It was just a few weeks ago that the community was flying high, the price was furiously making new highs, euphoria was in the air, and it seemed like (to some at least) we were on the brink of the next great Bitcoin bubble. Yet, to this author, something did not seem right.
That was around the time I put this post together:
While the post primarily focused on both technical and fundamental analysis (mostly technical), it did indeed seem like something was just “not right.” And one of the 3 bearish catalysts I was intuitively watching for was the escalation of “BU FUD.” Yet, at the time of writing, there were not many worried about this, heck, the block-size debate was nothing new for anyone following Bitcoin. Right?
We’re all learning
— Meltem Demirors (@Melt_Dem) February 8, 2017
Sure, in the early days, we all thought Bitcoin was this magical, unicorn type of thing that could solve every problem. I’ll admit it, even I was naive, and I too thought Bitcoin could solve world hunger 😂. And then–gradually over time–I learned what Bitcoin really was, how it actually worked, and what *really gives Bitcoin it’s value.
The key thing I eventually learned, was that Bitcoin can not do everything for everyone. At least not as it exists today. Now, I do believe that ultimately, layers built on on top of Bitcoin, or crypto-currencies as a whole, or some combination of the two CAN do everything for everyone. Well at least in some senses (no not world hunger). What!? Alt-coins sticking around say?! The horror 😱 Roger was right! We’re all DOOMED! Anyway, for those less informed on the different trade-offs involved, it might be worth reading this piece by Charlie Lee, Director of engineering at Coinbase, and creator of Litecoin, titled “Eating the Bitcoin Cake”
In this piece, Charlie eloquently describes the reality of Bitcoin, and it’s trade-offs, with an ingenious metaphor of “Satoshi’s Castle.” We all have our own unique ways of describing bitcoin, but what’s often missed is that there are no free lunches (except in the case of Dorian Nakomoto 😉). Bitcoin’s security is not without cost. Censorship resistant, immutable/irreversible transactions can only be possible through decentralization, and thus must necessarily have a cost. Decentralization is inefficiency, inefficiency is the price we pay for such a valuable, never before possible, method of transacting and storing value.
The sky is falling!
What I find quite comical…is the sentiment of people like Bruce Fenton that are just absolutely distraught, hysterical, and horrified that what a group of optimistic, excited, redditors in 2013 thought was possible in Bitcoin (essentially free transactions stored on every node) is not the current reality of Bitcoin, and how this means “ROME IS BURNING” as he put it. You know, as the price was shattering all time highs. And again, there was a time I was a part of this group, until I learned how Bitcoin worked, why it was important, and what made it valuable.
Well guess what Bruce, I have some news for you, a more appropriate sentiment here is “Rome wasn’t built in a day”
And the Lightning Network (which can be enabled once Segregated Witness is adopted), in my humble opinion, is the single most exciting technology in crypto. With the LN, Bitcoin can be everything for everyone, we can have our cake and eat it too, not to mention, we can eliminate the ability for exchanges to steal or lose funds, this is huge! But-but off-chain! Not Bitcoin! Well, that is silly, it would be off-chain in a good way. Transactions that were already off-chain and done through exchanges will involve even *less trust. And we can do micro-transactions! It’s not as if we can do micro transactions now. And every transaction is eventually settled *on the blockchain. But anyway, this post is not about the LN.
I will add though, that this path forward just makes perfect sense, an under-appreciated fact is that as it stands today, no one buys Bitcoin to use it for payments! And can you blame them? The price is insanely volatile. Why would you ever want to use it for such a thing, even if Starbucks actually did accept Bitcoin (which they don’t!). Here is a satirical tweet playing on both this, and the stupidity of using the $ value of fees as a metric (which by extension, is measuring the price of bitcoin):
In other news, $ value of tx fees is dropping like crazy yay! I'm go go buy a coffee at all the fictional Starbucks's that accept Bitcoin!
— btc_joe (@btc_joe) March 17, 2017
(The price of bitcoin was crashing)
SOV is driving demand, lets be honest with ourselves
This became a self-fulfilling prophecy from 2015 on when the MSM started covering it as such. What’s driving demand in Bitcoin today, is the people who are trying to protect their families wealth in countries with collapsing currencies, and speculation based on such. Digital gold. It is the same reasons people buy real gold (multi-trillion $ market), yet arguably better in that it’s weightless and can be transported anywhere in the world at a fraction of the cost, or even simply as a password in your head when you get on a plane…”hey let me check those bags for Bitcoin sir” /s
As Bitcoin grows in value for these reasons (and there is no doubt it will if we keep it decentralized), it will get more liquid, and in turn more stable in price, and this virtuous cycle will make it much more appealing for payments. So what’s the god damn rush? Let the LN develop, who are these imaginary people dying to use Bitcoin for payments *today? They don’t exist. On the other hand, the people in Venezuela are very real.
Back to my article (feel free to give it a read if you wish). At the time, something just didn’t seem right. The block-size debate is nothing new. We’ve had Bitcoin Classic, Bitcoin XT, etc. I don’t know what it was that was off. It almost seemed like there was this weird inverse relationship developing between the price of Bitcoin, and the insecurity of the BU crowd. If you even want to call them that. BU is essentially two big Chinese ASIC producers, Roger Ver, and a few other people who can be counted on one’s hand.
There really are no two “sides” if you think of this in terms of the # of minds involved. The BU crowd is just really loud, and Ver can throw his money around to make points. He can pump Dash, he can hire his r/btc trolls, etc. There is really *no part of the respected technical community on the side of BU. And do we really need any proof of this? These are the guys who are supposedly going to be in charge of a 20 billion $ network:
— Matt Corallo (@TheBlueMatt) March 21, 2017
It’s a fricken joke. A travesty, a sham, and mockery, it’s a traveshamockery. Which brings me to my next point. I mentioned early what drives value in Bitcoin. But I left out another key point. Some have said that a reason to invest in Bitcoin, is that it’s essentially the largest Research and Development project in the world. And that’s true. I recently highlighted the term “Intellectual Capital” on twitter. If you think this is not a part of Bitcoins value, and part of why there is trust in this monetary experiment, I have a bridge to sell you. A good tweet from economist/researcher Tuur Demeester today:
Badass Bitcoin Core Developer Facts pic.twitter.com/oFEAyiltvy
— Tuur Demeester (@TuurDemeester) March 21, 2017
But, back to this inverse relationship between the Bitcoin price and the insecurity of the BU’ers, as few and far between as they are (in terms of minds, not capital expenditure in metal boxes). Here is another good one from the brilliant Bruce Fenton as Bitcoin was peaking:
@alansilbert Don’t get too psyched about the price /–99% of buyers / holders have no clue about the very very serious issues we face.
— Bruce Fenton (@brucefenton) March 8, 2017
Think about the psychology of this tweet. When he said this, it went under the radar, I thought it was pretty astonishing. Who are buyers/holders? Ehrmmmm. Us. The bitcoin community. In other words, you wise, 1% know much better than us, who collectively give value to the unit of Bitcoin. What? This is insanity. This tweet in combination with the “Rome is burning” tweet inspired a tweet of my own that later followed:
In no way shape or form is the sky falling unless you married a particular manner/path in which Bitcoin would grow https://t.co/jqij8snbSQ
— btc_joe (@btc_joe) March 6, 2017
But I want to stick to this inverse relationship I noticed, because it really is a common theme amongst this minority of minds called Bitcoin Unlimited. And also corroborates that this is really not about the block-size, or fees, but rather control over bitcoin. But we’ll get back to that later. Now Roger Ver. Roger likes to live in his fantasy/hypothetical world, and dropped this statement that has sent Irony futures prices through the roof:
The damage caused by Core's intentional fee market via full blocks has already likely damaged Bitcoin's market cap by billions of dollars.
— Roger Ver (@rogerkver) March 19, 2017
No, Roger, sorry, there’s NO evidence or logical reasoning to support this wild claim. And he had a lot more tweets like this throwing insults at the very intellectual capital that has made him rich, and miraculously kept this experiment running quite smoothly in the midst of a 20 Billion $ hacker’s bounty. But ya, I’m sure BU is totally competent to do the same, even if we assumed all the other ridiculous assumptions about this hypothetical demand for payments existed today. My retort:
Only in a backwards world could a group of hijackers create FUD, reverse the price, and claim btc's success depended on them all along.
— btc_joe (@btc_joe) March 18, 2017
And the inverse relationship still held after Bitcoin subsequently crashed under $1000 in response to this hijack attempt. Here is Rick Falkvinge (who I am actually fan of otherwise), but who knows nothing about Bitcoin. The celebrations came out of the shadows as the price deteriorated.
Last 24h #bitcoin blocks have 43% for Unlimited and 8% for 8MB. CORE 1MB IS NOW A MINORITY. Good job, everyone working for improvements.
— Rick Falkvinge (@Falkvinge) March 19, 2017
Because, at the end of the day, for these people, its not about bitcoin succeeding/growing in whatever path makes the most sense. It’s about it succeeding according to their path, or what benefits them most. A good thought experiment on this is: if they really believed there was demand for Starbucks Coin, wouldn’t they have launched it as an alt coin a long time ago? But it’s not about that, it’s about hijacking the value that Bitcoin has already created, for the reasons described extensively above, and guiding it in a direction they please. Which whether they know it or not, will *inevitably lead to a centralized Bitcoin, which is really an oxymoron. This is why it is all too clear that Roger and Co. have teamed up with Jihan. They think, the enemy of my enemy is my friend. Their interests are aligned.
And so they spew they same old rhetoric, which is laughable, that “Bitcoin development” is centralized, when the reality is that the current bitcoin development is what has *kept bitcoin decentralized.
Deception: core is centralized we need another group to take over. Wrong. Core is the group that has KEPT Bitcoin decentralized. Morons.
— btc_joe (@btc_joe) March 18, 2017
Of course, if Core ever violated these properties I would be all for another group taking over, and it would inevitably happen.
To me it was already becoming clear that Bitcoin Unlimited is literally a coup attempt on bitcoin even before I saw this tweet storm by Andrew Desantis:
— DeSantis 僧兵 (@desantis) March 18, 2017
Or Vinny Lingham’s excellent posts:
Wrapping things up.
Bitcoin Unlimited is not about the block-size debate. It is about taking control over Bitcoin for those who are horrified by it going to the moon without them steering the ship. There is absolutely no long run value in a Bitcoin Unlimited chain. The millions of $ invested in Metal Boxes (as Samson Mow recently put it in a clever simplification) does not make something valuable, and if their makers do not take heed, POW will be changed.
People that making a living building small metal boxes shouldn't throw rocks at people that write the code which makes those boxes valuable.
— Samson Mow (@Excellion) March 21, 2017
A Bitcoin Unlimited chain is really more aptly described as ChinaCoin as Michael Krieger recently suggested:
What transactions would be allowed on ChinaCoin? Can we be sure or even confident that, at a certain point down the line, the powers that be will not opt to change the monetary policy of this so called “Bitcoin?” The whole idea is utterly ridiculous.
I agree with Vinny Lingham that the market will respond appropriately to these ridiculous prospects. And while it’s all nice and great to think of this as some weapon we are using to save bitcoin (I mean in some senses it is true), I think a better way to describe what is coming is the market simply reacting appropriately.
But I also feel confident that–given we all emphasize what makes Bitcoin important/valuable–we can and will eventually avoid this potential Tragedy of the Commons. The moon is not out of reach, but the market must clean things up first, and put an ! on what makes Bitcoin valuable before the phoenix can rise from the ashes yet again.