I fell in love with bitcoin—but am cheating with its best friend

Ever felt like you were in a transactional relationship?
Ever felt like you were in a transactional relationship?
Image: btckeychain on Flickr/CC BY 2.0
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“A scientific man ought to have no wishes, no affections — a mere heart of stone.”
Charles Darwin

The feelings of love and affection for a network protocol may seem a bit absurd to an outsider of the cryptocurrency space, but not to those who have been in the industry for years. In fact, it’s rather commonplace. The phenomena of techno-worship did not start with bitcoin, but surely there have been few loves as devout and developed as the one between bitcoiners and bitcoin.

The evolution of this fetish or worship did not happen quickly, but rather, as with most strong loves, years of interaction provided the fertile grounds for devotion. I must admit, so as to provide full disclosure: I did once love bitcoin…

It takes time to be reflective and to gain value from our past experiences. Many of you whom this article finds will not receive it pleasantly, but in fact, it may be received rather threateningly. I cannot blame you for this, as I too know what it’s like to be blinded by love.

Please know that my intentions are friendly—but I will not be the friend who enables.

Falling in love

If you have been actively watching bitcoin since the early days—2008 being the start of it all—then you know that this was the launch of a new era. Conceived amidst the chaos of the global financial crisis and with such poetic timing, some might call it destiny. On January 3, 2009, the genesis block was generated, and thus the birth of the first digital talisman.

Andreas Antonopoulos, the de facto spokesperson/preacher of bitcoin, started his involvement in early 2012, quitting all other work to research and promote bitcoin full time. Antonopoulos deserves massive respect, as he is the springboard from which bitcoin has jumped. He has spread awareness of the value and utility of the cryptospace to the masses, likely responsible for more adoption, investment, and the creation of more Bitcoin Maximalists—individuals who are religiously pro bitcoin—than anyone, ever. Not even Ross Ulbricht, who is known for marrying bitcoin to drugs, and that’s saying a lot.

To quit everything to go 100% into a pursuit is admirable, and many veteran bitcoiners have a similar story. Once you truly begin to see how revolutionary something is, and how truly revolutionary bitcoin was, it makes sense to follow it with all of your heart. Andres has done so magically, with grace and confidence to be rivaled only by some of the greatest rhetoricians/orators in the last hundred years. Antonopoulos helped secure my own faith and love for bitcoin. His words transformed bitcoin from a nerd’s wet dream to a modern mythology to be admired by all of humanity.

Bitcoin Maximalists see bitcoin as “the one” and “the way,” calling all other digital assets “altcoins.” Gaining an understanding of how Bitcoin Maximalists are created requires an investigation into psychology.

Those individuals who shun all altcoins and scoff at the mere mention of another blockchain have likely gained much from their devotion to bitcoin. After all, it makes perfect sense to gain a fondness for something that has provided you benefit. If you bought bitcoin early, let’s say 2013-ish or prior, you have had to deal with tremendous levels of euphoria and severe down-trend despair.

In mid December 2017, bitcoin hit an all-time high of nearly $20,000, and then, within a month, dropped below $10,000.  The ups and downs force all kinds of feelings, and an emotional history can spur strong bonding. Few people who have bought bitcoin are experts in the technology (most have purchased speculatively), so when prices shift, as they have done intensely over the past few years, bitcoin hodlers hodl on hope.

When we do not fully understand something, but wish not to fret, we find faith. We seek it out to pacify our concern and anxiety from uncertainty. I have used faith in bitcoin to remedy my own concerns when the price goes down or someone asks a question I cannot answer. “Close your eyes, and hodl on, and everything will be ok.”

The trend has generally been up, even with a recent tumble across the cyrptocurrency board. Those who have been holding for more than  just a few months will have still made substantial gains, despite the past week’s dip. This only reinforces the Maximalists’ faith in bitcoin, and confidence in the certain death of all alts. (Altcoins are also pompously referred to as “shitcoins” by the Maximalist crowd.) There is literally a movie called The Bitcoin Gospel, featuring Roger Ver, a man they call “Bitcoin Jesus.”

Faith in bitcoin has, until recently, been acceptable (or at least profitable), but continued faith in the near future will require a hodl based on wishes, affection, and blindness.

It’s unlikely that the true pioneers and veterans of the cryptospace are Bitcoin Maximalists. It seems that many of the earliest adopters understand that technology evolves, grows, and branches, and to love a protocol regardless of its faults is troublesome and slows advancement.

New people to the space don’t generally have this faith. They either go to what’s popular and growing in value in hopes of gains, or jump on what is useful. I will admit a few newcomers to the space will become Maximalists, for the sheer fact that Antonopolous could convert a banker to a pro-Bitcoin lobbyist in a single sitting, provoking a faith in them that the battle was already over. But in the end, those who can adapt the quickest will survive.

Losing faith

It’s quite interesting to watch millions of new people jump on the bitcoin bandwagon, caring little about the improved future, the great paradigm shift, or the mass disintermedation that is often touted by Andreas as bitcoin’s claim to fame. The money is rolling into bitcoin, yet the innovation has fled. Most people are reveling in gains made by the most recent wave of fresh investors, with little care, or knowledge, of the stagnation and comparative decline of their techo-pulpit. It’s possible this could continue well into the future, but information travels fast in the information age, so it is more probable that awareness of this atrophy is already spreading like a virus. In technology, potential has a shelf life — and it’s short.

Enter ethereum, the blockchain platform that is the oil of the next-generation web.

On July 20, 2015, the ethereum genesis block was generated. Ethereum reached a network value of $1 billion in about eight months, six times faster than bitcoin’s four years and three months (51 months total). This rapid early growth can be attributed to bitcoin laying the foundation of awareness and information channels that allowed for ethereum to jump quickly into the consciousness of the freshly mined cryptospace. The creator of ethereum, Vitalik Buterin, understood these information channels well, as he had started his legacy as a writer and co-founder of Bitcoin Magazine. Surely Vitalik had a great appreciation for bitcoin, dedicating his energy and time to it, but thankfully he is not a Bitcoin Maximalist.

The greatest innovators in the space are not locked down by a religious sentiment for bitcoin; they move freely from great idea to greater idea, propelling forward the collective consciousness of technology. It appears that there is a great stagnation in bitcoin, as the block-size debate moves slowly and development on the protocol is non-fluid, leaving bitcoin with few developers comparatively. It might be that the stagnation in bitcoin is not a recent development, but inherent in the system. Slow development on bitcoin is a “feature,” as its intent was not to be adaptable, but rigid.

The use of bitcoin as currency is unlikely, as its transaction times and costs are growing. For bitcoin, the speed is currently 3tx/sec with a 10 minute blocktime, compared to 15tx/sec and a 15 second blocktime for ethereum. For something that claims to be the future world currency, you might think it would have a competitive advantage of speed or scale… or maybe adaptability.

Erik Vorhees, another pioneering bitcoin millionaire, recently tweeted about ethereum’s possible use for payments instead of bitcoin. Clearly, Voorhees is also not a Maximalist.

Surely there must be some use for bitcoin, right? The digital gold of the world? Not a currency, but a commodity? A store of value? Its position as a possible non-perishable commodity is eroding quickly, as many of the up-and-coming digital assets—the altcoins—actually have utility. One of these is ethereum, which acts as a platform to develop dapps (decentralized applications) and smart contracts, can play the role of currency better than bitcoin, and was built to be adaptive. There are numerous examples of new cryptocurrencies/digital assets that do what bitcoin does—and more. Once we have guided the Maximalists through this very psychologically difficult realization, they eventually agree and cry out “but… but… the network effects, this is what will keep bitcoin alive.”

The more users of a network there are, the more valuable the network becomes. It’s just like social media: the more people who use it, the more you get out of it. The network effect of bitcoin will lend to ethereum in the same ways it did to spur eth’s explosive entrance on to the scene. The network of the first roads were built for horses, and then the cars came…

The main push behind bitcoin’s price recently is not because of its increased utility, but through selling the dreams of getting rich from bitcoin—the sheer hype effect of “I’ve heard bitcoin has made millionaires.” The denial of the bitcoin ETF (exchange traded fund) by the US Securities and Exchanges Commission (SEC) had a minimal and only brief impact on the price. This isn’t surprising, because the media attention is helping millions discover it, keeping it “new” and seemingly innovative. And it is… compared to the old economy.

Its utility dwindles, but speculation built on hope is keeping the price on the up and up. There is the false assumption that value of something (bitcoin) is directly related to its utility or its health; that its continued increase in value is directly related to the delayed mainstream adoption and discovery process. The ETF failed to be pushed through, and though bitcoin may get one in the future, this only delays the inevitable: the migration to something truly useful.

The network effect of bitcoin is extremely limited, as it has built its own laborious network, benefiting only from its first mover advantage (which is likened to the “Myspace advantage”). Ethereum, on the other hand, has an entire network of network effects working for it.

As each new token or smart contract built on ethereum gains exposure, more people become aware of the utility and value of the ethereum network. Iconomi, Augur, Golem, DigixDao, Status, and MakerDAO are a few ethereum projects independently expanding and propelling the ethereum network utility upward and multiplying the number of developers on the protocol, and more projects and potential use cases are popping up regularly. Currently 91% of all tokens, by market cap, exist on the ethereum network. There are even tokens being developed on ethereum that could act as a stable currency, far better than bitcoin. Ethereum may soon have multiple tokens, filling the use-cases bitcoin once claimed it would solve. Coinbase, another non-Maximalist company, has opted into ethereum, unable to deny its value. This is an initial hint at the dETHroning of bitcoin.

The bitcoin monopoly was gone before most even realized there existed any competition at all. Those who continue to hodl to their hopes of bitcoin supremacy have a rough road ahead. Fortunately, the ultra fluid exchange from the inefficient to the efficient systems of today require only a click. Jumping from the bandwagon couldn’t be easier.

Moving on

I am a confident that “The Flippening” will occur. There will be a time in the near future where bitcoin is no longer the dominant coin or blockchain, and this will likely happen sooner than most expect… and ethereum will be the one to take its place. This idea does not come from hope, nor love: It comes from logic.

As of mid January 2018, ethereum is processing about 4.5 times more transactions per 24 hours than bitcoin, for about 25 times cheaper. The single-use concept and rigid development protocol of bitcoin was not intended to be the infrastructure of web 3.0. The world needs more than a “digital gold”—the world needs ethereum. Its highly adaptable nature allows for the infrastructure building of a new paradigm via smart contracts. As Wikileaks continues to unveil the troubles of today’s governance protocol, the need for better privacy and security for the individual is ever increasing. The majority of our lives exist on the web; it’s how we communicate with family and friends, it’s the way we make purchases, it’s where we store our memories, our data. Bitcoin is currently unable to provide the swift development and decision-making necessary to be the protocol of the globe.

Bitcoin may very well be the bridge to the promised land, but it is not, in fact, the promised land itself. Maximalists will fight this idea tooth and nail, hoping to maintain their “I am ahead of the curve” beliefs. It takes time to learn about the new kid on the block, and like the bitcoin protocol itself, Maximalists have slowed and stalled.

In contrast, ethereum is blossoming rapidly into a rain forest of diversity. The ICO (initial coin offering) movement is gaining momentum, overtaking venture-capital investments faster than anyone could have imagined. Any person, business, or organization can launch an ICO crowdfund quickly using the ethereum network with ease from anywhere in the world. This is causing an explosion of innovation. Ethereum is laying the foundation for the new web, the infrastructure of the new internet, and the fourth industrial revolution.

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Imagine if you could have bought a piece of the internet, when it first started.  Ethereum is kind of like that, but magnitudes greater.

We will bid a fond farewell to the information age when bitcoin is surpassed, and with its passing comETH a new era—a digital and decentralized renaissance.

I still love bitcoin, but I am no longer in love with it.