An essay by Max Grünberg on the current state of Bitcoin politics.
On June 8 2021 a supermajority in the national congress of El Salvador approved president Nayib Bukele’s proposal to make Bitcoin legal tender, making it the first national government betting on the continuation of Bitcoin’s triumphal march in replacing the allegedly rotten monetary system. Unsurprisingly this news was ecstatically received by the wider crypto community. But it is more than ironic that legal tender, which has been so heavily attacked by their thought leaders in the past as a compulsory interference into the economic freedom of individuals, ultimately becomes the salvation as soon as it works in their favor. It is not only that citizen can pay their tax in Bitcoin, from now on Article 7 of the Bitcoin Law forces all economic agents in the state’s territory to accept Bitcoin as payment. Every street vendor in this corroded economy is now obliged to accept this highly volatile asset unless they are unable to provide the digital tools necessary to facilitate the transaction.
Why should a government have any interest in separating money from state control? First of all, El Salvador does not have an own currency. Since 2001 the country’s official currency is the U.S. dollar. In a decree addressed to congress, we get some more insight into the president’s counterintuitive rationale. There he states that ‘In order to promote the economic growth of the nation, it is necessary to authorize the circulation of a digital currency whose value answers exclusively to free-market criteria.’ The young president, who has been a successful entrepreneur in his earlier life, is certainly right that the only forces driving Bitcoin’s price action today are supply and demand. Leaving the staggering capital concentration within the Bitcoin network and the concomitant market manipulation aside for one moment, president Bukele seemingly does not realize that he betrays the gospel of free markets with the introduction of another compulsory law as he intervenes with its underlying principle, which is competition. When the Austrian economist Friedrich Hayek wrote Denationalisation of Money in 1976 as a treatise against the state monopoly over money and a call for a legislative framework to foster a competitive environment between private currencies, he argued that legal tender laws are an interference and unnecessary exploitation of state power as they would reduce the freedom of choice. Contract law would suffice to regulate the use of money between economic parties. A policy true to the free market ideology would have to abolish all legal tender laws, and not extend them.
Throughout his lifetime Hayek was haunted by the fear of the devaluation of currencies induced by despots and other incompetent government actors, which was undoubtedly caused by the trauma he experienced through the Austrian hyperinflation in his youth. The same fear of inflation became today a central puzzle piece in the rhetoric around the usefulness of Bitcoin. Hayek’s solution to the problem of inflation was the introduction of competing private currencies. An abolition of legal tender laws would ultimately result in a level playing field. In his view, this competition was staged around one central property, which is price stability. According to Hayek, economic actors desire nothing more than stable currencies as a basis for exchange and accounting. After millennia of state-led currency debasement, price stability would ultimately pave the path to mass adoption for private money and drive out the bad government money for good and lead society into a bright future with accurate price signals. This process of determining the most stable currency can only be realized through competition for Hayek and can never be known a priori. As for everything else, feasible currencies cannot simply be designed but can only manifest within the spontaneous order of markets.
Although most Bitcoiners see themselves in a direct lineage to Hayek, he would have despised Bitcoin for its price volatility and would have even rejected to call it money in the first place. And in fact, many Bitcoiners like Michael Saylor, founder of Bitcoin investment firm MicroStrategy, have stopped calling it money themselves, and shifted to other properties of money, and focus more on the aspect of a store of value by advertising it as digital gold. The only way for Bitcoin to serve as a store of value, however, is to nurture the narrative of becoming the world‘s currency, thus presenting the prospect of price going up. In a new commercial for a wallet named Coin Cloud, director Spike Lee recently sold his soul for a handful of Bitcoins by piggybacking on the diversity discourse advertising cryptocurrencies as the people’s money that finally breaks with the oppressive structures of the past which are so associated with the US dollar. With Bitcoin, the visually rich advertisement suggests, we will eventually have financial freedom for the masses, leaving no minority behind.
Without a doubt, Bitcoin has been one of the best performing assets of the last decade thanks to its artificial scarcity which is embedded in the Bitcoin protocol and the cypherlibertarian rhetoric surrounding it. When conceiving Bitcoin, its mysterious founder Satoshi Nakamoto, took the exact opposite route for the creation of the first decentralized digital currency than Hayek as he believed that mass adoption of a currency would need a strong incentive structure. And what is a better incentive than strongly rewarding early adopters? The rewards that are handed out to the miners in return for the work they put in to secure the network, increase in value the more people buy into the system. It is therefore not surprising that many observers call out Bitcoin to be driven by the bigger fools theory and that it is nothing more than a pyramid scheme. But to be fair doesn’t this logic of rewarding early investors apply to all assets? Despite the speculative boom and bust phases, until now Bitcoin did not turn out to be a Ponzi scheme. Even after the worst crashes the price of Bitcoin did not only recover and reclaimed past alt time highs but also spiraled further up into new dizzying heights, drawing in ever more capital into its gravity well. The future will tell whether Bitcoin has more steam in the tank.
From a technological standpoint, it is highly questionable whether Bitcoin will ever be able to replace our current financial system and become the global financial settlement layer as blockchains are the slowest and most expensive databases ever conceived. Decentralization comes at a price. For years critics argued the 7 transactions per second the Bitcoin network is able to process will not suffice for mass adoption and even with off-chain scaling solutions like the Lightning Network protocol it is uncertain whether the routing between nodes will be feasible when the network grows into millions or billions of users, who would like to use a reliable and cheap financial infrastructure for microtransactions in their everyday life. At the same time, these solutions are already being rolled out and tested in the real world. In 2019, an anonymous American donor funded the largest Bitcoin experiment yet at the pacific coast of El Salvador in the surf village El Zonte, transforming the local economy to run on Bitcoin’s Lightning Network. In what became known as Bitcoin Beach, the cryptocurrency was introduced as a form of payment two years prior to El Salvador’s bitcoin laws. While some share the story of enthusiastic users, others point towards the exorbitant transaction fees to exchange Bitcoins back to stable coins on central exchanges or at the two Bitcoin ATMs in the country, which makes the technology useless for the local population unless they hold onto their Bitcoin. At least president Bukele promises to provide a national wallet called ‘Chivo’ with the option to convert Bitcoin automatically to US Dollars. As approximately 70% percent of the population does not have access to traditional financial services, this would bank those without access to the legacy banking system without exposing them to the volatility of Bitcoin price movement. The critical question is how high the fees will be.
One who certainly believes that Bitcoin still has a long way to go is Nayib Bukele. Like the investors before him, he bets that a relatively early entry, in case other countries follow, will allow him to suck off the wealth of the future latecomers who will drive the price even higher. In a tweet, he declared that ‘It [Bitcoin] will bring financial inclusion, investment, tourism, innovation and economic development for our country’. By abolishing the capital gains for crypto assets, he hopes to attract wealthy individuals and companies to set up their operations in his country. One day after Congress approved his proposal, this man of action revealed his strategy of using geothermal energy produced by volcanos to supply energy for future mining operations, which would make El Salvador the first governmental actor officially participating in the validation of the transaction history in the Bitcoin network. Since the target difficulty of the Proof of Work consensus mechanism increased to a level, where mining was not profitable any longer on consumer devices, huge mining facilities and whole industries providing necessary specialized hardware, so-called Application-specific integrated circuits (in short ASICs), spawned everywhere around the globe at places where energy is cheap enough. To run a profitable mining operation, the cost per kilowatt-hour must be below three cents. This concentrated Bitcoin mining where energy can be easily stolen or exists in abundance, for instance near hydroelectric dams in the Sichuan region in China, where, in the dry summer months, miners also had to rely heavily on energy that is produced in coal plants, around gas fields in Siberia controlled by Gazprom, or in Iranian mosques, which do not have to pay for electricity.
In their power struggle for global financial supremacy, China recently doubled down with restrictions on cryptocurrencies for a couple of reasons. First of all, the Chinese leadership wants to increase capital controls to make their citizen invest within the country. The second, and arguably the most important one, is to strengthen the position of the digital yuan, one of the first central bank digital currencies, to ultimately supersede the US dollar as the global reserve currency. Surely, the communist party must have been fed up with the ongoing overloads of the energy grid through mining operations as well. After banning Bitcoin numerous times, this time Chinese authorities seem to pull through. Over the last months, Chinese banks and payment companies were ordered to cut all ties with clients involved in mining, trading, clearing, and settlement for cryptocurrency transactions. This provoked a massive exodus of mining operations throughout the country. As over sixty-five percent of Bitcoin’s hash power was located in China, this resulted in a drastic 50% drop in the hash rate of the Bitcoin network. Images and videos surfaced online of miners closing down their operations in panic, who now look for new locations to make use of their equipment. Several governmental actors worldwide competing now to attract the capital to create Bitcoin hubs within their territory. While Russia seems to have the edge in regards to a series of geographic, climatic, economic, and technical advantages, Bukele certainly is one of these state actors, who is in the race to secure a share for his country, with his volcano publicity stunt, the promise to grant Salvadoran permanent residence in return for 3 Bitcoins, and the reduction of the crypto tax burden to zero.
While for some Bukele appears to be a visionary, his actions resemble more a desperate family father who is at the brink of defaulting on mortgage payments, after receiving a shady insider tip, he pawns the family jewels and car to put in one last bet at the horserace as the last way out of the family’s misery. As the cards are stacked against the people of El Salvador, the president’s decision is even comprehensible in some ways. Remittances, money sent home from abroad, make up around 20% of El Salvador’s gross domestic product (GDP). According to Bitcoiners, the parasitic intermediates controlling transnational money transfers like Western Union drain this capital inflow further with outrageous transactions fees. However, the data shows that it is even more expensive at the moment to do these transactions via the Bitcoin network because of the high costs of Bitcoin ATMs. With or without this money from abroad, the economic outlook for El Salvador is grim. A near stagnant economy, persistent corruption, and the neocolonial doctrine of free markets let the country amass a public debt to global financial institutions totaling over 70% of GDP in 2019. Battered by the Covid pandemic this number shot up to 90% last year. Under given circumstances, it would need a wonder to pay back this debt. And for Bukele this wonder is Bitcoin, it is the last resort, the national lottery ticket for a better future.
Elected with the promise to bring economic prosperity and clean up corruption and violence in El Salvador, president Nayib Bukele enjoys astonishing approval ratings of up to 90%. But the president is far from being an unproblematic figure. When we lift the sheets of El Salvador’s politics, we discover the free market being in bed again with another authoritarian leader. It seems after the countless coups in Latin America in the name of freedom and open markets, history repeats itself. In 2020, he first drew international attention when he ordered the military into the chamber of national congress as intimidation to push for the approval of funds for another government security to fund police equipment for his Territorial Control Plan to crack down on the country’s rampant gang violence. Since his landslide victory in February 2021, the dynamic and charismatic president, who knows how to play the digital media game, controls 56 of 84 seats in the legislative assembly. Shortly after the election one of the last checks on Bukele’s power crumbled when he used this majority to replace the attorney general and five top judges in the supreme court with loyalists and unified every branch of the government under his scepter. It seems we have witnessed yet another autogolpe, a coup by democratic means, as the people in this run-down country are yearning for a strong man with a vision. Let’s hope for them that their despot turns out to be a benevolent ruler and uses his power in their interest.
While Bukele faces no more noteworthy resistance for his policy from the inside, the pressure from the outside intensified in the last weeks. Unsurprisingly, the empire strikes back as the World Bank, International Monetary Fund (IMF) and other global authorities are opposed to the country’s decision to grant Bitcoin the status of legal tender. After the Salvadoran Finance Minister Alejandro Zelaya sought technical assistance from the World Bank for the technical implementation, a bank official responded to Reuters: ‘While the government did approach us for assistance on bitcoin, this is not something the World Bank can support given the environmental and transparency shortcomings.’ Also, Gerry Rice, an IMF spokesman, raised his concerns: ‘Adoption of bitcoin as legal tender raises a number of macroeconomic, financial and legal issues that require very careful analysis’. While these diplomatic statements do not sound too confrontational at this point, a more serious warning for Salvadoran banks comes from Fitch, one of the ‘big three’ credit rating agencies: ‘The lack of adequate regulations to manage banks’ balance sheet exposure would be a credit negative based on a recent Basel prudential consultation. This would effectively fully deduct open positions from banks’ regulatory capital.’ With plummeting credit ratings due to the risk assessment of rating agencies and increased interest rates for these banks, an acceleration of the downward spiral of the El Salvadorian economy would be inevitable. We can be certain that the global financial institutions will make use of their full arsenal to punish El Salvador and do everything in their power to set a precedent to discourage other countries to follow.
Meanwhile, at this year’s Bitcoin conference, after countless apologetic lamentations on Bitcoins resource and energy consumption, the news about El Salvador’s new monetary policy was publicly announced in a pathos dripping presentation under the frenetic applause of the audience. Who wondered how it would look like when some frat bros and conspiracy theorists receive funding to create a social movement, might find answers when examining this ethnographic goldmine. At this cultish ceremony, where vocal spokespersons like RT host Max Keiser shared their paranoid worldviews, several insights on the wider Bitcoin community were imposed on the viewer. The first of these insights is the crude economic views these people hold. Nick Szabo, inventor of smart contracts and early contributor to the Bitcoin project, once famously tweeted: ‘An economist or programmer who hadn’t studied much computer science, including cryptography, but guesses about it, cannot design or build a long-term successful cryptocurrency. A computer scientist and programmer who hasn’t studied much economics, but applies common sense, can.’ Except for certain outliers, the event displayed that the community’s common sense is in a defective condition. Bitcoin is not freedom, all there is to see is a community free from the ability to develop critical economic thought.
Now, Bitcoiners are certainly right in that Satoshi Nakamoto chose the more successful game-theoretical approach compared to Hayek concerning adaptation. While the fundamentals are questionable in regards to scalability, the Tokenomics, or pumpamentals as they are also referred to in the space, turned Bitcoin into a highly successful pyramidal casino. This strategy however came at the price of Bitcoin ceasing to be money. Unable to estimate the price of Bitcoin in the future, only a madman would sign a contract depicted in Bitcoin. Before the Euro, economic actors in all European countries resorted to the most stable currencies for long-term contracts, which they found in the Swiss Frank or Deutsche Mark because even their national currencies were too volatile. But it is not only the volatility that impedes mass adoption due to a lack of rational planning certainty. It is also the deflationary nature of Bitcoin that contradicts its use as a medium of exchange on a macro scale. For a community that stresses the importance of game theory so much, it is surprising they do not see a problem in deflation.
When money and debt increase in value over time, it incentives consumers and producers alike to take fewer loans and to hold on, or hodl, a typo which became an inside joke within the Bitcoin community and now stands for ‘hold on for dear life’, to the money they have, as they would get more for it in the future. To underline their rationality, Bitcoiners always like to emphasize the importance of delayed gratification when it comes to savings. But what might be beneficial for the individual in the short term, can be disastrous for the economy as a whole. As less is bought, less is produced, and fewer wages are being paid, surely this would lead the economy to spiral downwards. The productive delayed gratification of capitalists, who acquire more fixed capital instead of squandering it on personal consumption, is fundamentally different from the unproductive delayed gratification of Bitcoiners, as their capital lays dormant as long as they are hodling it. Withdrawing capital from the system by encouraging the citizen of El Salvador to not spend their money but to hodl Bitcoin, in the hope, it becomes the global reserve currency, might turn out to be the final death blow to the country’s economy. Moderate inflation on the other hand fuels the capitalist economy. By eroding the value of cash and offering cheap credit it encourages consumers to spend. As producers are incentivized to accelerate capital turnover, production cycles are shortened, thus more workers find jobs and spend their wages on commodities again, resulting in capitalist reproduction on an extended scale as Marx would have put it. Hayek, however, would have certainly disagreed with this positive aspect of inflation, as he believed that inflation cannot be controlled by a central authority and sooner or later central bankers would face running inflation like we are seeing in places like Turkey today, the optimal currency had to be price stable, which, for him, can only be achieved through competing private currencies.
In an interview on the Great Depression deflation Hayek said ‘I agree with Milton Friedman that once the Crash had occurred, the Federal Reserve System pursued a silly deflationary policy. I am not only against inflation but I am also against deflation.’ While the young Hayek of the 1930s still thought short periods of deflation could have a purpose in breaking rigidities that prevent price adjustment, the late Hayek of neutral money came to see sense: ‘Today I believe that deflation has no recognizable function whatever, and that there is no justification for supporting or permitting a process of deflation.’ As even the Austrians would agree that deflationary money is rat poison squared, to use Warren Buffet’s words here, Bitcoin stands there naked without an economic theory supporting their protocol. Now some Bitcoin evangelists would certainly reply, that this does only apply to the transition phase and we will gain price stability in the future. If their wishful predictions end up being right and in 50 years the demand side would reach a natural limitation after absorbing the whole financial system and every value on this planet is expressed in Satoshis, the purchasing power per Bitcoin would still grow over time. Even though the total supply of Bitcoin will increase until May 2140 every 10 minutes by a fixed amount that halves all four years, we will never see the promised 21 million Bitcoin in circulation because each year about 4% of the available supply is irretrievably lost due to careless owners losing access to their private keys. As a side note not many people know about, two times in the history of the Bitcoin protocol inflation bugs were discovered, which allow malicious actors to mint an infinite amount of Bitcoin at almost zero cost. In 2010, actually 184 billion Bitcoins were minted by an attacker and Satoshi Nakamoto had to roll back the blockchain to purge the coins. A couple of years ago, in 2018, another inflation bug was discovered, which enabled miners to double spend by including the same unused transaction output twice in a block, this time by a developer, who informed the Bitcoin Core team and the bug was fixed before somebody else could have exploited it. It is very likely that we will see other such bugs be discovered in the future in the spaghetti code that is Bitcoin.
After the recent deaths of the orange-pilled Antivirus pioneer John Mcafee, and Mircea Popescu, father of Bitcoin toxicity, again a significant amount of Bitcoin might be lost forever, assuming they did not entrust the location to their keys to someone else. The possibility of recovering these wallets, or the 1 million Bitcoins in Satoshi’s wallet, in case the person decides to return if he or she did not die, represents an unpredictable risk for the future price of Bitcoin. Both outcomes, the reappearance of large amounts of Bitcoin that somebody could dump on the market or a constant deflation by people losing their private keys are equally catastrophic scenarios for a protocol that strives to be the future currency of the galaxy as the Winklevoss twins try to make us believe. Concerning deflation, some projections go as far, that we are past the maximum circulating supply already, and from now on fewer Bitcoins are generated in the mining process than lost by those suckers who fail to fulfill the puritan ideal of radical self-reliance. These can be unfortunate individuals like the desperate Brit, who still has not given up on his wallet holding 7500 Bitcoins that he believes to be buried under tons of trash on a landfill site in Newport, South Wales. But it can also hit larger companies like the Israeli cryptocurrency company Fireblocks, which lost approximately $75 million worth of cryptocurrencies it was entrusted with because an employee failed to back up data and deleted the keys by accident. As long as there will be human errors or other catastrophes like houses that burn down, keys will be lost and these tragedies will result in a steady decline of the circulating supply. But what is a loss for some, is benefitting the survivors as the coins they still have access to increase in value. And those who are stupid enough to get phished or are mentally weak paper hands, who panic sell their holdings at a loss to whales when the markets are crashing, simply do not deserve their spot in paradise according to the Bitcoin community. We have seen this all before, it is rugged individualism at its best.
If we think of Bitcoin mining as the production process of a commodity, then the labor time expended to produce electricity, build ASICs, and oversee the mining operation has to be accounted for as the creation of value. Beyond that there is no surplus created within the Bitcoin network, only existing value is redistributed. Between the cost price for mining Bitcoin, totaling roughly $10 billion since 2009, and the price of Bitcoin, a trillion earlier this year, exists a huge gap, which reveals that 99% of Bitcoin’s value originates elsewhere in the society and is sucked in and redistributed in the circulation sphere. In practice, this means that for a Bitcoin millionaire to be born countless people have to take a loss. And by dumping their bags on those retail investors, who jumped in too late in the bull run, this smart money then creates enough liquidity to increase their Bitcoin position again when prices hit the bottom, while the retailers capitulate and sell-off. There is no reason why this dynamic should suddenly change in the future. Despite, or perhaps precisely because the Bitcoin network provides rules without rulers, no checks in power are put into the way of individuals with the ability to exploit their market position by manipulating the price action of the asset, which will ultimately result in an even less egalitarian distribution of wealth like we have today in the legacy system. For Bitcoiners, the only answer is to toughen up and hodl. What they don’t tell is the toll, which has to be paid on one’s mental health by constantly being exposed to this emotional rollercoaster of greed and fear. Restless sleep, gambling addictions, and emotional blunting are externalities that are neither priced in nor spoken about in the community directly, the pain is only addressed implicitly in the form of memes.
Another widespread economic fallacy is the delusion of Bitcoin being a panacea. Without any shame, Bitcoin is presented at the conference as the solution to the world’s economic problems: fix the money, fix the world the slogan goes in the crypto space. For these hardcore Bitcoiners, everything bad that is happening in the economy has monetary roots. Numerous times on the panels speakers construct a causal relationship between income inequality and inflation, or the wealth tax, as they call it. The only thing standing in the way of the prosperity of the El Salvadorian people is the rotten dollar. In one of the dullest presentations of the conference titled FIAT fascism vs Bitcoin Liberty, blogger and entrepreneur Aleksander Svetski presented his assessment of the world without Bitcoin, a world that suffers from: ‘Stagnation. Corruption. Theft. Waste. Poverty. Wealth Redistribution by Bureaucrats. Environmental Destruction. State indoctrination instead of schooling. Sludge instead of food.’ But do not despair, Bitcoin is here to change that by transforming society from the ground up. Although he acknowledges that classes will persist in his Bitcoin utopia, according to him social stratification is a natural order anyways, his anarcho-capitalist analysis comes to the conclusion that Bitcoin will create semi-permeable barriers, allowing upward mobility for the productive members of society and punish those on top, who fail to deliver. How exactly Bitcoin will create such a meritocratic system is not answered in his talk but he provides a reading list for the curious containing pertinent titles like Atlas Shrugged, the Sovereign Individual, and ‘everything from Murray Rothbard’. Can it get any more caricatural?
The exact same naive monetary solutionism becomes also evident during the announcement of Nayib Bukele’s decision at the conference. There the seemingly sobbing messenger Jack Mallers, CEO of the bitcoin investment and crypto payments processor company Zap, that is active in El Salvador with their Bitcoin lightning payment app Strike, and which will have a good chance to become the contractor for developing the national wallet app Chivo, offered in his talk another bizarre claim about the current economic system. In his talk, he compared the official US inflation numbers based on the consumer price index, which sits currently at a 5% rate, mostly due to a spike in used car prices, with something that is far more threatening, which he refers to as hidden inflation. The examples he provides for this ominous hidden inflation are tuition fees and housing prices. And again the money printing of the central bank is at fault that his kids will not be able to afford real estate where he grew up. What he fails to understand, or what he tries to sweep under the table, often it is not clear if the speakers are as stupid as they make themselves appear or whether they just think the audience is ignorant enough to take their bullshit as truth, is that the gap between the price increases in essential sectors like housing, healthcare and education and the general inflation of consumer prices, cannot be explained with the monetary expansion driven by central banks.
There are other cost-push and demand-pull effects at work accounting for this gap, like a ballooning university administration, a natural scarcity of land in the centers of global cities like San Francisco, or laws prohibiting the Medicare program from negotiating the price of drugs, which Bitcoin will never solve. As all these are essential services, people are forced to participate in these markets and an ever-growing share of their paychecks is deducted by landlords, colleges, and health care providers until competition is reintroduced or these markets are regulated in other ways. The problem with general inflation is that during the last decades, wages did not keep up and increased at a lower rate for a large part of the working class. Labor politics and class struggle are of course solutions to this problem libertarians and anarcho-capitalists would never consider. The route they choose to escape this dynamic is to build an arch with their fellow brethren that will lead the chosen few into the promised land, where tuition fees, healthcare, and rent cease to be a problem. These Bitcoin barons envision themselves to be the new elite of the coming society, a Lamborghini driving cohort, and all those fools, who failed to invest in Bitcoin in time will be at their service. So get in before it is too late. In the end, the Bitcoin scheme is nothing but ‘a wealth transfer to the cartel of early bitcoin accumulators’, as former Bitcoin bull Nassim Taleb points out in a recent paper, it will never bring prosperity for the whole society like Twitter founder Jack Dorsey claims it will. As with the other fallen Bitcoin saint Elon Musk, who became the scapegoat for the recent crash because he reversed his decision to include Bitcoin on Tesla’s balance sheet, the community has nothing but hatred for these traitors, who dare to damage the reputation of their church.
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In the Bitcoin space, this aggressive tone towards nonbelievers and heretics is framed as toxic Bitcoin maximalism. Michael Saylor understands it as the ethos of the “loud in the face cyber hornets”, that will pave the way for Bitcoin’s ultimate victory. In short, maximalism constitutes not only a strong belief in a specific technology, but it encompasses also a monogamous conviction to it: No other coin shall persist in the light of Bitcoin’s grace, and who dares to disagree will be met with the righteous wrath of the Bitcoin order. Since the first appearance of altcoins, crypto has been a tribalist space. The portmanteau altcoin in itself is already telling, as these coins will ever only be an alternative or alteration of the holy scripture that is the Bitcoin protocol. And for the most part, this was somewhat justified in the early years of distributed digital currencies, as the first altcoins like Namecoin or Litecoin were simply forks of the Bitcoin Core client with only minor adjustments like the reduction of the block generation time or the use of another hashing algorithm. Under the pressure of competition, the language soon intensified when these alternative projects became serious competitors. In 2017, a debate around the block size led the heterodox proponents of a blocksize increase, called ‘Big Blockers’ by the zealous defenders of Bitcoin’s purity, to create another fork named Bitcoin Cash. Not only did these protestants believe that Bitcoin Cash actually is Bitcoin but after the fork Bitcoin Cash even almost flipped Bitcoin in market capitalization and total hash rate during the 2017 bull run. This was also the time when Bitcoiners began to thrash altcoins as shitcoins. Today on Twitter, a prayer-like chain letter circulates through the laser-eyed Bitcoin community to test the faith of fellow brethren that reads: ‘I TOO WAS A SHITCOINER. I LEARNED. YOU WILL TOO.’ Amen.
But the ultimate sacrilege in the crypto space was the heresy of Vitalik Buterin founding Ethereum together with his disciples, among them Gavin Wood, Charles Hoskinson, and many others, who followed his vision in extending the capabilities of distributed ledgers by introducing the idea of a programmable blockchain. By picking up the pieces of the shattered early internet Utopianism and merging it with distributed ledgers, the dream of a decentralized web beyond the current control of monolithic internet platforms such as Amazon Web Services was resurrected. But for the church of Bitcoin, the utility of smart contracts represents nothing but a dilution of decentralized digital currencies’ pure purpose. Where Bitcoin became a pious and reactionary numbers-go-up ideology, which is solely driven by the desire for self-enrichment, the ideological core of the Ethereum project is anchored more in the Free Software movement and still follows the principles of curiosity and adaptation. Yet, the Ethereum community itself is not free from tribalist tendencies. Today it seems like the tribalist spirit lives on in all those pagans rallying around their favorite crypto project in a competitive environment on the marketplace of ideas, while at the top thrones the inquisition of the holy Bitcoin order. And in many cases, the inquisition’s judgment is even justified when looking at the myriads of copypasted cryptocurrencies that are out there, whose only purpose is to serve as coordinated pump and dump schemes to enrich their creators. Beyond that, one can actually smell the fear of Bitcoiners, whose aggressive tone cannot hide their sweaty palms, as they know that they are at risk of betting on the wrong horse.
As of now, all other cryptocurrencies together compromise over fifty percent of the total crypto market capitalization, with the space maturing, technological advancements, and new use cases materializing this number will likely increase and Bitcoin will find itself someday on the graveyard of history if it’s community rejects to adapt and progress. Deep inside the Bitcoiners know this, thus they have to defend their church on both sides against nocoiners and shitcoiners alike. At the conference, someone threw a toilet paper roll written Shitcoin over it at Charles Hoskinson, who now leads the Cardano project, when he came to pay tribute to his roots and get back into the dialog between projects. But critics like him, are not welcome any longer in the space. His contributions to the Bitcoin Education Project are nullified by his betrayal. Now, he is simply another threat that stands in the way of Bitcoin’s mass adaptation. What might be funny for some is just another example of the anti-intellectual ethos, self-centered morals, and disgusting manners that underly this community. What might have been an open-minded space, is now rotten to the core. Not one of these people would give a shit about the people of El Salvador if their charity work would not enrich them.
Finally, on the yaw-dropping panel Toxic Maximalism: A Feature Not A Bug, addressing the internal criticism of this toxic Bitcoin maximalism, the holy crusade reached its rhetoric peak. After summing up the most important inventions in the evolution of mankind, obviously fire and Bitcoin, everything in-between was preparing the arrival of the latter, Alex Svetski reveals the holy duty for all believers, which is worth being quoted in full: ‘We are the white blood cells of the network. We are the things that … when an external virus of stupidity comes in and tries to adjust it. We fight it off. There is nothing more important than holding that line, you know? The intolerant minority? You can’t beat that. If the center does not hold we just become another shitcoin project. That’s where the game is. The white blood cells, the Bitcoin maximalist position, like I said it earlier today, I started at Bitcoin maximalism and I go into supremacism or whatever else is at the top. (laughter) I request everyone else to join that position because there is nothing more pure and there is nothing more important in the world today.’ And when you think you have seen it all another panelist proves you otherwise. YouTuber Nico ZM, seemingly frothing at the mouth, responds to the moderator’s question whether people could be driven away by this toxicity: ‘There is no other way. Not only do I think Bitcoin toxicity is important, I think it is absolutely necessary. And if you are against bitcoin toxicity you are against Bitcoin and if you are against Bitcoin you are against freedom. Period.’ When on the following panel Erik Voorhees called this out as the bullshit it is, he was almost booed off the stage. With presentations like these, Bitcoiners at least do everything in their power to rug pull themselves.
Unironically, this religious framing of Bitcoin is being put forward by the community itself. At the conference, Michael Saylor referred to the full nodes of the Bitcoin network as altars to Satoshi. The economic burden to run a full node then becomes a sacrifice or testimony of faith. Max Keiser was addressed by him as the high priest of Bitcoin. And when asked by the lunatic whether he has been visited by the ghost of Satoshi Nakamoto, Saylor responds that Satoshi speaks to him through all his disciples on Youtube followed again by the claim that as Bitcoin ‘fixes everything else’ even ‘governments act rationally’. In an off-stage interview with crypto influencer Ran Neuner, it slipped Max Keiser how this new rationale might be derived. While he is tearing up a dollar banknote, Ran Neuner warns him ‘Max do you know that it is a criminal offense to tear up..’ who is interrupted by a hyped-up Keiser, finding himself somewhere between the roles of a failed comedian and future autocrat: ‘Do you know with the Bitcoin I have I can buy any fricking senator or congressman I want? I make the laws. He who has Bitcoins makes the laws … We have got the capital, we make the laws!’
When looking at the wealth distribution within the Bitcoin network, which is even worse than the one in the off-chain world, excluding crypto exchanges around 2% of network entities control 71.5% of all Bitcoin, it reveals how exclusive this new ruling class will be. Ultimately, Alex Svetski concludes ‘the line that will define those who are free and those in the modern gulags, is gonna be those who hold Bitcoin and those who do not.’ While in his distorted reality these gulags will still be run by the old collectivist order, but it will be the early Bitcoin accumulators who will be in power if things turn out in his favor, and one might begin to wonder who the actual fascists are.