The issue with this concept is that a vast majority of the global population will never educate themselves enough to understand sound money properties. As a result, they will continue to be attracted to number-go-up altcoins, which actually helps build communities.
The simplest way to perceive money is that money is a belief system, and sometimes our beliefs defy logic. For example, the fact that Dogecoin has had such a large community for so long does not make sense when considering sound money properties, but doge has been a top 10 crypto for years.
As much as we disagree due to using logic, the world might not choose BTC as the number one crypto asset, because their investment/savings motivations are far less calculated than ours. It's still too early in the crypto game, we should always keep an open mind, that's all I'm saying.
Thanks for the thoughtful response, Salvatore! A couple things come to mind:
Saifedean likes to say "you can't insulate yourself from the consequences of people choosing a harder money than your own." Which is to say, economic reality imposes itself over time.
The other observation I have is that, surprisingly, Doge might be the closest altcoin to Bitcoin's "immaculate conception." Specifically because it has no leader (the founder denounced crypto as a whole and walked away with nothing) & no marketing budget (no premine).
Clear article, thanks a lot. SoV aka digital gold is clear. What about Ethereum with its smart contracts capabilities? I do like the DeFi it allows. Does ETH (not shitcoins) have differentiated and added features to no longer just be a copy?
With BTC winning as SoV it won’t make Ethereum disappear. Can’t they coexist?
Ethereum sealed its decline when it migrated to proof of stake. I expect it to ultimately fail. You can make money trading it along the way, but Bitcoin is the long term value play. I expect bitcoin to do everything Eth does, on a stable foundation, on higher layers. At that point eth will have no value.
Thanks for the balanced response (too often people get too maxi). Could you elaborate please why you think PoS sealed ETH’s decline? Or point me to a resource, happy to learn more about PoS vs PoW longterm outlook.
What’s your longterm time frame, in years? I get Bitcoin’s lightning but haven’t seen any higher layers allowing DeFi like Ethereum does. Couldn’t ETH have itself established by then, or do you think all these Aaves, Curves, Makers, Tethers will leave Ethereum for Bitcoin? As far as I can see (not far) it looks like co-existence?
Eth has the centralization problem and securities problem, and the complexity of the road map will hurt it. Bitcoin is already the clear leader, but I expect this to become clear to everyone in the next five years. The first wave will be from the 2024 halving through 2025 and the next when it halves again in 2026.
Brian's two responses in this chain are excellent. I feel similarly - Ethereum will continue to have appeal to the "move fast and break things" ethos. Meanwhile, Bitcoin will continue to move slow and accumulate more value, incentivizing people to "build slow and build right", incrementally taking over any of the functionality that Eth today has that Bitcoin does not (which is all spurious DeFi functionality, really)
Curious if either of you actually use ETH regularly for any kind of specific use case. My guess is not, or you wouldn't by making such sweeping academic and abstracted conclusions. My long and successful experience with ETH is that it's super useful for many real world financial things I need to do, and just as I don't really care how Amazon's servers parse my transactions, I don't really care all that much about ETH's deep plumbing either. I don't own Amazon stock or ETH tokens, other than for gas, but I frequently and happily use both networks when I need to get something done. For you to say ETH is spurious or headed for the scrap heap is kinda Paul Krugman-esque.
Thx, good points, I'll study more and let's see. Halving 2024 and next years gonna be super interesting. Next halving guess 2028... if my 4 year count is right (never mind, assume just a typo).
Catch 22 doesn't really explain anything here.. it's kind of a lame analogy, to be honest. The network effect is why other crypto currencies, even ones with limited supply like Litecoin, can't catch up to Bitcoin. You can't just throw any analogy and fit it in with bitcoin.. feels like clickbait.
Thanks for your feedback, Andy. As far as I can tell, it does a pretty good job of reflecting the dynamics at play here. Network effect is key, but it's also relevant to observe how impossible it is to catch up in terms of network effect without violating the Howey Test
There is also a boom-bust cycle in bitcoin, it could get cheaper if it's your wish to accumulate. Nevertheless, the parabolic is flattening. The intrinsic value of BTC is the replacement value; network size and CPU time and how they relate. Difficulty increase is only part of the scarcity. The scenario where block reward (in fiat) runs under block discovery cost is not unheard of. Bitcoin may have not been the first digital scarcity. So we can have a whole fruit basket. Almost perfect article. Congratulations.
It seems a bit reductive at first glance, but each or your three points is surface level simple with complexity underneath expanding like a fractal to support your thesis. All that to say, I get it and I agree.
I had so much FOMO early on with every thesis of all the newest “gonna change the world” coin until I finally came to this same basic conclusion (although much uglier & less scientific) — realizing that #Bitcoin is the only system that does NOT divide by zero — meaning actually decentralized.
The issue with this concept is that a vast majority of the global population will never educate themselves enough to understand sound money properties. As a result, they will continue to be attracted to number-go-up altcoins, which actually helps build communities.
The simplest way to perceive money is that money is a belief system, and sometimes our beliefs defy logic. For example, the fact that Dogecoin has had such a large community for so long does not make sense when considering sound money properties, but doge has been a top 10 crypto for years.
As much as we disagree due to using logic, the world might not choose BTC as the number one crypto asset, because their investment/savings motivations are far less calculated than ours. It's still too early in the crypto game, we should always keep an open mind, that's all I'm saying.
Thanks for the thoughtful response, Salvatore! A couple things come to mind:
Saifedean likes to say "you can't insulate yourself from the consequences of people choosing a harder money than your own." Which is to say, economic reality imposes itself over time.
The other observation I have is that, surprisingly, Doge might be the closest altcoin to Bitcoin's "immaculate conception." Specifically because it has no leader (the founder denounced crypto as a whole and walked away with nothing) & no marketing budget (no premine).
Clear article, thanks a lot. SoV aka digital gold is clear. What about Ethereum with its smart contracts capabilities? I do like the DeFi it allows. Does ETH (not shitcoins) have differentiated and added features to no longer just be a copy?
With BTC winning as SoV it won’t make Ethereum disappear. Can’t they coexist?
Ethereum sealed its decline when it migrated to proof of stake. I expect it to ultimately fail. You can make money trading it along the way, but Bitcoin is the long term value play. I expect bitcoin to do everything Eth does, on a stable foundation, on higher layers. At that point eth will have no value.
Thanks for the balanced response (too often people get too maxi). Could you elaborate please why you think PoS sealed ETH’s decline? Or point me to a resource, happy to learn more about PoS vs PoW longterm outlook.
What’s your longterm time frame, in years? I get Bitcoin’s lightning but haven’t seen any higher layers allowing DeFi like Ethereum does. Couldn’t ETH have itself established by then, or do you think all these Aaves, Curves, Makers, Tethers will leave Ethereum for Bitcoin? As far as I can see (not far) it looks like co-existence?
I would recommend Gigi's article on the topic, which includes a great deal of resources to dig into.
https://dergigi.com/pos/
I agree, Gigi's thoughts on this are excellent
Eth has the centralization problem and securities problem, and the complexity of the road map will hurt it. Bitcoin is already the clear leader, but I expect this to become clear to everyone in the next five years. The first wave will be from the 2024 halving through 2025 and the next when it halves again in 2026.
Brian's two responses in this chain are excellent. I feel similarly - Ethereum will continue to have appeal to the "move fast and break things" ethos. Meanwhile, Bitcoin will continue to move slow and accumulate more value, incentivizing people to "build slow and build right", incrementally taking over any of the functionality that Eth today has that Bitcoin does not (which is all spurious DeFi functionality, really)
Curious if either of you actually use ETH regularly for any kind of specific use case. My guess is not, or you wouldn't by making such sweeping academic and abstracted conclusions. My long and successful experience with ETH is that it's super useful for many real world financial things I need to do, and just as I don't really care how Amazon's servers parse my transactions, I don't really care all that much about ETH's deep plumbing either. I don't own Amazon stock or ETH tokens, other than for gas, but I frequently and happily use both networks when I need to get something done. For you to say ETH is spurious or headed for the scrap heap is kinda Paul Krugman-esque.
Thanks!
Thx, good points, I'll study more and let's see. Halving 2024 and next years gonna be super interesting. Next halving guess 2028... if my 4 year count is right (never mind, assume just a typo).
*halves again in 2028
Bingo ... well said.
Catch 22 doesn't really explain anything here.. it's kind of a lame analogy, to be honest. The network effect is why other crypto currencies, even ones with limited supply like Litecoin, can't catch up to Bitcoin. You can't just throw any analogy and fit it in with bitcoin.. feels like clickbait.
Thanks for your feedback, Andy. As far as I can tell, it does a pretty good job of reflecting the dynamics at play here. Network effect is key, but it's also relevant to observe how impossible it is to catch up in terms of network effect without violating the Howey Test
Great article, I only wish I knew this back in 2017 when I started stacking sats, tweeted it!
Thank you! And same. I put together the article I wish I had read in early 2018
There is also a boom-bust cycle in bitcoin, it could get cheaper if it's your wish to accumulate. Nevertheless, the parabolic is flattening. The intrinsic value of BTC is the replacement value; network size and CPU time and how they relate. Difficulty increase is only part of the scarcity. The scenario where block reward (in fiat) runs under block discovery cost is not unheard of. Bitcoin may have not been the first digital scarcity. So we can have a whole fruit basket. Almost perfect article. Congratulations.
Great article!
It seems a bit reductive at first glance, but each or your three points is surface level simple with complexity underneath expanding like a fractal to support your thesis. All that to say, I get it and I agree.
I had so much FOMO early on with every thesis of all the newest “gonna change the world” coin until I finally came to this same basic conclusion (although much uglier & less scientific) — realizing that #Bitcoin is the only system that does NOT divide by zero — meaning actually decentralized.