The ethical argument for Bitcoin maximalism

Bitcoin logo projected over a darkened skyline.

Matthew Knudsen

Since the intent of this article is to bridge a gap, let’s start with what we agree on.

After the invention of Bitcoin, there was widespread adoption of digital money – work on the Bitcoin code continued and it remained the most valued and widely used digital money even as its supporters fragmented into factions and various alternatives emerged.

However, an honest assessment of this landscape means that in 2021 we will be faced with the question: What should we think of Bitcoin? And in a broader sense, what should we make of the thousands of competing cryptocurrencies that claim to be usurping or improving their invention?

It is widely recognized that Bitcoin exists independently of the state and that its most important achievement is global money, which is defined by transparent spending, fair verifiability and perhaps above all by a limited amount of monetary units.

In fact, a pillar of Bitcoin advertising remains the idea that these properties better protect both human rights and liberal values, and effectively anchor the universal right to money in code.

These are important arguments in favor of Bitcoin, and it is not the intent of this article to belittle them. However, it would be remiss if we did not notice that these articles often come before the answer to a natural second order question. Since most cryptocurrencies share these characteristics, what enables Bitcoin proponents to claim that they guarantee these rights better than alternatives?

If bitcoin and cryptocurrencies are indeed different types of economies, how exactly do they differ? After all, why do these differences matter to users when both systems allow for new types of applications and exchanges?

As this article tries to argue, the unspoken answer is that Bitcoin and cryptocurrency offer opposing visions of how users’ financial rights should be protected and managed.

Far from esoteric, the ramifications of this division should be of interest to any market watcher, as it will affect millions – if not billions – as the adoption of Bitcoin and cryptocurrencies grows.

A compendium of views

To defend the claim that this more fundamental divide exists, we must first understand the motivations that drive the evangelists of bitcoin and cryptocurrencies.

I am now approaching a decade in my study of bitcoin and cryptocurrencies and believe that you can divide the prevailing ideologies into three views (although there are variations on both).

  1. Bitcoin maximalists – Those who believe that Bitcoin alone satisfies the definition of a neutral, non-governmental monetary system and that this definition exists in the domains of economics and computer science. They believe that the conditions that launched and bootstrapped the Bitcoin economy cannot or will not repeat themselves, and that the creation of cryptocurrencies is undermining the economic scarcity that made Bitcoin novel in the first place. While some may tolerate the broader cryptocurrency market, it only lasts as long as it confirms Bitcoin’s dominance. (This is where I place myself).
  2. Crypto agnostic – Members of this group believe that Bitcoin has a narrow, large, or no place in a broader ecosystem of cryptocurrencies. Although they view some as better or worse than others, they believe that most cryptocurrencies are inherently good as they provide an alternative to existing monetary systems. Most of all, they assume that by offering different functions or focusing on different use cases, cryptocurrencies will serve as a new type of programmatic money that competes with Bitcoin. Hence, they believe that the crypto market both provides evidence for this claim and determines the validity of claims made by competing market participants.
  3. Bitcoin Denier – This group rejects the idea that the private market should spend money or argues that the computer science discovery of Bitcoin is not an economic invention. Rather, they believe that democratic states should maintain a monopoly of money in the public interest, since governments derive authority from the people (a right that extends to the ability to print, spend, or devalue money at the discretion of the state).

If these definitions are accepted, this article claims that the least understood and most interesting difference lies between the Bitcoin maximalists and the crypto-agnostics.

After all, they firmly believe in alternatives to government money, but disagree on what Bitcoin and cryptocurrencies can achieve and how claims to their success should be conveyed.

Most importantly, crypto-agnostics seem to instinctively reject the notion that there are a number of criteria a cryptocurrency could meet in order to serve as a unique alternative to government monetary systems, especially if that appear to deny the market a choice.

This lens is often implicitly confirmed by bitcoin maximalists who argue against cryptocurrencies by focusing on comparisons such as the size of their networks, how they meet the properties of money, or their starting parameters. After all, it is not immediately clear to newbies why other cryptocurrencies cannot compete with Bitcoin on these parameters (or why the market fails to provide evidence that they already do).

Of course, such arguments only bypass the fundamental gap – Bitcoin and cryptocurrencies offer their users very different guarantees due to their different attitudes to the market.

Where the disagreement begins

To begin with this claim, we must first review the properties that enabled Bitcoin to serve as money and examine how they result in cryptocurrencies acquiring unique properties as software.

Bitcoin and all cryptocurrencies simply need to be sufficiently decentralized (to maintain operations outside of the state) and regularly updated (to continuously improve). However, it soon became apparent that the nature of this update process gave rise to concerns about the rights of users.

In particular, to make a change, users of a cryptocurrency can only either introduce new rules (make new software incompatible with old versions) or change the existing rules (allow users to continue running the old software, upgrade to new software if and when they want) do it) wish).

There is an inherent risk associated with every choice – the creation of incompatible software and the risk that the market may create new, incompatible cryptocurrencies. So it is noteworthy that Bitcoin maximalists and crypto-agnostics have chosen to look at and manage this risk in different ways.

Bitcoin maximalists saw this choice as a way of ensuring what they saw as the defining features of the system – users’ right to both money and a known amount of money – and chose a roadmap that was defined by modifications, the one Made the split less likely (and thus the preservation of the second guarantee).

Cryptocurrency agnostics, on the other hand, manage this risk by pursuing changes with a more tolerant attitude towards incompatible software, arguing that users can use money however they want and that a well-known offering is a trait rather than a right.

In fact, this view was best defined by Ethereum creator Vitalik Buterin, who has claimed that Bitcoin’s roadmap is “compulsory.” In his view, Bitcoin users who wanted to use their money in new ways with new functions have been violated in their freedom over their money by a stubborn minority.

However, it is unspoken that crypto-agnostics with this view represent a very specific view of the financial rights of the users, who probably subject these rights to the market itself.

In other words, crypto-agnostics believe that any cryptocurrency can be changed at will by the majority of their users and, secondly, that this majority can make any decision – up to and including revoking the rights of other users.

That this opinion exists is evidenced by Buterin’s preferred conclusion when settling cryptocurrency splits: “If you really want to make a controversial change … let the market sort it out.”

Should a user disagree with the majority vote for a cryptocurrency, crypto-agnostics claim that they can simply execute (or start) another coin. As long as alternatives exist, access to money is possible for the individual.

The implications

But while this view seems to be accepted by crypto-agnostics, there is less discussion that the consequence of this preference is effectively the replacement of state authority over money, not with individual authority but with market authority.

With Bitcoin, for example, users not only have the right to money and the right to a known amount of money, but also the right to object to the majority of users by rejecting undesired functions.

In Ethereum and similar systems, however, changes are almost always passed by majority rule, and in fact changes to many staking protocols and decentralized financial applications are an explicit feature of the system.

In other words, with cryptocurrencies, like fiat money, users cannot object, which means that they retain their right to money only at the discretion of the market.

By design, this is exactly the freedom that Bitcoin – and only Bitcoin among other competing cryptocurrencies – now enables. Far from being theoretical, there are minority groups within Bitcoin today who oppose majority upgrades and keep older software that remains by consensus.

Take the upcoming Bitcoin Taproot upgrade, for example. Should a user who has a value in Bitcoin refuse to agree to the change preferred by the majority to implement the Smart Contract Code, they will continue to hold Bitcoin, which has the same value as any other Bitcoin.

Again, compare this to updates on other cryptocurrencies and the difference couldn’t be greater. If you don’t upgrade to the majority’s preferred code, your right to your funds may be suspended or revoked.

From this we can see that one of the predominant problems with cryptocurrencies is not their ability to store or transfer values, but rather in their claim code alone a system differs from the majority status quo of the fiat system.

Of course, one could argue that the results of this observation are not so bad. Crypto-agnostics are likely to continue to argue that cryptocurrencies that operate by the authority of the market are a new invention that may be preferable to economies defined by government regulations.

One would hope, however, that this group can see that this class of digital money and its economies exist at least apart from Bitcoin.

From there, we can begin a more honest discussion of the various guarantees that both systems offer to users and, by extension, the global economy as a whole.

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