Bitcoin Maximalism is Rubbish


Ever since the the launch of the first altcoin (alternative coin, as in alternative to Bitcoin), prior to the invention of the label “Bitcoin Maximalist,” there have been people opposed to the idea of multiple blockchains. At first they claimed that there can only be one blockchain. Their argument usually was that the invention of the Bitcoin protocol was analogous to the invention of the TCP/IP protocol which is the backbone of the internet. Therefore, just as TCP/IP was the first and only protocol to be used in what later became the internet, despite there being superior protocols invented afterwards, bitcoin will be the only protocol that will be used because, like TCP/IP, it had first mover advantage.

The first mover advantage would help the Bitcoin protocol achieve such a large network effect that it would make other blockchain projects redundant. If someone had to use a blockchain, that someone would use Bitcoin because it was the most widely used blockchain and blockchains are only meaningful if other people use them. It does not matter that competing blockchains may offer superior technological innovations because those innovations could be incorporated into the Bitcoin protocol thus rendering the competing project redundant.

The problem with this argument is that it’s based on an incorrect analogy. The Bitcoin protocol does not provide a service analogous to the TCP/IP protocol. The TCP/IP protocol is generic and trivial to use. Meaning that it can be used to transfer any type of information and no single transfer of information is significant to the network, thus not having any value. The cost of changing to a new protocol is higher than the cost of developing better hardware and software to work with the current protocol. On the other hand the Bitcoin protocol is very specific and its use nontrivial. One can only transfer bitcoins through the network and each transfer is significant enough that it requires other users to validate that network event (the bitcoin transaction). Thus every event is costly to the network and it may be cheaper to use a different protocol. In addition the fact that Bitcoin’s protocol is specific opens Bitcoin to competing projects with different protocols that satisfy users’ needs that Bitcoin cannot satisfy.

Although, there have been efforts to make the Bitcoin protocol more generic, such as the Mastercoin project and the Counterparty project, the Bitcoin protocol has been proven to be highly inefficient in performing the types of transactions a more generic project could offer. On the other hand were a more generic protocol be created to serve primarily to transfer tokens, as Bitcoin does, it would pale in comparison to Bitcoin. The network would be clogged with the amount of information having to be processed with every transaction, not to mention the rapid growth its blockchain would experience in terms of memory, i.e. Ethereum. For this reason it is not sensible for Bitcoin to adopt features offered in other blockchains, as Bitcoin’s performance limitations are not an accident but intentional by design.

When encountered with these facts some of the proponents of Bitcoin Maximalism argue that some of the features offered by other blockchains should not even be used by any blockchains at all. Their argument is that if a feature cannot be adopted by the Bitcoin protocol, it does not make sense at all in the realm of blockchain technology. Therefore, it cannot be considered an improvement on blockchain technology. The problem with this argument is that it assumes knowledge of the full impact of blockchain technology on society. It assumes full knowledge of the future, something no one is capable of. Prior to the creation of Google, searching the internet was considered a solved problem. In the 1990s no one had envisioned the rise of online social networks or the sharing economy. Microsoft was expected to rule the world. Therefore, while someone can make educated guesses on what is or what isn’t an improvement on blockchain technology, no one really knows what it is. Only the market will tell which features of new blockchains are improvements because they fulfill a need among the people that use them. This is evident in Ethereum’s rise as the default funding platform for new blockchain projects, overtaking Bitcoin’s place through the Counterparty and Mastercoin platforms back 2014.

Although no one can really tell what the future will be like, given the large potential impact blockchain technology can have on society, one thing is certain, Bitcoin will not be the only widely used blockchain in existence. In addition it is most likely that Bitcoin will not be the most widely used protocol given the limitations of its design. At this point in time Bitcoin is ancient technology with even Litecoin (a long time competitor) being significantly ahead of Bitcoin technologically, having already implemented Segregated Witness, something that may or may not happen for Bitcoin. A most likely future scenario is one of multiple blockchains specializing on different services with some competing against each other in the same service space and some dominating their service space. Bitcoin, however will no doubt remain as one of the most well known blockchains in existence for being the first of its kind, and therefore may still be widely used.

Leave a Reply