercoaster of greed and fear. Restless sleep, gambling addictions,
and emotional blunting are externalities that are neither priced in nor spoken
about in the community.
Another widespread economic fallacy is the delusion of Bitcoin being a panacea.
Without any shame, Bitcoin is presented at the conference as the solution to
the world’s economic problems: fix the money, fix the world the slogan goes in
the crypto space. And for these hardcore Bitcoiners, everything bad that is
happening in the economy has monetary roots. Numerous times on the panels
speakers construct a causal relationship between income inequality and
inflation, or the wealth tax, as they call it. The only thing standing in the
way of the prosperity of the El Salvadorian people is the rotten dollar. In one
of the dullest presentations of the conference titled FIAT fascism vs Bitcoin
Liberty <https://www.youtube.com/watch?v=uoXJd8SBCYk>, blogger and entrepreneur
Aleksander Svetski presented his assessment of the world without Bitcoin, a
world that suffers from: ‘Stagnation. Corruption. Theft. Waste. Poverty. Wealth
Redistribution by Bureaucrats. Environmental Destruction. State indoctrination
instead of schooling. Sludge instead of food.’ But do not despair, Bitcoin is
here to change that by transforming society from the ground up. Although he
acknowledges that classes will persist, according to him social stratification
is a natural order anyways, his anarcho-capitalist analysis comes to the
conclusion that Bitcoin will create semi-permeable barriers, allowing upward
mobility for the productive members of society and punish those on top, who
fail to deliver. How exactly Bitcoin will create such a meritocratic system is
not answered in his talk but he provides a reading list for the curious
containing pertinent titles like Atlas Shrugged, the Sovereign Individual, and
‘everything from Murray Rothbard’. Can it get any more caricatural?
The exact same naive monetary solutionism becomes also evident during the
announcement of Nayib Bukele’s decision at the conference. There the messenger
Jack Mallers, CEO of a bitcoin investment and crypto payments processor company
Zap, that is active in El Salvador with their Bitcoin lightning payment app
Strike, and which will have a good chance to become the contractor for
developing the national wallet app Chivo, offered in his talk another bizarre
claim about the current economic system. In his talk, he compared the official
US inflation numbers based on the consumer price index, which sits currently at
a 4% rate, mostly due to a spike in used car prices, with something that is far
more threatening, which he refers to as hidden inflation. The examples he
provides for this ominous hidden inflation are tuition fees and housing prices.
And again the money printing of the central bank is at fault that his kids will
not be able to afford real estate where he grew up. What he fails to
understand, or what he tries to sweep under the table, often it is not clear if
the speakers are as stupid as they make themselves appear or whether they just
think the audience is ignorant enough to take their bullshit as truth, is that
the gap between the price increases in essential sectors like housing,
healthcare and education and the general inflation of consumer prices, cannot
be explained with the monetary expansion driven by central banks.
There are other cost-push and demand-pull effects at work accounting for this
gap, like a ballooning university administration, a natural scarcity of land in
the centers of global cities like San Francisco, or laws prohibiting the
Medicare program from negotiating the price of drugs, which Bitcoin will never
solve. As all these are essential services, people are forced to participate in
these markets and an ever-growing share of their paychecks is deducted by
landlords, colleges, and health care providers until competition is
reintroduced or these markets are regulated in other ways. The problem with
general inflation is that since the 1980s wages did not keep up and increased
at a lower rate. Labor politics are of course a solution libertarians and
anarcho-capitalists would never consider. The route they choose to escape this
dynamic is to build an arch with their fellow brethren that will lead the
chosen few into the promised land, where tuition fees, healthcare, and rent
cease to be a problem. These Bitcoin barons envision themselves to be the new
elite of the coming society, a Lamborghini driving cohort, and all those fools,
who failed to invest in Bitcoin in time will be at their service. So get in
before it is too late. In the end, the Bitcoin scheme is nothing but ‘a wealth
transfer to the cartel of early bitcoin accumulators’, as former Bitcoin bull
Nassim Taleb points out in a recent paper, it will never bring prosperity for
the whole society. As with the other fallen Bitcoin saint Elon Musk, who became
the scapegoat for the recent crash because he reversed his decision to include
Bitcoin on Tesla’s balance sheet, the community has nothing but hatred for
these traitors, who dare to damage the reputation of their church.
In the Bitcoin space, this aggressive tone towards nonbelievers and heretics is
framed as toxic Bitcoin maximalism. Michael Saylor calls it the ethos of the
“loud in the face cyber hornets”, that will pave the way for Bitcoin’s victory.
In short, maximalism constitutes not only a strong belief in a specific
technology, but it encompasses also a monogamous conviction to it: No other
coin shall persist in the light of Bitcoin’s grace, and who dares to disagree
will be met with the righteous wrath of the Bitcoin order. Since the first
appearance of altcoins, crypto has been a tribalist space. The portmanteau
altcoin in itself is already telling, as these coins will ever only be an
alternative or alteration of the holy scripture that is the Bitcoin protocol.
And for the most part, this was somewhat justified in the early years of
distributed digital currencies, as the first altcoins like Namecoin or Litecoin
were simply forks of the Bitcoin Core client with only minor adjustments like
the reduction of the block generation time or the use of another hashing
algorithm. Under the pressure of competition, the language soon intensified
when these alternative projects became serious competitors. In 2017, a debate
around the block size led the heterodox proponents of a blocksize increase,
called ‘Big Blockers’ by the zealous defenders of Bitcoin’s purity, to another
fork named Bitcoin Cash. Not only did these protestants believe that Bitcoin
Cash actually is Bitcoin but after the fork Bitcoin Cash even almost flipped
Bitcoin in market capitalization and total hash rate during the 2017 bull run.
This was also the time when Bitcoiners began to thrash altcoins as shitcoins.
Today on Twitter, a prayer-like chain letter circulates through the laser-eyed
Bitcoin community to test the faith of fellow brethren that reads: ‘I TOO WAS A
SHITCOINER. I LEARNED. YOU WILL TOO.’ Amen.
But the ultimate sacrilege in the crypto space, that leaves anything else in
the shade, was the heresy of Vitalik Buterin founding Ethereum together with
his disciples, among them Gavin Wood, Charles Hoskinson, and many others, who
followed his vision in extending the capabilities of distributed ledgers by
introducing the idea of a programmable blockchain. By picking up the pieces of
the shattered early internet Utopianism and merging it with distributed
ledgers, the dream of a decentralized web beyond the current control of
monolithic internet platforms was resurrected. For the church of Bitcoin, the
utility of smart contracts represents nothing but a dilution of decentralized
digital currencies’ pure purpose. Where Bitcoin became a pious and reactionary
numbers-go-up ideology, which is solely driven by the desire for
self-enrichment, the ideological core of the Ethereum project is anchored more
in the Free Software movement and still follows the principles of curiosity and
adaptation.
Yet, the Ethereum community itself is not free from tribalist tendencies. Today
it seems like the tribalist spirit lives on in all those pagans rallying around
their favorite crypto project in a competitive environment on the marketplace
of ideas, while at the top thrones the inquisition of the holy Bitcoin order.
And in many cases, the inquisition’s judgment is even justified when looking at
the myriads of copypasted cryptocurrencies that are out there, whose only
purpose is to serve as coordinated pump and dump schemes to enrich their
creators. Beyond that, one can actually smell the fear of Bitcoiners, whose
aggressive tone cannot hide their sweaty palms, as they know that they are at
risk of betting on the wrong horse. Why need the loud mouth anyways if it is
the superior technology?
As of now, all other cryptocurrencies together compromise over fifty percent of
the total crypto market capitalization, with the space maturing, technological
advancements, and new use cases materializing this number will likely increase
and Bitcoin will find itself someday on the graveyard of history if it’s
community rejects to adapt and progress. Deep inside the Bitcoiners know this,
thus they have to defend their church on both sides against nocoiners and
shitcoiners alike. At the conference, someone threw a toilet paper roll written
Shitcoin over it at Charles Hoskinson, when he came to pay tribute. Critics
like him, are not welcome any longer in the space. His contributions to the
Bitcoin Education Project are nullified by his betrayal. Now, he is simply
another threat that stands in the way of Bitcoin’s mass adaptation. What might
be funny for some is just another example of the self-centered morals and
disgusting manners that underly this community. What might have been an
open-minded space, is now rotten to the core. Not one of these people would
give a shit about the people of El Salvador if their charity work would not
enrich them.
Finally, on the yaw-dropping panel Toxic Maximalism: A Feature Not A Bug
<https://www.youtube.com/watch?v=dHRINbszS2g>, addressing the internal
criticism of this toxic Bitcoin maximalism, the holy crusade reached its
rhetoric peak. After summing up the most important inventions in the evolution
of mankind, obviously fire and Bitcoin, everything in-between was preparing the
arrival of the latter, Alex Svetski reveals the holy duty for all believers,
which is worth being quoted in full: ‘We are the white blood cells of the
network. We are the things that … when an external virus of stupidity comes in
and tries to adjust it. We fight it off. There is nothing more important than
holding that line, you know? The intolerant minority? You can’t beat that. If
the center does not hold we just become another shitcoin project. That’s where
the game is. The white blood cells, the Bitcoin maximalist position, like I
said it earlier today, I started at Bitcoin maximalism and I go into
supremacism or whatever else is at the top. (laughter) I request everyone else
to join that position because there is nothing more pure and there is nothing
more important in the world today.’ And when you think you have seen it all
another panelist proves you otherwise. YouTuber Nico ZM, seemingly frothing at
the mouth, responds to the moderator’s question whether people could be driven
away by this toxicity: ‘There is no other way. Not only do I think Bitcoin
toxicity is important, I think it is absolutely necessary. And if you are
against bitcoin toxicity you are against Bitcoin and if you are against Bitcoin
you are against freedom. Period.’ When on the following panel Erik Voorhees
called this out as the bullshit it is, he was almost booed off the stage. With
presentations like these, Bitcoiners at least do everything in their power to
rug pull themselves.
Unironically, this religious framing of Bitcoin is being put forward by the
community itself. At the conference, Michael Saylor referred to Bitcoin full
nodes as altars to Satoshi. The economic burden to run a full node then becomes
a sacrifice or testimony of faith. Max Keiser was addressed by him as the high
priest of Bitcoin. And when asked by the lunatic whether he has been visited by
the ghost of Satoshi Nakamoto and Saylor responds that Satoshi speaks to him
through all his disciples on Youtube followed again by the claim that Bitcoin
‘fixes everything else’ even ‘governments act rationally’. In an off-stage
interview with crypto influencer Ran Neuner, it slipped Max Keiser how this new
rationale might be derived. While he is tearing up a dollar banknote, Ran
Neuner warns him ‘Max do you know that it is a criminal offense to tear up..’
who is interrupted by a hyped-up Keiser, finding himself somewhere between the
roles of a failed comedian and future autocrat: ‘Do you know with the Bitcoin I
have I can buy any fricking senator or congressman I want? I make the laws. He
who has Bitcoins makes the laws … We have got the capital, we make the laws!’
When looking at the wealth distribution within the Bitcoin network, which is
even worse than the one in the off-chain world, excluding crypto exchanges
around 2% of network entities control 71.5% of all Bitcoin
<https://insights.glassnode.com/bitcoin-supply-distribution/>, it reveals how
exclusive this new ruling class will be. Ultimately, Alex Svetski concludes
‘the line that will define those who are free and those in the modern gulags,
is gonna be those who hold Bitcoin and those who do not.’ While in his
distorted reality these gulags will still be run by the old collectivist order,
it will be the early Bitcoin accumulators who will be in power if things turn
out in his favor, and one might begin to wonder who the actual fascists are.
Max Grünberg
Research Assistant and PhD candidate
Media Philosophy and Artificial Intelligence (KIM)
http://kim.hfg-karlsruhe.de <http://kim.hfg-karlsruhe.de/>
Staatliche Hochschule für Gestaltung (HfG) Karlsruhe
Lorenzstr. 15, 76135 Karlsruhe, Germany
T +49 (0) 721 / 8203 2283
[email protected] <mailto:[email protected]>
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