It’s strange to say, but after more than a decade of existence, there’s now some agreement on what Bitcoin is.
Bitcoin is compared to “digital gold” by hardcore Bitcoiners, who see it as a safe-haven asset whose primary use case is hoarding. Even those who aren’t really interested in it tend to accept the story. There isn’t a day that goes by without some famous investor opening on TV, stating things like, “We believe Bitcoin is a rising store of value, which, like gold, can play a significant part in a diversified portfolio.”
Nobody even mentions how it isn’t used in everyday transactions. Or how it’s either too slow or too volatile to be helpful as a medium of exchange. All of this is true, but these are old talking points. The HODLer story has mostly triumphed.
Of course, some scoff at the notion that something so turbulent could be deemed a safe haven. After all, it has had repeated 50% or more drawdowns, including most recently.
On the other hand, you have to give credit where credit is due. Despite having no backing, a roughly $1 trillion asset has been memed into existence.
(At this point, someone will argue that I’m mistaken and that Bitcoin is backed by power and math! That, however, is incorrect. Electricity and math protect the Bitcoin network. The terms “secured” and “backed” are not interchangeable. You have no right to exchange your Bitcoin for anything.)
The truth is that nothing fundamentally underpins the value of Bitcoin other than certain people’s conviction that network space is important. (The blockchain can be compared to a large, decentralized spreadsheet, and a “currency” can be thought of as a unit of space on it.)
Bitcoin’s value has been memed into existence, as I explained earlier. People naturally think of Dogecoin when they think of memes and currencies. Bitcoin, on the other hand, is a meme coin. It’s simply that one of the great memes out there is about digital gold.
Bitcoin has a slew of ridiculous memes, such as the Magic Internet Money magician.
Apart from being an excellent meme, Bitcoin and gold share a few other characteristics:
It isn’t used for much other than holding. Yes, gold may be used to manufacture jewelry. It also has certain industrial qualities. However, the majority of people regard gold as a financial asset.
There is no such thing as a Saudi Arabia of gold (or Bitcoin). Both may be found almost anywhere on the planet. Unlike, for instance, oil, no single location on the planet has a remarkable abundance of it.
Both need a lot of energy and are tough to mine.
Gold’s supply schedule isn’t as rigid as Bitcoin’s, but barring a gold meteor colliding with the Earth, the overall amount of gold on the market is quite predictable.
The origins of bitcoin and gold are both magical. Satoshi Nakamoto is the founder of Bitcoin (plus numerous other religious parallels). Because gold did not tarnish, the ancients regarded it as divine.
You can agree or disagree on Bitcoin’s haven qualities once more. But that’s how an increasing number of people see and utilise it.
Of course, disagreements have always been a feature of Bitcoin and cryptocurrency in general. There have been several schisms within Bitcoin regarding where it should go and how it should be used. And, of course, tens of thousands more coins have been launched over time, each with ostensibly distinct goals or objectives.
The Blocksize War, which raged from 2015 to 2017, was sparked by one faction’s desire to modify the code to make Bitcoin more of a spending currency. Without getting too technical, the network can only process a certain number of transactions per second at the base layer. By increasing the size of each Bitcoin block, several miners, exchanges, and other firms pushed to make base-layer transaction throughput faster and cheaper.
That appears to be harmless. enough, but if you’re wanting to be “digital gold,” making major modifications is a dangerous proposition. Consider tinkering with gold’s atomic structure to make it even more lustrous. That may appear to be the case, but is it the same gold that people have trusted for thousands of years? Adding extra capacity was considered by many in the community as a danger to the network’s decentralization.
How does increased transaction capacity jeopardize decentralization? One of the community’s key beliefs is that everyone, wherever on the planet, should be able to run a full Bitcoin node capable of downloading and monitoring the whole network. That way, anyone can independently check what’s happening on, such as how many coins are in circulation, how many transactions have been made, and so on. This can be done right now on almost any low-cost PC. However, if the base layer becomes too large (i.e., if too many transactions accumulate), it may become too expensive to download and monitor, limiting the number of nodes available.
While this was a technical battle, there were also political undertones, with both sides suspecting that some people were aiming to control the network for their own ends. In the end, Bitcoin remained essentially untouched. Some minor adjustments were made, but nothing drastic. The basic Bitcoin development ethic is, in general, quite conservative and resistant to change, which is the polar opposite of Silicon Valley’s “move fast and break things” mindset. It’s not about iteration indefinitely. If your only goal is to be gold, this is probably reasonable.
Of course, some individuals are intrigued by Satoshi’s achievement — which established the potential to create decentralized scarcity online for the first time — and wants to do more than just create something to keep. Some people wish to use this technology in some way. Being truthful is understandable.
Vitalik Buterin, who published the Ethereum white paper in 2013, argued that a blockchain could do so much more than simply be a money database with some tweaks, was one of the people who wanted to do something with this technology. Among other things, his idea featured a repository for identities, decentralized file storage, and financial derivatives. Basically, the paper started a lot of what people are interested in accomplishing today with Defi, NFTs, DAOs, and other topics (all of which we’ll return to).
Cryptocurrencies vs. Tokens
Both Bitcoin and Ethereum may be defined as the official currencies of two distinct digital tribes in some ways. Both currencies are clearly owned by a large number of people. And what you’re about to read is a broad statement. There is, however, something to it.
Bitcoiners have a strong preference for adversarial thinking. Nobody can be trusted. Did you purchase your Bitcoin on a cryptocurrency exchange? Remove it from there as soon as possible and move it to your own wallet to avoid any counterparty risk. Run your own node to keep a close eye on the network. The laser-eyes joke has been popular among Bitcoiners on Twitter in recent months.
It’s “Bitcoiners vs. The World,” as influencer Anthony “Pomp” Pompliano recently phrased it. Bitcoiners are wary of banks. They have a deep aversion to central banks. Bitcoin purists argue that you should treat everyone as though they’re con artists. Satoshi’s disappearance is critical to the Bitcoin movement because if he were still alive, some people would trust his judgment. Bitcoiners consume a lot of meat as well. That has nothing to do with trust; it’s merely a reality about the tribe. That has nothing to do with trust; it’s merely a reality about the tribe. That isn’t universal by any stretch of the imagination, but it is a thing.
Ethereans are unique. Their creator is still alive and well, and he wields considerable power. Vitalik Buterin’s eyes aren’t lasers. He has, however, been photographed wearing T-shirts with kittens on them on multiple occasions. He consumes a lot of coconut, dark chocolate, nuts, and avocados instead of meat. Uniswap is the largest decentralized crypto exchange on Ethereum, and it has a quirky unicorn-themed design. There will be no macho bro talk. Some Ethereans responded to Pomp’s tweet about Bitcoiners vs. the world by saying their mission is to be for the world, some Ethereans answered by stating their mission is to be for the world, and some Ethereans responded by saying their mission is to be for the world, not versus. the world. Everywhere you look, there’s a different feel.