Earlier this week, Coin.fyi writer Cole South published a post about why he stopped using Bitcoin HODLs that are producing some animations. Twitter discussion. So it seemed important to provide a quick look at some of the arguments for the South from a Bitcoiner’s perspective. Of course, I don’t expect to change the mind of the South and get him to buy back, but I think the response is worth it so that onlookers can understand the difference in mindsets. Southern text will be in group quotes all the time.
“Productive Assets vs. Pet Rock Assets
In general, I try to own assets that have real demand/utility/cash flow for the end user on assets that are strictly dependent on market supply and demand.”
I think this is a category bug. I offer bitcoin in a separate category from stocks, bonds, or physical real estate. They pay dividends, coupons, and rental income, while Bitcoin has to be valued based on its qualities like money. I see Bitcoin as having monetary qualities that make it excellent money, in terms of things like rarity, portability, and durability.
Viewing Bitcoin as a “non-productive asset” is a misframing because we really have to think about why we keep the money after all. For example, in “Reconsideration of Return on Money Held” by Hans-Hermann Hoppe, the point made is that holding money allows us to reduce uncertainty in the future. Money itself is not meant to have a “return,” but that does not preclude lending under a full reserve banking standard.
The South acknowledges some of this here:
“Bitcoin has done a great job winning the “digital gold”/store of value asset class.”
But I’d say that doesn’t give Bitcoin enough credit, redeeming money plus some of the world’s current value stores (bonds, stocks, property) gives it a huge potential market. Even with the “envelope back” numbers, we were talking about $120 trillion in global fiat currencies, divided by 21 million coins, with a value of about $6 million per bitcoin. Colloquially speaking, once we add that Bitcoin may “suck up some value” from bonds, stocks, and even property around the world, we’re talking above $6 million per BTC number.
Thinking in terms of expected value and bets, you will evaluate the probability of this outcome and then buy an amount of bitcoin accordingly.
“Bitcoin will face serious security and decentralization issues.”
“The block reward earned by miners securing the bitcoin network is halved every 4 years. By 2140, there will be no block rewards at all… but it is becoming more and more entrenched in “there are and will be only 21 million bitcoins” with A society that is very resistant to change. Without modest inflation or a significant reversal in attitude toward actual dealing with Bitcoin, it is hard to see how Bitcoin can maintain security and decentralization.”
Bitcoin is still quite young in its public life and adoption. The point at which 99% of the coins have been mined will occur sometime around 2035, which is still about 13 years from now. My view is that because bitcoin is better money, the demand to own it will grow rapidly during that time, especially in a world where people need a way to save themselves from rapidly inflating fiat currencies. Block support in terms of mined value will continue to rise, and on-chain transactions that pay mining fees should rise over time.
Once more people have a bitcoin balance, it will be more natural for them to spend and receive bitcoin locally. And of course, there are people today who live on bitcoin and transact regularly, whether they are participating in CoinJoins, opening and closing Lightning channels, using bitcoin for coupon sites or buying things directly with bitcoin.
“Environmental, Social, and Governance Concerns It Will Be Hard for Bitcoin to Shake”
It’s worth noting that much of this is due to shitcoin-sponsored attacks, such as Ripple founder and CEO Chris Larsen publicly sponsoring Greenpeace USA and the EWG with $5 million to pay for the “Change Token” campaign. or the World Economic Forum post on ESG with collaborations from the likes of Andreesen Horowitz, CoinDeskthe Ethereum Foundation, Ripple, and the Stellar Development Foundation – all are chitcoins or have chitcoin links.
“Ethereum on the other hand has a very clear answer to this problem: it is moving from Proof of Work to Proof of Stake”
The problem is that Proof of Stake is simply not secure. It is a political system, not a technical answer to the question of how the network can remain decentralized and agreed upon. I discussed with Gigi on a recent episode of the podcast why this happens. Also, I highly recommend Gigi’s thread here: “Failure to understand the proof of work is failure to understand Bitcoin.”
“No matter how clean Bitcoin is, or how accurate/inaccurate the environmental concerns are, I think it will continue to face this criticism.
Maybe, but even here, it will affect bitcoins but not the bitcoin network. Crazy jurisdictions that don’t see meaning will lose those that do. Perhaps there is a swing side to this, as rich countries believe socialism can work, and increasingly support crazy policies like “net zero” and the big welfare state. Even within the United States, we can see markedly different treatment of bitcoin mining when comparing, for example, New York State to Texas. Not to mention the notion that even though major mining is banned in China in 2021, there are underground/pirate mining operations in China, with It is assumed that 5%-16% of the global hash rate is still coming from China.
“The Bitcoin Society Isn’t Pro-Capitalism”
of course no! Bitcoin in general is very supportive of capitalism. Discrimination is more about being hostile to space scammers and scammers. It is especially worse when the trade-offs or risks are disguised by the creators and promoters of altcoins in the name of pumping out their projects.
“Bitcoiners have generally been hostile towards new coins and anything that generates wealth for a creator…”
Here I think there is some confusion going on. People confuse things as if “you shouldn’t criticize the people who build”, when in reality these people can only build scams or scams of very dubious value. They can generate a token when there is not enough justification to create a floating token.
They can build products and services that charge a fee, or they can issue shares or debt. Instead, token pumping allows the broken VC model to have faster “liquidity events,” profiting insiders at the expense of uninformed or uninformed retail users.
“We know how it ends: innovation, progress, and economic rewards end up with the capitalists.”
Entrepreneurs, investors, and employees of Bitcoin companies (and community contributors and open source) are innovating, but on a much more difficult and honest path. They generally do not have the luxury of working in companies and environments that suffer from overfunding.
“Bitcoiners have been incredibly resistant to change…”
In some things, this is a feature, not a bug. Bitcoin should be seen as a monetary technology. The technology part is important, but the financial part is arguably important more important. This is the creation of a new money that combines the idea of selling gold through time, and fiat currency that can be sold through space.
“If BTC adds modern smart contracts and has a long-term inflation scheme to secure the network, I think it could catch up in the tech arms race.”
As noted above, some Bitcoin users see “smart contracts” as unnecessary. as my friend Petstin He says, “dayenu,” or “that would have sufficed.” That is, it is enough for Bitcoin to bring rare, non-governmental, non-commercial and non-individual funds into the world.
Other Bitcoin traders believe that additional functionality can be introduced to Bitcoin, but in more powerful ways that do not infringe on the ability of HODLers and “money-only” Bitcoin customers to do what they want to do.
And let’s be clear, Bitcoin already has multiple signatures, CLTV (CheckLockTimeVerify) and CSV (CheckSequenceVerify), which are types of contract ability, but are less expressive than altcoin nodes. In terms of pathways to more capabilities, there is currently discussion in the community about vows and what kind of pledges Bitcoiners accept. This includes several proposals such as CTV or OP_TX.
Given its broad and long-term scope, Simplicity is an example of a low-level programming language with greater flexibility and expressiveness than the current Bitcoin Script. It will require a soft fork, but that’s for a future discussion.
“Historically, a lot of the narrative around Bitcoin has been that it would act as something like an inflation hedge, a bear market hedge, or a currency.”
I don’t see bitcoin as a short-term inflation hedge, in fact it’s like the base layer for a new stock-based financial system. Of course, since it has better monetary qualities, I think it will protect against inflation on longer time scales, usually four years or more.
“If I am going to own a crypto asset and have the market place it in that pool, I want to own the asset that is more like a technology company with innovation and end-user demand (ETH, not BTC).
I’d rather carry what I think is going to be money. Also, a company that looks like a tech company can’t claim to be decentralized very well.
even in Vitalik Buterin is now expressing his concerns and desire to see Ethereum become more like Bitcoin. The sheer complexity and technical debts of Ethereum make it difficult to maintain its veil of decentralization.
Bitcoin’s development and advancement is more of a “bottom-up” approach, with major changes requiring the Bitcoiner’s “chaotic mob” agreement. The ecosystem generally prefers to test things in low stress environments like side chains, testnet/regtest/signet, and prove things through incremental real-world experience.
Are you sure you’re on the right track, Cole?
This is a guest post by Stefan Levera. The opinions expressed are their own and do not necessarily reflect the opinions of BTC Inc or Bitcoin Magazine.