Key Takeaways
- Satoshi Nakamoto imagined Bitcoin as a “peer-to-peer electronic cash system” for the world, but its narrative has changed over the years.
- Bitcoin has become adopted as a digital gold, but some teams are trying to evolve the network by embracing Layer 2 and DeFi.
- Bitcoin’s most toxic community members are holding the top crypto back.
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What would Satoshi Nakamoto think of the Bitcoin community in 2022? Chris Williams addresses the elephant in the room.
Satoshi and the Immaculate Inception
When Satoshi Nakamoto shared the whitepaper for what would become the world’s most important invention since the Internet, they presented the concept of “a peer-to-peer electronic cash system.” First teased to a group of cypherpunks on the Cryptography Mailing List off the back of the Great Financial Crisis in October 2008, Bitcoin was Satoshi’s response to the failings of governments and central banks worldwide.
Until their sudden disappearance in December 2010, Satoshi never made a secret of their disdain for the traditional finance system. They pointed out problems with trusting banks on the Bitcointalk forum, pushing Bitcoin as the world’s first decentralized alternative. On Bitcoin’s Genesis block, they embedded a message pulled from the front page of The Times newspaper on the same day. It read “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.”
Bitcoin quickly evolved into a small community of Internet geeks who believed in freedom and self-sovereignty. Many early Bitcoiners were Libertarians who shared Satoshi’s distrust for authority. Occupying a niche corner of the Internet for its early years, its first mainstream use case was on Silk Road, a darknet marketplace that became an eBay equivalent for illegal drugs.
Bitcoin grew thanks to its passionate community of believers, but it eventually became apparent that it had changed since Satoshi introduced it as “a peer-to-peer electronic cash system.” Where Bitcoin’s early users would happily spend dozens of coins on eighths of weed on Silk Road, now they opted to “HODL,” crypto slang for sitting on your holdings and waiting for the price to go up.
Is the Bitcoin Narrative Dying?
Bitcoin’s supply is limited to 21 million coins. That makes it provably scarce, contrary to fiat money that banks can print on a whim. It’s part of the reason Bitcoin has seen astonishing growth over the past 13 years, rising from fractions of a cent on launch to $69,000 in late 2021 (it trades closer to $23,000 today). As Bitcoin’s price has risen, it’s become adopted as a “digital gold.” Its biggest advocates frequently point to its limited supply in response to money printing and soaring inflation rates, but it failed to act as an inflationary hedge when the Federal Reserve hiked interest rates in 2022. Bitcoin and the crypto market now trade in close correlation with stocks and other global markets; when the Fed pivoted to hawkish to curb inflation, it suffered hard alongside practically every other asset class.
Some Bitcoiners have tried to help the top crypto evolve beyond the digital gold thesis, but none of the developments has been a remarkable success. Blockstream, a company led by some of Bitcoin’s most ardent proponents, developed a Liquid sidechain to offer faster settlement times than the Bitcoin network’s 10-minute block times. Barely anyone uses it. The Layer 2 Lightning Network has become Bitcoin’s first realistic shot at creating the cash system that Satoshi imagined, but it’s also failed to gain meaningful traction because it requires people to spend their coins. There are also ways to earn yield on Bitcoin today, but you usually have to trust a custodian with your coins. Many of Bitcoin’s most prominent voices have previously endorsed centralized custodial services like BlockFi, then they deleted their tweets when BlockFi blew up due to the firm’s irresponsible management. Some big Bitcoin advocates like Anthony Pompliano got behind Terra’s controversial CEO Do Kwon when he committed to accumulating billions of dollars worth of Bitcoin to stabilize its flawed UST stablecoin in early 2022; they went quiet once Terra crashed to zero and Kwon was facing multiple lawsuits on allegations of fraud and misleading investors.
Beyond HODLing coins without doing anything with them and encouraging others to help push prices up by buying in, much of what Bitcoin is trying to do to improve itself already exists in a better format on smart contract networks like Ethereum. That’s partly why so many Bitcoiners hate Ethereum and its competitors. Smart contracts make use cases like earning yield and spending dollar-pegged stablecoins possible, while technologies like Zero-Knowledge Rollups, a nascent scaling development that leans on cryptographic zero-knowledge proofs, promise to offer quantum leaps in scaling and dirt-cheap transaction costs.
Ethereum, the second-biggest cryptocurrency after Bitcoin, has been a better investment than Bitcoin since it launched; one BTC cost around 1,500 ETH in 2014, while today one BTC is worth only 14 ETH. Bitcoin’s purists have a problem with all crypto assets that threaten Bitcoin’s dominance, but it’s Ethereum they hate the most. In May 2011, the recipient of the first Bitcoin transaction, Hal Finney, wrote a message arguing that “any successful replacement of the Bitcoin block chain will forever undermine the credibility of any successor.” Bitcoin’s cult-like following often points to the post to justify its toxic maximalism.
Since it became clear that DeFi would be more useful to the world than digital gold, some have made efforts to rebrand Bitcoin. One of them is Jack Dorsey, whose TBD initiative is currently trying to build “a decentralized web platform” akin to the ones that launched on Ethereum five years ago. Dorsey has marketed his Bitcoin DeFi efforts as “Web5,” a direct shot at the fast-evolving Web3 ecosystem that Ethereum is synonymous with.
Another of Bitcoin’s most notable developments over the past year was the attention it received from big corporations and nation states amid a heated crypto market frenzy. Michael Saylor’s MicroStrategy famously accumulated 174,000 Bitcoin over the course of the cycle, while El Salvador became the first country to adopt Bitcoin as an official currency. The Latin American country’s President Nayib Bukele has since spent millions of dollars buying the Bitcoin top for the government’s treasury, at times bragging that he was buying the dip from his iPhone (El Salvador also forced businesses to accept Bitcoin when it introduced it as a legal tender, raising questions about its support of crypto’s freedom-based ideals). Though Bitcoin was created in a pushback against governments and El Salvador’s move led to nationwide protests, rich Bitcoin whales like Max Keiser, Stacy Herbert, and Samson Mow have decided that it’s their duty to cozy up with Bukele to help El Salvador and other developing countries buy into their “Hyperbitcoinization” thesis.
Toxic Maximalism
Bitcoin’s community has become increasingly toxic in recent years, perhaps because its loudest thought leaders are so visible on social media apps like Twitter. There are plenty of early adopters who stepped away as the toxicity intensified and new innovations surfaced—people like Erik Voorhees, Meltem Demirors, and Nic Carter—and they were branded as “shitcoiners” by the Bitcoin cultists.
Another big factor behind the spike in hate has been the notable developments happening in Bitcoin-adjacent ecosystems. Bitcoin doesn’t only have to deal with putting in a weak price performance against practically every other crypto asset in the 2021 bull run—it’s also falling short in development terms against many of its predecessors. The most notable of these developments is Ethereum’s upcoming “Merge” event, which will see the blockchain ditch the Proof-of-Work consensus mechanism similar to the one Bitcoin uses in favor of Proof-of-Stake. Bitcoin’s Ethereum critics say that Proof-of-Stake will make the network more centralized because whales will earn more rewards by staking more ETH, disregarding the point that mining is a zero-sum game where the small fish get priced out by bigger players with bigger mining rigs.
Now that Ethereum is in the home straight toward Proof-of-Stake, the market has decided to turn bullish, and the Bitcoin purists have directed more hate toward it. Without a doubt the most desperate move has been the Bitcoin community’s ongoing discussions over ETH’s possible security status. Saylor has insisted that ETH is a security on multiple occasions, while Natalie Brunell, another Bitcoin-only HODLer who entered the space only two years ago, appeared on Fox Business over the weekend to echo Saylor’s mantra.
The frequent calls to regulate ETH go back to Ethereum’s Initial Coin Offering in which the Ethereum Foundation raised $18 million worth of Bitcoin in an ETH crowd sale. Critics argue that ConsenSys, the Ethereum software company behind the ubiquitous Web3 wallet MetaMask, scooped up millions of dollars in ETH and now controls the token supply. After the Ethereum ICO, Gary Gensler suggested that ETH could be classified as a security at an MIT lecture. In 2018, then-SEC Director of Corporation William Hinman declared that neither Bitcoin nor Ethereum were securities, but Gensler revived the debates last month when he said that Bitcoin was crypto’s only commodity. The SEC also labeled nine Ethereum-based tokens as securities in an insider trading case against a former Coinbase employee (the SEC is reportedly investigating the exchange over its listings). Some have pointed out that appealing to the SEC chair to regulate ETH is about as anti-crypto as it gets, but that hasn’t stopped the so-called “community” from doubling down on its calls to the U.S. agency.
While Ethereum is about to undergo a big change, so far there’s little evidence to suggest that it will be classified as an unregistered security post-Merge. Whatever the update brings, it’s hard to escape the problems it has exposed in the oldest cryptocurrency community. Ready to attack its competitors and run to a government agency for help with preserving Bitcoin’s supremacy, the community is lost and fading into irrelevance in 2022. If Bitcoin is to thrive, its believers must shun Bitcoin maximalism and support all genuine efforts to strengthen individuals’ sovereignty. Because in its current state, Bitcoin is starting to look like a pet rock led by a community that even Satoshi would be ashamed of.
Disclosure: At the time of writing, the author of this piece owned ETH and several other cryptocurrencies.
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