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What is Bitcoin Maximalism?

by | Jan 26, 2019

This is part 1 of a 2 article series explaining arguments surrounding the Bitcoin Maximalism vs. Crypto Pluralism debate. Stay tuned in our social communities for the next article to drop in the coming weeks!

Introduction to Bitcoin Maximalism

In the cryptocurrency community there is a stronghold of people that wholeheartedly believe that Bitcoin is the only true cryptocurrency and blockchain. They believe that it is the only cryptocurrency that will not only survive, but also be adopted worldwide as the predominant global currency – as a medium of exchange AND store of value. They will only support a roadmap that achieves that goal and all of their focus and attention is directed towards that goal. They will ignore, not support, or even go as far as openly criticize any altcoin, because they believe those are harmful to Bitcoin’s progress. They believe that everybody should only support Bitcoin because that’s the best strategy we have of creating a healthy crypto ecosystem with less scams and the most secure global blockchain network! I am talking here about Bitcoin Maximalists or Bitcoin Maximalism. Interestingly enough, the term was jokingly coined by Ethereum founder Vitalik Buterin, but hardcore Bitcoiners have since then proudly accepted the moniker.

So what is Bitcoin Maximalism, what do its supporters stand for, and why do they believe what they believe? This article will serve as an overview of the Bitcoin Maximalist worldview. They stand in contrast with Crypto Pluralists, multi-coiners who believe and support a world where a whole range of cryptocurrencies and tokens will be adopted along with Bitcoin.

Why is Bitcoin so important to maximalists?

First, the core characteristic of Bitcoin that maximalists value the highest is its decentralized network for transferring or storing digital value (that would ideally also enable its function as peer-to-peer digital cash). However, decentralization is not the main goal in and of itself. It is a means to an end. Decentralization is crucial to achieve the following core critical properties:

  • Permission-less: no permission needed to participate
  • Censorship resistance: no one can stop you from making a transaction
  • Non-confiscatable: if responsibly stored, no one can confiscate it without your personal cooperation.
  • Trustless: no trust in a 3rd party/middleman needed
  • Self sovereign bearer asset: no single outside entity controls it, the asset is personally held.
  • Hard money: there is a capped amount of Bitcoin that will ever exist. You can never create more after it reaches its limit.

To achieve these goals, the network needs to be secure enough to reach the level of trust needed in the state of truth of its ledger against any bad actor that could potentially destroy its valuable properties. Security is achieved via the Proof of Work algorithm, which rewards miners, who have spent physical resources (energy and equipment) in maintaining the network and providing security, with newly minted Bitcoin. The cryptocurrency Bitcoin is therefore inherently needed as core function to guarantee the security of the ledger that is built out of a chain of blocks (commonly referred to as the “blockchain”), each block containing newly verified transactions. When the network agrees on the latest state of the ledger, the block with transactions is propagated on the network to the rest of the validating nodes, so that the latest state of the ledger is sufficiently distributed.

It is this revolutionary innovation for the digital age that solved the double spending problem (originated from the previously unsolved Byzantine Generals problem that computer networks and systems were subject to). Until Bitcoin, transfer of value could not be done digitally without a central, trusted, third party that could maintain a ledger and validate the transactions. This is because any message representing a transaction can easily be copied and sent to others if no one validates the state of balances to make sure that the transfer did not already occur. Bitcoin’s blockchain can reliably record the transfer of a digital asset without the need for a central authority to validate the transaction. Proof of Work is the innovation that provides true digital scarcity by tying the “production” of new Bitcoins to the real physical world.

Other features (such as cheap, instant transactions) or more importantly, critical infrastructure can eventually be built on top of it, but it first needs to build the trust required for that. So far, the network has been operating uninterrupted for 99.9% of the time in the past 10 years, but it is still in an infant state of development and may need another 10 years to ensure globally that it is safe enough to actually build critical infrastructure on top of it.

The Roadmap for New Money Paradigm

In general, most maximalists think that Bitcoin’s adoption will go through the following major stages, based on what they believe is the progression for any new form of money (as described in “The many faces of Bitcoin” by Murad Mahmudov):

  1. Collectible
  2. Store of Value
  3. Medium of Exchange
  4. Unit of Account

In the very early days, Bitcoin did not have much economic viability yet and was only something “cool” to have for the small niche of tech geeks and tech-savvy libertarians. As time progressed and the functionality of Bitcoin was demonstrated, the value and liquidity increased astronomically. As a result, many more people now believe in Bitcoin as a form of money, and we can clearly see that we are moving towards the “store of value” phase where enough people believe in its fundamental properties that they are prepared to store value with it and keep (HODL) Bitcoin over a longer period of time. An asset can be perceived as a store of value if the people holding the asset believe that within a reasonable amount of time, it will either hold its value or appreciate in value, meaning that its value can be utilized to make purchases in the future. Short term, it is clearly not yet suitable as a store of value, but long term it is supposed to be building confidence with its users that value stored on its blockchain will be convertible to a similar amount of value in the future. In short: can I buy the same amount (or more) of pizza in a few years as I can today with this amount of Bitcoin?

It is also here where there are opposite views within the Bitcoin community about what actually comes first (and what they should prioritize): phase #2 or phase #3. Generally, most maximalists think that establishing a form of money as store of value comes before it can be adopted as medium of exchange. This is why the scaling debate usually favor conservative approaches that are more geared towards the store of value aspect.

(Here is also where the tribes within the Bitcoin maximalists movement differ in opinion: some argue that medium of exchange (fast, cheap transactions and merchant adoption) is the priority over store of value, which ultimately led to the community split in the Bitcoin Cash hard fork. They believe that creating bigger blocks solves the short term congestion of the network so that transactions can remain cheap and fast, enabling merchant adoption and small payments by consumers. The majority of these maximalists are now part of the Bitcoin Cash community (which has since split into the ABC and Satoshi’s Vision chains). Maximalists that believe store of value currently has priority are still in support of the “real” Bitcoin (BTC/XBT), where real can be defined as the chain with the most accumulated “work”.)

Following the acceptance of Bitcoin as a valid store of value, the use of the Bitcoin as medium of exchange should grow organically. However, Bitcoin as a medium of exchange will also be enhanced by technological advancements, such as 2nd layer solutions (Lightning Network, sidechains), which take workload off the primary blockchain for smaller transactions. After this happens, more and more people would be willing to utilize Bitcoin in everyday transactions. This can only happen when the majority of value growth has already occurred, because before that, spending Bitcoin would mean missing out on future profits. But when the value growth decreases over time, willingness to spend would increase. Spending and receiving Bitcoin would still mostly occur on a fiat value basis for goods and services, meaning prices will be determined in fiat value (USD) at the moment and the equivalent value in Bitcoin will be exchanged.

Once this phase of adoption has matured well enough and Bitcoin as medium of exchange is generally accepted, the expectation is that the market value of Bitcoin needs to have grown to such magnitude (justified by enormous trading value), that it becomes increasingly more difficult to move the price of Bitcoin in either direction. At this point, volatility should also have decreased enough that Bitcoin can also realistically serve as unit of account, meaning that businesses and consumers can agree on prices primarily denominated in Bitcoin or satoshis.

This is the path that many Bitcoin maximalists generally envision as the most realistic way towards mass adoption of Bitcoin as (alternative) world (reserve) currency. However, this can only be achieved if indeed the Bitcoin network attracts enough participants on its network and its core principles and properties remain unchanged. If the core properties are tampered with, this will result in its fundamental value being broken. If people are being diverted into fundamentally broken cryptocurrencies and end up getting burned, that will lead them to lose faith in Bitcoin as well, which will delay mass adoption or even prevent it if critical mass can’t be reached. Maximalists believe that humanity will have only one shot to reform finance and economics, and that by adopting a permission-less, self sovereign bearer asset that can serve as an opt-out of traditional finance is the best chance to do so! Bitcoin is the best shot to achieve this reality, but if we waste this opportunity, we won’t get another chance, because no one in future will have enough faith in such an ambitious endeavor again.  

Another argument that Bitcoiners believe to be applicable in the road to mass adoption is the Lindy Effect – the longer that some (non-perishable) thing exists, the longer it is expected to continue to exist. The theory says that by surviving a long time, that thing becomes more anti-fragile and therefore their chance of further survival increases. This seemingly applies to Bitcoin, because it is becoming more and more anti-fragile by staying out in the open and being under attack constantly. Over time, its security (total hash power) has also increased, which also means that every time it survives attacks, people will start to trust it more and more, hence fortifying its position and increasing its life expectancy.

The Maximalist Position Towards Altcoins

So then why are Bitcoin Maximalists so opposed to altcoins in various degrees of intensity?

The larger subset of Bitcoin Maximalists generally holds the following views (edited from a tweet of Saifedean Ammous @saifedean, the author of “The Bitcoin Standard”):

  • The Bitcoin blockchain network has the highest level of security against malicious attacks, the longest track record, highest brand recognition (even in the world of traditional finance), it is the most adopted and most decentralized (on various levels, such as mining, development and leadership). These properties are going to be extremely hard to be exceeded or even be replicated.

  • Only reason altcoins and altcoin scams exist is that they are parasites on Bitcoin & Bitcoiners, to the point where they have succeeded in convincing ignorant people that Bitcoin and altcoins are all part of the same “space”. Many of those scams also falsely claim to be the “next Bitcoin” that is going to make the investor rich quick, for whoever feels they missed the boat by not having invested in Bitcoin in the first years. These scams are obviously damaging for the reputation of Bitcoin.

  • No altcoin does anything that Bitcoin cannot do. No altcoin will ever be neutral money like Bitcoin. Alts are not invented to be money, but to make their creators rich, so they’ll always be controlled by the people behind them. They are not innovation in any shape or form similar to the innovation of Bitcoin.

  • The only way any alt can grow is if there is a team of full time con artists working hard to code, mine and promote it. So every alt is under the full control of a team of “scammers” (intentionally or unintentionally), which makes their entire use of Bitcoin’s decentralized design extremely ridiculous because of its contradiction.

  • Bitcoin matters not because it’s fast, cheap or easy (because that is subjective and can be competed against much easier even by traditional finance); but only because nobody controls it. It grew spontaneously in the wilds of the internet without a central planner. After it, no alt could ever recreate this, as there’s no spontaneous market for a less secure Bitcoin.

  • There is nothing wrong with a centralized competitor to Bitcoin. But there is something wrong with centralized altcoins adopting a highly inefficient decentralized structure purely to pretend to be Bitcoin 2.0.

  • It is trivial to build an exact replica of Bitcoin. It’s impossible to make that replica grow and achieve any traction without the creator being in control of it. But having someone in control defeats the entire purpose of it.

One of the reasons many Maximalists want to speak up against vaporware altcoins and scammers is that if their scams implode, like Bitconnect, then it will also leave a negative taint on Bitcoin.

Sidenote: Because indeed scams are extremely rampant in the cryptocurrency space and the above arguments against altcoins include pretty much at least 90% of altcoins, the warnings from Bitcoin Maximalists aren’t entirely unwarranted. Whether you are a Bitcoin Maximalist or not, you should always be extremely skeptical about any (coin, token an/or ICO) project other than Bitcoin, even if you would like to keep an open mind towards other forms of technical innovation.

Attack of the altcoins

Maximalists believe that Bitcoin is currently under attack of 1000s of altcoins that aim to take over Bitcoin’s leadership position. However, Bitcoin is expected to be attacked in many ways before it can be proven to be really attack resilient. Maximalists believe that Bitcoin’s inherent properties will defeat every altcoin in the long run and that the great majority will be sent to the graveyard eventually. Proving once again why Bitcoin will be the only coin to ultimately serve as a world currency with its network utilized as global infrastructure for decentralized, permission-less, and censorship resistant transactions (to which there may be other applications than currency alone).

Supporting altcoins in any shape or form takes away demand in the market that would otherwise have benefitted Bitcoin and resulted in a higher price. This is bad for Bitcoin but also for the ignorant people that are losing money in the process.

The ICO insanity that plagued the 2017 bull run caused an over-inflated total crypto market value, which had no other outcome than the severe bear market that has left a lot of bag holders disillusioned. Many of those bags will be dead coins of flawed projects that won’t ever recover. It will be hard to win those participants back, even to support a fundamentally strong Bitcoin.

The Silicon Valley “move fast and break things” mentality that exists as a culture in many alternative projects stands in contrast to the slow but thorough approach of Bitcoin’s development. Bitcoiners are confident that their approach will eventually achieve a much higher level of trust in their protocol’s fundamentals than most altcoins ever will. Altcoins might be able to catch a wave of hype, but the long term solid foundation of trust required for critical infrastructure, such as sound money, will be reserved for Bitcoin long term.

People are now investing a lot of money in computational power to mine other coins, which results in a fragmentation of mining power. If that computational power was invested in the Bitcoin network, the Bitcoin network would be even stronger (and thus more valuable). Instead, we have a multitude of altcoins that separately don’t have enough hashing power to resist malicious attacks on their blockchain networks.

Furthermore, many talented people that could have been developing for the Bitcoin network or ecosystem, by coding, engineering, building businesses or evangelizing, are now putting energy into projects that are 99% probable to fail. Instead, they could have been making Bitcoin stronger.

Some altcoin fans have also been smearing Bitcoin, claiming that its limitations call for a “better” coin to replace Bitcoin. They fail to appreciate that those “limitations” are actually its core qualities – 10 minutes block confirmation time, limited block size, non Turing-complete, etc. This behavior leads un-informed people away from supporting Bitcoin and thus jeopardizing the whole ecosystem.

The only acceptable way to interact with altcoins, in the opinion of maximalists, is not to hold them, but to actively trade them in order to increase the trader’s stack of satoshis (Bitcoin).

Bitcoin Maximalists believe that any altcoin is either a scam or doomed to fail, so by default, no altcoin could ever surpass Bitcoin. Another reason why they believe that competing with Bitcoin is a doomed effort, is because Bitcoin needs to stay a store of value in order to eventually become globally accepted real money. If another altcoin hypothetically succeeded in replacing Bitcoin as the dominant cryptocurrency, then no cryptocurrency could ever be a store of value. Because they would always have the potential of being replaced and hence lose its store of value characteristic.

In short: the wisest path forward is to support Bitcoin only because that’s the best chance we have of creating a healthy crypto-ecosystem with less scams while providing the most secure, decentralized, permission-less, and censorship-resistant blockchain network for any use case that inherently needs those core properties.

Bitcoin Radicalism

The majority of Bitcoin Maximalists primarily focus on advocating for Bitcoin while viewing the altcoin space with suspicion and contempt. That generally involves warning people about things they find unhealthy for the progress of Bitcoin, but that usually ends with vocal discussions at worst. There is, however, a small portion of maximalists that take a much more radical stance and view the altcoin space as toxic for Bitcoin and therefore should be eliminated by all means possible. This includes active attacks on these altcoin networks by hacking or performing 51% attacks to destroy those blockchains (called shark pools).

I think that it is a reasonable thing to distinguish between the average Maximalist that has pure loyalty to Bitcoin and has concerns about the existence of the altcoin space (or just doesn’t believe in the value proposition of altcoins vs Bitcoin) versus the smaller group that are more extreme in their beliefs and actions. It would be unfair to ascribe the actions of those extremists as the ideology of all Bitcoin Maximalists.

Final Thoughts

The moral compass of the reasonable Bitcoin maximalist is just that they are convinced that Bitcoin will eventually outcompete the altcoins and survive victoriously after altcoins fall to oblivion (for which the market will realize). It is still everyone’s choice under a free market to choose any altcoin and/or Bitcoin. The maximalist believes, however, that the market will teach that supporting, investing in, and standing by Bitcoin was the only long term wise decision to make. And even if Bitcoin will never reach its previous 90% dominance level ever again, the best choice and strategy would still be to only support Bitcoin.  

Hopefully this explanation about Bitcoin Maximalism gives a better understanding about the motivations of the majority of Maximalists. It is up to every individual if they want to agree or disagree with the concept of Bitcoin Maximalism. Despite the shenanigans of some Bitcoin maximalists, it is my opinion that the presence of Bitcoin Maximalism brings a needed balance in the overall crypto space against the unlimited exuberance over very risky altcoins. In fact, their efforts have helped identify real scams while also preserving the strength and further development of Bitcoin.

Disclaimer:

This article was written to the best of our knowledge with the information available to us. We do not guarantee that every bit of information is completely accurate or up-to-date. Please use this information as a complement to your own research. Nothing we write in any of our articles is intended as investment advice nor as an endorsement to buy/sell/hold anything. Cryptocurrency investments are inherently risky so you should never invest more than you can afford to lose.

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