The Case Against Crypto Maximalism

Bitcoin is one of the 21st century's most remarkable innovations. The ability to send and receive value over the Internet without relying on a centralized intermediary signifies a paradigm shift in the evolution of money. Bitcoin's disruptive influence has extended far beyond money and could reach nearly every aspect of the global economy as there are several other social constructs that have the potential to be transformed by open blockchains. Blockchain-based technologies can help us digitize essential constructs, like contracts, in a manner that is less vulnerable to manipulation by third parties i.e.,  trust-minimized.

Smart contracts (contractual clauses embedded in hardware/software) enable the development of computer programs that securely and autonomously handle digital assets. For example, if Alice wants to bet that Manchester will win the next World Cup and Bob wants to bet they will lose, smart contracts can facilitate the bet in a trust-minimized manner. If Manchester wins, Alice's "yes" shares can be redeemed at a profit while Bob's "no" shares will be worthless. Alice and Bob don't have to trust each other or a centralized intermediary like Predictit, just the open-source code and integrity of the decentralized betting system. The transactions are completed by “unstoppable code,” rather than human action.

Bitcoin has the potential to support advanced smart contracts for use cases like betting, but that vision appears to be at least several years away from being a reality. There are a swarm of innovations that will improve Bitcoin’s flexibility being actively developed such as the Lightning Network,  Sidechains, and Simplicity, that could help by adding more layers to Bitcoin, creating separate blockchains secured by Bitcoin, and providing more advanced scripting languages for developers to write smart contracts with, respectively.

A Look at Innovation in Bitcoin’s Technology Stack–Digital Asset Research

Ethereum is a blockchain that was designed specifically to help developers create advanced smart contracts and decentralized applications. One of my favorite Ethereum-based applications is Augur, a decentralized prediction market platform. Augur’s developers initially started building on top of Bitcoin’s blockchain, but switched to Ethereum in order to take advantage of Solidity, a programming language for writing smart contracts that made their work much easier. Augur lets users bet on the outcome of any event without relying on a central authority to create markets, hold funds, or pay out winnings. It’s a nearly completely automated global online betting market. A system like this would not exist without an open programmable blockchain.

A market for the UK General Elections on Augur

Thought leaders in crypto have expressed varied opinions on the value of Ethereum. Balaji Srinivasan (Stanford Engineering PhD, Former Coinbase CTO, Andreesen Horowitz General Partner) for Ethereum’s utility as an open blockchain with more flexibility than Bitcoin. Nick Szabo, the digital currency pioneer who coined the term smart contract and was once optimistic about Ethereum himself, now believes it is at risk of devolving into a highly centralized system.

I can understand both perspectives. Ethereum-based experimentation and entrepreneurship has been impressive, but there are still major questions surrounding its long-term viability. Can it effectively scale to support thousands of transactions per second and billions of users? Will its transition to Proof-of-Stake be successful, and can it remain sufficiently trust-minimized?

Healthy skepticism of Ethereum is warranted, but the vitriolic hatred it receives isn’t. “Bitcoin Maximalists” and maximalists of all stripes extoll the virtues of their preferred blockchains and deride other chains as gimmicks, scams, and ancient relics. All of this intra-crypto tribalism seems a bit silly when you consider that only (very optimistically) 1.8% of people on the planet have ever used any type of cryptocurrency.

I am not a maximalist.

Bitcoin could evolve into a widely trusted form of global, Internet-native money. The experiment of decentralized digital money has already surpassed many of my expectations. Ethereum, at the very least, is a valuable sandbox where we can experiment with various uses of smart contracts and prepare for a future where reliable smart contract development platforms are available.

Blockchains like Cosmos that aim to foster interoperability between other public blockchains, could help Bitcoin and Ethereum  communicate with each other in a decentralized manner. Gmail, Yahoo, and Microsoft Outlook users can freely communicate with each other because all email providers use open standards like SMTP and IMAP that create interoperability. A world full of open blockchains should have similar standards.

I've obsessively followed the evolution of open blockchains since 2011 because I’m optimistic about their potential to help improve the resiliency, transparency, and efficiency of our social institutions. I'll keep an open mind towards any technology that might help achieve that goal.