Differing Views On The Future Of The Future Of Money

Bolstered by its ascent on the world stage, not to mention the newfound admiration of tech icons and investors, it’s no secret Bitcoin believers are bullish on its future, with advocates going so far of late as to predict the global economy to be on the verge of a cataclysm only its invention can solve.

Still, if there is now an acknowledgement Bitcoin has carved a place in the economic order, discussions with the technology’s more tenured advocates reveal there remains a divergence in outlooks on its long-term development, divides that cut to the heart of the mysteries that remain in the decades-long experiment to create a digital cash.

But while no doubt natural in any emerging scientific field, the disconnects have arguably grown more pronounced with an influx of new investors into Bitcoin over 2021, many of whom are now more familiar with Bitcoin’s economics than its computer science breakthroughs, and who have been further emboldened by the escalating promises of its more eccentric advocates.

Indeed, far from a technology trapped in competition, a growing number of today’s users see Bitcoin as a dominant predator on the economic landscape, an asset whose fixed policy and finite supply differentiate it absolutely not just from fiat monies, but all other cryptocurrencies.

Still, on the margins, Bitcoin’s more tenured evangelists appear to be quietly chafing at the fervor of the day, arguing against a complacent culture, seeking to accelerate the pace of network upgrades, or else asserting that the project could still fail.

The unspoken tension emerging can be summed up as such: At a time when Bitcoin advocates are eager to delight in the inadequacies of the global economy, its leading thinkers remain arguably as uncertain as to how its economy will mature as an alternative.

Promoting debate of late is that while Bitcoin is becoming mainstream as a portfolio asset, it remains a peer-to-peer network, the two attributes being irrevocably intertwined, each equally necessary for the system’s eventual operation.

From here, thornier dilemmas begin to emerge – namely, if Bitcoin’s long-term viability as an asset is assured, why make improvements to its network at all? And conversely, what if our optimistic attitude toward its asset turns out to be a liability for the economics of its network?

To begin, the intent of this author is not to draw alarm, but to inform debate by parsing the prevailing opinions of those who today believe Bitcoin to be the only viable cryptocurrency, separating what the mainstream today sees as a homogeneous group.

Rather, this article will attempt to divide Bitcoin Maximalists into three broad camps – monetary maximalists, network maximalists, and platform maximalists – each of which holds a different bias toward its long-term direction.

In the paragraphs to follow, we’ll expand on these varied worldviews, illustrating how and why they appear to be subtly, but meaningfully, out of sync.

A Clash of Concepts

Embraced by all groups, of course, is the acknowledgement that Bitcoin is “decentralized,” a term that denotes how its money uniquely operates free from the control of any person or group. But we need only a brief survey of the crypto world to see there is disagreement on the definition.

Within Bitcoin there are notable divergences in its use as well, and it is here where the break between the sectarian groups of Bitcoin maximalists begins to become apparent.

Chiefly, while all variants believe strongly that Bitcoin is the only decentralized cryptocurrency, they differ as to the reasons why. Monetary maximalists, for instance, view all alternatives as inherently centralized, yet when asked, give answers that appeal to Bitcoin’s monetary policy.

Put succinctly, monetary maximalists seem to believe Bitcoin is decentralized because it has a finite supply and fixed monetary policy no one can change. If a cryptocurrency can change the rules that govern its asset or network, monetary maximalists argue the system is centralized.

Still, what appears obvious in this observation is that, in holding this view, monetary maximalists are introducing a definition of decentralization that is purely germane to the world of Bitcoin and not applicable to other computer science fields. Further, this obfuscates the fact that Bitcoin as a network can and does change parameters, the most recent update coming last year.

Unsurprisingly, this is where the network maximalists clearly diverge. Composed mainly of more tenured developers brought up on the Bitcoin white paper and its cypherpunk vision, network maximalists harbor the same distaste for centralized cryptocurrencies as monetary maximalists, but stick more closely to definitions applicable to the internet and networking technologies.

Stated clearly, network maximalists believe Bitcoin is decentralized because the cost to censor transactions and change the rules is meaningfully high. Bitcoin may have value due to its asset properties, but these properties are protected by a network that’s always at risk of subversion.

Doubtless, there is much agreement between the groups on what contributes to Bitcoin’s value – including the fair launch by creator Satoshi Nakamoto, the low cost of verifying transitions with a node, and the free market competition for new money issuance enabled by proof-of-work.

Yet, to the network maximalists and platform maximalists, decentralization needs to be evaluated, measured, and in the case of networks built on Bitcoin (like Lightning, Liquid, and sidechains), strategically limited to scale the network to handle larger volumes, add new features, and experiment.

Either way, the difference in attitudes should be obvious – one group sees decentralization as an absolute, while the others see it as a fragile, mutable state. This divergence accepted, we can move to the next question – namely, what is the attitude of each group toward Bitcoin’s long-term economics, security, and viability?

Network and Platform Maximalism

For network and platform maximalists, the answer has long been that the network’s security is tied to decentralization, which is protected by its mining power. Indeed, the idea that hash power equates to security is a long held belief, obvious in many initial assessments of its design.

As these groups of maximalists are all too aware, in order to maintain its finite asset supply, the number of new bitcoins the network issues to miners must trend toward zero over time. As there will only ever be 21 million bitcoins, one day Bitcoin will no longer distribute any new bitcoins.

Immediately, this appeared as if it should be a driving concern among Bitcoin believers, and so it was inferred that since miners protect the network, this “subsidy decline” was a liability, one that could only be solved as proposed by Satoshi Nakamoto, with transaction fees paid by users.

As such, the total fees paid by Bitcoin users has sometimes been termed a “security budget,” the implication being that replacing new Bitcoin issuance with fees is essential to the network’s eventual operation. It so follows, network and platform maximalists are unified in foreseeing a future where fees for Bitcoin transactions may need to be both consistent and high.

Yet, cryptocurrency is anything but static, and shortly, a development would split the groups. Emerging in the mid-2010s, alternative cryptocurrencies would begin to launch, offering users new and experimental features, including some both camps assumed would be valuable for Bitcoin – like added privacy and the ability to create or represent new kinds of assets.

What would emerge in response was an ambitious thesis called sidechains, a so-far unrealized effort that sought to wield Bitcoin’s network effects and user base in an effort to assimilate new assets and blockchains, with the idea that Bitcoin could serve as an ultimate platform for digital assets.

But while the network maximalists saw Bitcoin’s ability to serve as a platform as a more limited feature, meant to empower users with new freedoms and privacy, platform maximalists instead interpreted it as a mechanism to engineer its economy at the expense of alternative networks.

Indeed, what would become clear is that while network maximalists accepted Bitcoin’s inherent value over alternative networks, platform maximalists feared that Bitcoin was competing against these networks for demand as a platform, a competition that, if lost, could lead to its demise.

But while less influential in Bitcoin of late, platform maximalism continues to dominate the crypto design ecosystem, where leading cryptocurrency builders assert openly that demand (measured in fees) is what gives their competing cryptocurrency networks value and security as platforms.

This outlook defined, it’s clear platform maximalists accept a world where blockchains are just transaction platforms competing to: 1) Win demand 2) build fee volumes and 3) ensure the underlying incentives that power their respective networks. Network and monetary maximalists do not.

Monetary Maximalism

Yet, emboldened by a decade of demand for Bitcoin as an asset, monetary maximalists appear to be the most vocal in questioning the idea that the Bitcoin network is in any competition at all.

Increasingly the dominant form of Bitcoin maximalism, monetary maximalists believe Bitcoin’s asset has inherent value, and that its network benefits from inherent demand. Said another way, because Bitcoin is intrinsically valuable, settlement on its network is also intrinsically valuable.

In fact, monetary maximalists foresee a future wherein demand for Bitcoin increases to the point where paying for settlement on its blockchain is not optional. Rather, everyone will have to pay fees to move Bitcoin due to the fact it will be the most widely accepted global money.

Still, as outlined, this has important implications for Bitcoin’s development roadmap. After all, by holding this view, monetary maximalists are effectively rejecting the idea that top-level networks need to grow or boost Bitcoin’s demand beyond what is occurring for it naturally.

That this is true is evidenced by their primary critique against other cryptocurrencies, which in their effort to serve as platforms allow the creation of new money in the form of tokens – the very money printing monetary maximalists say Bitcoin solves. Far from a benefit, they assert this practice makes it impossible for these cryptocurrencies to ever garner any real demand.

Opposed to this alternative economic design, monetary maximalists are rejoicing at a time when Bitcoin fees remain low and evoking a future where they might always remain low.

As Saifedean Ammous, author of The Bitcoin Standard, explained in a recent interview: “There’s no scenario where people are holding $1 trillion in Bitcoin and they can’t afford to pay to keep the network running.”

Even tenured developers, like Adam Back, cited in the Bitcoin white paper, have alluded they support this view. In a Twitter Spaces last year, he posited that users may simply pay to run the network because it is valuable, as they do the internet today.

Said differently, Ammous and Back evoke a future where Bitcoin is not secured absolutely – via some mechanism design that guarantees fees equivalent to today’s block rewards – but where Bitcoin is secured by users, who they say will always have the means to ensure its operation and overcome an attack.

Ammous goes so far as to suggest the value of the block reward – now $250,000 – may only be a kind of bootstrapping tool, necessary to protect the Bitcoin network in its infancy. By the time the subsidy runs out in 2140, hyperbitcoinization, he suggests, will have already occurred, a transition that will find global economic activity repriced in Bitcoin.

Summarized, far from an environment where the Bitcoin network remains at risk of attack, monetary maximalists see a future where humanity is destined to embrace and secure Bitcoin.

Conclusions

These positions described, we can assert that there are three important differences between the groups, first in their bias to action toward improving the network today, secondly in their attitudes to building on top of Bitcoin, and lastly in their confidence in its ultimate design security.

Indeed, it may be tempting to see the views of the differing maximalist groups as outlooks users can adopt freely to their advantage. Bitcoin has developed a cyclical economy, and so long as this monetization continues unabated, it may be decades before Bitcoin’s longevity is a concern.

Yet, the fact remains that, in following the monetary maximalists, Bitcoin is clearly charting a very different path than the one embraced by alternative cryptocurrency developers, who still see blockchain networks as having little value beyond their economic utility as platforms.

For Bitcoin’s platform maximalists who still hold this view, the change in sentiment has been a shock, and of late, they have been forced to reckon with the idea they may now be a minority in the culture, working on solutions for problems that are no longer widely accepted.

It’s this author’s assertion that this is the likely cause of notable recent defections from Bitcoin, including the ardent advocates who of late have argued Bitcoin maximalism has “failed” due to the disinterest of users in competing or collaborating with alternative networks.

Still, it’s worth noting that all these groups soldier on, the network maximalists seeking ways to use Bitcoin to build technology that expands user freedoms, the platform maximalists promoting models that argue that Bitcoin’s price appreciation may not be enough to secure the network into the future, and the monetary maximalists focused on Bitcoin’s institutional adoption.

Of course, either way, it remains at best unclear how Bitcoin’s economics will evolve – while an interesting field of study, predicting the future 100 years out is difficult.

So why study the question at all? In his defense, this author would argue that, while clearly a historic invention, it remains to be seen if Bitcoin, as a technology designed and operated by humans, can remain truly free from our human flaws.

Ultimately, the real question posed by studying the variances may be bringing to light the biases at the core of each outlook – a bias to economic engineering (platform maximalism), a bias toward activism (network maximalism) and a bias toward economics (monetary maximalism).

Viewed through this lens, however, it’s hard not to see why the platform maximalism view has lately fallen out of favor. As opposed to a system defined by economic engineering, Bitcoin’s monetary maximalists appear at least united in believing that the Bitcoin economy may only ultimately persevere through our collective decision to value and protect it.