My position is simple. We are in the early innings of crypto, and we haven’t even touched the surface of what’s going to happen in the crypto space. Recently, several experiments have imploded. From the Terra collapse to all the services it brought down with it - Celsius, Voyager, and Three Arrows Capital. - The end of the current boom cycle has been especially rough on AltCoins. However, every time we fail, we pick ourselves up, dust ourselves off, and learn what we need to do better the next time.
Bitcoin’s Challenges
It has not been easy for Bitcoin, either. The 800K BTC that Terra and its Luna Foundation Guard had saved up to protect UST’s peg to the dollar hit the market all at once and tanked the price. And, presumably, each named bankrupt service will have to sell its BTC and ETH reserves to pay creditors and customers. In any case, that’s not what concerns us today. The debate on the table is, can Bitcoin cover all the possible crypto use cases now and in the future? And, most importantly, does it want to?
Is Bitcoin Maximalism the Way to Go?
Jonathan Levi on Bitcoin and My Response
Let’s examine Levi’s main points and try to argue against them. The goal is to walk away with lessons learned and find some understanding between the warring parties. He makes 5 assertions:
1. A blockchain is not the solution
According to Levi, 99% of AltCoins’ use cases could be efficiently solved with a centralized database. A blockchain is not fast or effective, and it’s not designed to handle the hundred things that Ethereum or other L1s are trying to do. Plus, since a blockchain carries the network’s complete historical activity, they’re getting heavier by the minute.
My take: he may be right for now, but blockchains are evolving. The first inning just ended and a lot of smart people are working on the second. The weight of all that data might be a problem, though.
2. Ethereum and other L1s are bloated or bloating
Bitcoin realized long ago that all of the activities couldn’t possibly be in the first layer. That’s why they’re building the Lightning Network and other L2s on top of the Bitcoin network, said Levi. That allows them the privilege of having a relatively weightless blockchain that runs on nodes that almost every home computer can run. And that guarantees decentralization.
My take: Ethereum, the biggest and most famous smart contract-enabled blockchain, is doing things differently. They are also growing in L2, Polygon being the clearest example of that. In addition to that, they’re implementing “sharding” and “rollups” to allow its blockchain to scale. According
3. The Lightning Network is the killer app
What has Bitcoin put forward lately that everybody uses? When I asked Levi that question, he immediately said the Lightning Network. It might not be as popular on this side of the world, but people in El Salvador are using it to buy pupusas on the side of the road. The network is definitely growing, on July 18th, its capacity reached an all-time high of 4267 BTC. And the number of nodes and number of channels are breaking records as well.
My take: The Lightning Network may be on the cusp of achieving something great, but right now, it’s not widely used or popular enough. Let’s keep our eye on it and see how this story develops.
4. Bitcoin is already doing what it was designed to do
According to Levi, AltCoins have yet to deliver a lot of features and capabilities that its creators promised. They might accomplish them, but that’s not guaranteed. Bitcoin, on the other hand, is doing exactly what it’s supposed to do: transmit value from one place to the other. And with the Lightning Network in place, Bitcoin is ready to scale its services to the next billion people.
My take: Levi has a point here, but AltCoins are constantly evolving and will likely achieve unimaginable things in the future. Sure, some projects and experiments might fail, but better ones will take their place. As Amazon rose from the Dotcom bubble’s ashes, chances are AltCoins will eventually dominate.
5. Bitcoin is a protocol, and it’s open source
Levi compares Bitcoin to the TCP/ IP protocol, and believes that a new Internet will grow on top of its seeds. Not only that, Bitcoin is truly open-source. Just as Linux came to eventually dominate the server market, he believes Bitcoin’s destiny is to take over all aspects of the world’s financial life. The reason is simple, by being open Bitcoin guarantees that more developers will work on top of it. The process will be slow, though, because being methodical is also on Bitcoin’s nature.
My take: The thing with this point is, Bitcoin is open-source, but the rate of development seems to be much higher in Ethereum’s blockchain, for example. Not to mention that Ethereum is also open-source.
My Conclusion
Besides this, AltCoins make Bitcoin better. They challenge it and introduce new ideas to the field. The “move fast and break things” ethos - well known in the technology industry - also has a place in the crypto space. Bitcoin doesn’t address all of the possible use cases. And somebody has to.