Please click the link to listen to the 36th episode of my weekly crypto podcast ‘Two Minute Crypto.’ These are intended to be short, single-topic ramblings on some aspect of the cryptosphere. Comments and critiques welcome.
External Podcast Links
Two Minute Crypto – The King and the Rebel (Part 3 of 3)
The explanation requiring the fewest assumptions is most likely to be correct.
Welcome to Two Minute Crypto. This week concludes the three-part series examining some common assumptions underlying the choice to invest in crypto but not in Bitcoin. To continue:
Bitcoin is Slow and doesn’t Scale Easily
Oh, the glitter of transactions per second. Many of my worst investments in crypto have resulted from taking this promise at face value. Five hundred transactions per second is better than one hundred, right? Well, yes and no. Yes, in an ideal world where no technical and security trade-offs are required, faster is better. However, looking under the hood of blockchain, BTC is secure because it is slow or rather the comparative lack of speed is a necessary trade-off to create the security proposition that BTC has proven itself to be. There’s no doubt, that many projects have found efficient compromises, the Delegated Prove of Stake(DPoS) of EOS springs immediately to mind.
However, and this is fundamentally important – BTC is not meant to be blazingly fast and probably will never need to be. To repeat, BTC is not meant to be blazingly fast and probably will never need to be – it’s key to understanding BTCs continued dominance in the market. Bitcoin is a base layer protocol, a foundational ledger for the storing of value – a competitor to gold and the global currency reserve system. Lofty goals – absolutely and likely decades in the making or failing. Bitcoin is not primarily meant to be fast – it is meant to be decentralized, secure, immutable, and scarce – all traits it currently displays.
If that were the end of it – then indeed, lack of speed would be a core weakness and one which might well erode BTCs competitive advantage. However, developers have been feverishly working on layer 2 (and 3) scaling developments for BTC, the Lightning Network being key among them. The Lightning Network today – right now – facilitates lightning fast (as it says on the tin) transactions for fees close to zero (1 Satoshi). Such networks can scale as necessary and broadcast to the base layer much more efficiently, preventing it from becoming endlessly backlogged.
Bitcoin Maximalism is Wrong and Bad for the Industry as a Whole
Correct but what’s that got to do with the future success of Bitcoin? Bitcoin maximalism is obviously an extreme position – blinkered, dogmatic and aggressive. It is, however, held by only a vocal few in the cryptosphere. The ‘only Bitcoin’ narrative doubtless puts some investors off the entire industry. It is an intellectual dead-end – but BTC maximalism and BTC are two entirely separate realities – Indeed, Bhttps://mentormarket.io/category/cryptocurrencies/itcoin will likely succeed despite the braying of a few. Of all the reasons not to invest in BTC -this is by far the weakest – Bitcoin cares not a whit for the bleatings of the ‘there can be only one’ crowd and nor, should you.
Thanks for listening.
Please note – the first two points discussed here are excerpts from a recent article by the author which may be found here.